Monday, April 18, 2005

dollar dreams?

The truth about earning in dollars!
April 11, 2005
here are two ways to look at a foreign salary -- the Catholic and theProtestant.
The first is characterised by a missionary zeal to convert using therupees-multiplied-by-43.8-times formula ingrained in everyself-respecting Indian head.

Which is how $110,000 achieves the headline-grabbing status of 'Rs 50 lakh!'

But, protests the economist, how far does that Rs 50 lakh go in a foreign land?

What you have to look at, then, is Purchasing Power Parity. The theoryof purchasing power parity says that, in the long run, exchange rates should move towards rates that would equalise the prices of an identical basket of goods and services in any two countries.

Duh. Despite having acquired, at some point in life, a BA inEconomics, I have no idea what that means.

Purely in layman's terms, how much bang for the buck? Well, says theWorld Bank, $150,000 fetches you a Rs 50-lakh lifestyle if you reside in India.

In the US, the same $150,000 is actually equivalent to earning Rs 18.7 lakh.

The Economist's famous 'Big Mac index' makes it easy to understand. A hamburger costs $2.90 in the US, but $1.10 in India. Take that, you dollar-earning desi!

Beyond economics

Of course, the real picture is far more complex. Despite what the BigMac index might indicate, an 'upwardly mobile' lifestyle in India is more expensive.
If your family decides to have Kellogg's cornflakes for breakfasteveryday in India, it will work out to about 4 boxes or Rs 500 amonth.
An American family, on the other hand, would spend about $20 a month for the same breakfast.
Given that a reasonably well-to-do Indian family earns Rs 50,000 amonth, it spends 1% on its cornflakes! Whereas the reasonably well-to-do American family earning $5,000 a month spends only 0.4% from the mahine ka budget. That's way, way cheaper.
So despite being a supposedly 'poor' economy, we have higher relativeprices -- dollar prices -- for many commonly consumed goods. Food andpetrol, in particular.
Although, conversely, we can afford bais and drivers, dry cleaning andnice haircuts. There is always a trade-off!

Living like a desi

How much dosh you have stashed away in the bank depends on how youchoose to live.
If you are earning a dollar/ pound salary and your objective is to'save', you live an Indian lifestyle in a foreign land.
This means eating mostly at home/ shopping at Kmart/ Wal-mart;thinking 10 times before making an impulse buy (out pops theconversion calculator: 'I can get this cheaper in India. Forget it!')
This is an attitude typical of the just-set-foot-on-foreign-shoreworker, especially on an H1-B visa. And there's nothing wrong with it.Four-five dudes share a cramped apartment, live frugally and save apretty packet by the time they head back home.

And even though they may have lived in what the Chicago or London native might consider as Mira Road and eaten at the US equivalent ofUdipi joints, the experience of living in the First World is reward enough the first-timer. Clean air, wide roads, 'systems' that seem towork.
But, should s/he decide to stay on longer, the immigrant will betempted to buy in to the host country's way of life. You shop to 'feelgood' about yourself and, eventually, being the thriftiest shopper in town loses its charm.

So one fine day you decide to buy the Polo shirt costing $100, even ifyour mom thinks you are crazy because you could buy five shirts forthe same money back home. Earlier, you moved, geographically. Now, youhave arrived, mentally.

That dollar salary will never feel quite as weighty again.

Resident Non-Indians
On the other hand, living in India -- even for the guy with the Rs 18lakh salary -- has its own hidden cost.
Money provides some insulation -- but the stress of working in FirstWorld conditions but living in Third World ones is inevitable. You canfiddle with a Blackberry [suit] in the backseat of an A/C chauffeur driven car.

But you are in Saki Naka, stuck in a trademark traffic jam, with abeggar tap-tapping furiously at your window.

The airport -- which sees more of you early in the morning than yourspouse does -- seriously sucks. As does the fact that a substantial portion of the taxes the government earns from you end up asemployment guarantee scheme for politicians.

Par kya karen, yeh hai India. So we 'adjust', grin and bear it.

At least we now have multiplexes and megamalls to hang out at, no?

