A little mental exercise for a Saturday morning………

I used Purchasing Power Parity - "PPP" to compare the per capita spend in Bombay’s budget with that of Toronto. According to the calculations, Bombay's municipality spends $539 in equivalent $ per capita, while Toronto spends $3,190 – in other words, Toronto spends 6 times as much even allowing for the differences in purchasing power.

See the computations below:

1. Computing PPP factors:

India:

GDP (current exchange rate method) – US $598.966b
GDP (PPP method) – US$2,266b
PPP factor = 3.783

Source: http://en.wikipedia.org/wiki/Gross_domestic_product

Canada:

GDP (current exchange rate method) – US$834.39b
GDP (PPP method) – US $923b
PPP factor = 1.106

Source: http://en.wikipedia.org/wiki/Gross_domestic_product

2. Computing the per capita budget spend in equivalent $

Toronto’s budget = C$7.5b
Using the PPP factor to compute equivalent $ = C$8.295b
Toronto’s population = 2.6m (thanks, YT)
Per capita spend in equivalent $ = C$3,190

Bombay’s budget = C$1.8b
Using the PPP factor to compute equivalent $ = C$6.8094
Bombay’s population = 12.622m
Per capita spend in equivalent $ = C$539

Source for Bombay’s population: http://en.wikipedia.org/wiki/Mumbai

Have a great Saturday fellas!

There are limitations to this PPP theory too..

http://www.nationmaster.com/encyclopedia/Purchasing-Power-Parity

While using PPP exchange rates for comparison is an improvement over using actual exchange rates, it is still imperfect, and comparisons using the PPP method can still be misleading.

Comparing standards of living using the PPP method implicitly assumes that the real value placed on goods is the same in different countries. In reality, what is considered a luxury in one culture could be considered a necessity in another. The PPP method does not account for this.

A PPP exchange rate varies depending on the choice of goods used for the index. Hence, it is possible to deliberately or accidentally bias a PPP exchange rate by the choice of a bundle. PPP could also have difficulty accounting for differences in quality between goods in one country and equivalent goods in another.

Even if a good PPP is used, GDP per capita is still a measure of the economic output of the whole economy, not a direct measure of the mean or median person's quality of life. Other factors such as the quality of homes and schools, access to public services, the extent of pollution, and strength of consumer protection laws are hard to quantify and generally not fully reflected in the GDP. Thus, even a PPP-adjusted measure of GDP per capita must be used with caution, as it is only one component of quality of life.

For example, in 2002, the GDP per capita for Japan was about US$40,000 and the PPP was estimated as $27,000, while in the US, GDP per capita was about $27,500 and the PPP was $36,000. The US has higher crime rates and a greater extent of poverty and slums than Japan, while Japan has much less physical space per person and arguably less individual freedom. Ultimately, the quality of life will depend on subjective judgement and individual preferences.

Per capita income also does not take into account inequalities in wealth distribution.

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http://en.wikipedia.org/wiki/Purchasing_power_parity

I quote from the above link:

In economics, purchasing power parity (PPP) is a method used to calculate exchange rates between the currencies of different countries. PPP exchange rates are used in international comparisons of standard of living. They calculate the relative value of currencies based on what those currencies will buy in their nation of origin.

Incidentally, PPP is used in analysis by the CIA.

If you have a better idea, lets hear it.

Is mumbai budget enough to have a city like toronto ( cleanliness etc)

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"Ever dance with the devil in the pale moon light?"
"I always ask that of all my prey."
"I just like the sound of it."

Quote:

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Orginally posted by NorthAlberta

Is mumbai budget enough to have a city like toronto ( cleanliness etc)

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So Mumbai will have to have a budget 10 times of present to have a clean city like toronto.

Quote:

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Orginally posted by crenshaw

Quote:

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Orginally posted by NorthAlberta

Is mumbai budget enough to have a city like toronto ( cleanliness etc)

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Bottomline: it isn't!

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"Ever dance with the devil in the pale moon light?"
"I always ask that of all my prey."
"I just like the sound of it."

You are comparing a city from a country ranked 11 (in terms of per capita income PPP, Canada, International $ 29,740) and city from a country ranked 143 (in terms of per capita income PPP, India, International $ 2,880).

http://www.worldbank.org/data/databytopic/GNIPC.pdf

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