Why does India's GDP rank much higher when measured in PPP dollars than when measured at the market exchange rate?

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Because many local goods and services cost less in India, so the same rupee income buys more locally than it would abroad. PPP GDP converts output using local price comparisons, not the foreign-exchange market rate. Since many local goods and services cost less in India than in high-income countries, the same rupee income buys more locally — so PPP GDP comes out much larger than market-rate GDP. Read more: Economy0031 — Purchasing Power Parity (PPP).

Why does India’s GDP rank much higher when measured in PPP dollars than when measured at the market exchange rate?

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