With Facebook buying 9.9% of the shares of Reliance Jio for a whooping ₹43,574 crores, Mukesh Ambani became the richest man in Asia surpassing Jack Ma. His net worth currently stands approximately at 79 billion USD, bringing him to the top 10 rich list. But the story doesn’t end here, the question is whether he is the richest man in the world or not?
We can solve this mystery by using the Economic tool of Purchasing Power of Parity (PPP). The nominal value of USD against INR is approx. ₹75/USD. However, the PPP index puts INR’s value at ₹19/USD.
Hence, in terms of PPP, the wealth of Mr Mukesh Ambani is =79 x(75/19) = $300+ Billion. Which ultimately makes him far richer than Elon Musk (Founder of Tesla and SpaceX) whose net worth currently stands at approx. $183 billion.
Hence, Muskesh Ambani could have been the richest man in the world in terms of Purchasing Power Parity (PPP) but it’s just an economic tool, the real world is far different than what we learn in the books.
Put your thoughts below and tell us your understanding on the famous Economic term Purchasing Power Parity (PPP).
‘Purchasing Power Parity’ is nothing but an assumption.
–> It assumes that a basket of goods in one country should cost the same as an identical basket in another country.
–> It assumes that currency exchange rate is equal.
—> It ‘assumes’
It does not mean that the value of one currency is equivalent to the other.
A $100k USD will be equivalent to ₹81 Lacs (subject to FX rates)