The hidden price

Of course, living abroad may result in a postcard perfect 'BigPicture'. But life is made up of a million little things. And, at thatlevel, regrets remain.

A friend who has spent most of his post-IIT life in the US -- a good12 to 15 years -- noted on a recent visit that he really enjoyedvisiting Chinese restaurants in India. "Because you can taste thefood," he said wryly. "Everything there is so bland... so American."
Another friend says she misses the sights and smells of the sabzimarkets in India. "The veggies there are so fresh, it feels like abhizameen se nikle hain." American tomatoes, she insists, are huge andred, but absolutely insipid.
On a more serious note, there's the issue of parents. Growing old andlonely, often not in the best of health. Move here, you insist. Butthey resist.
The world is a 'global village' where India is just a mouse click away.
You buy the folks a computer with a broadband connection.
And life goes on.

The economics of emigration

Is where you live about geography, or a state of mind?

Well-known journalist Thomas Friedman has just authored a new book onglobalisation titled, The World is Flat: A Brief History of theTwenty-first Century.
In an article in the The New York Times Sunday Magazine, he writes,'Only 30 years ago, if you had a choice of being born a B student inBoston or a genius in Bangalore or Beijing, you probably would havechosen Boston, because a genius in Beijing or Bangalore could notreally take advantage of his or her talent.'
Now, he argues, anyone with smarts, access to Google and a cheapwireless laptop can join the innovation fray. 'When the world is flat,you can innovate without having to emigrate.'
With all due respect to Friedman -- a brilliant writer with a mostlycredible theory -- emigration will continue.
Despite anecdotal evidence exchanged at cocktail parties about youngpeople who would rather stay back in India than go abroad, the factremains that every Indian who enrols at Penn State or SheffieldUniversity is a potential immigrant.
The Japanese or Koreans are not.
The odd Westerner will make India his/ her home, often citing thewarmth received from the Indian people.
The majority of middle class Indians, given a chance, will make theWest their home, despite the cold reception.
Suketu Mehta, in his scintillating book, Maximum City, analyses thesituation as only an Indian can.
'Every summer, waves of Indians living overseas come back or send backlittle pictures: of their son in front of the new 52-inch TV; theirdaughter sitting on the hood of the new mini van; the wife in theopen-plan kitchen... the whole family laughing together in the smallbackyard pool, their 'bungalow' in the background.'
These pictures plant little time bombs in the minds of siblings leftbehind, he writes. 'They hold the pictures and look around theirtwo-room flat in Mahim and, suddenly, the new sofa and 2-in-1 Akaistereo look cheap and shabby in comparison.'

Hope floats

In the 1980s and 1990s, the IITs were associated with 'brain drain'.
Now, reports of dollar salaries of IIM graduates hit the headlines.But the real story lies elsewhere.
These handful of graduates studying in near world class institutionswill be in demand whether in India or abroad. There will be someinitial heartburn -- bhala usko mujhse better paying job kaise mila --but in the medium to long term, things usually even out.
And staying on in India -- where your company values you enough to putdown a Rs 50-lakh deposit for a house in Napean Sea Road -- is a verysmart option.
The real appeal of 'foreign' lies for those who graduate from thesecond and third rung institutes. Job mil jayega but not one with fastenough growth or large enough goodies.
Going abroad, for them, is the only means of achieving quick and easy economic salvation.
So, at great personal risk, they beg, borrow and pay their way intonot-so-well known universities. And then fight for a job to recoverthe several lakhs 'invested'.
By and large, the strategy seems to work.
And dollar dreams will continue to pound in India's head.

"The most profound technologies are those that disappear. They weavethemselves into the fabric of everyday life until they areindistinguishable from it."

- The late Mark Weiser, Father of Ubiquitous Computing and ChiefTechnologist of Xerox PARC.


Blogger Nox said...

You put forward the current scenario in a very interesting manner, kudos to u.
So the question remains, will the NRI's of the west shift towards their lands? I guess sooner or later things will change. But a change is gonna be there for sure.

3:56 PM  

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