International and domestic offers do not differ much if the Purchasing Power Parity (PPP) exchange rate is assessed, a study of placement records of IIT Bombay from the last five years shows. “The hype surrounding the one crore plus package is thus unwarranted,” the study adds.
Based on PPP exchange rates, the study notes, the median values of international and domestic packages differ by less than 10 per cent.
The study was conducted by Namit Agrawal, Sailakshmi Sreenath, Shishir K Jha and Anurag Mehra of the Centre for Policy Studies at IIT Bombay. It studies the PPP rate – the rate at which the currency of one country would have to be converted to that of the other country to buy the same amount of goods and services in each country – to assess placements instead of converting International currencies to their Indian equivalents using the financial exchange rate.
Underlining the PPP rate as a more “realistic way” of assessment, the study says: “Purchasing power parities (PPP) are the rates of currency conversion that are based on equalising the purchasing power of different currencies by accounting for the differences in price levels between countries. Official PPP conversion rates are based on assorted data.”
It gives an example to show the difference between the two methods.
“An annual salary of 4,600,000 Japanese Yen converted using the regular exchange rate is equivalent to 3,000,000 INR, whereas the same salary conversion performed using the PPP exchange rate shows the equivalent salary to be around 800,000 INR,” the study says.
The researchers studied IIT Bombay placement data from 2014-’18 to analyse the nature of jobs undergraduate students at their institute opt for and took into account placement data of 2,109 students, with responses from 269 of them.In 2017, IIT Bombay recorded the highest median gross salary at Rs 76,68,000. The median salary after being adjusted by PPP is Rs 21,57,624. The authors say in the report that they have used median salary for the comparison because, “extraordinarily high or low salaries, which only a few students earn, do not influence the value of the median salary significantly”.
Additionally, the study analysed the buzz created around prestigious international offers during campus placements at IIT Bombay.
Domestic salaries are comparable to international ones except for a few exceptions, the researchers say.
Mehra, the lead author of the report on the study said: “All international offers made during campus placements require the students to shift the base. This means his or her survival expenditure in a foreign country has to be considered. The simple multiplication mode of equivalising would have made sense if the candidate would be earning that salary while staying in India.”
Says the report, “The touted salary packages include base salary, performance bonus, joining bonus and often stock units. The publicized package value is thus a sum of the fixed and variable components. As the salary package data by the Placement Cell does not indicate the actual in-hand salary, these details do not make it to the media which is reporting the huge numbers resulting in popular impressions of highly inflated salary packages.”Data from the study also shows that the international offers have not been more than 10 percent of the total placements and are less diverse in terms of streams than domestic offers, with the “lion’s share of the offers going to Computer Science (CSE) and Electronics (EE) branches”.
Courtesy : The Indian Express