Tuesday, August 28, 2007

Why India is out of the Big Mac Index: Where's the beef?

Still on economist.com. Looked at the Big Mac Index. Couldn't find India.

Clicked on link offering explanation.
Found this:

Burgernomics is based on the theory of purchasing-power parity, the notion that a dollar should buy the same amount in all countries. Thus in the long run, the exchange rate between two countries should move towards the rate that equalises the prices of an identical basket of goods and services in each country. Our "basket" is a McDonald's Big Mac, which is produced in about 120 countries. The Big Mac PPP is the exchange rate that would mean hamburgers cost the same in America as abroad. Comparing actual exchange rates with PPPs indicates whether a currency is under- or overvalued.

And since McDonald's in India doesn't serve beef, we aren't considered for the index. It wouldn't be an apple to apple comparison.
I have no beef now on India being excluded.

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