Bombay Burgernomics

Purchasing-Power-Parity (PPP) is based on the idea that a US dollar should buy the same amount in all countries. In other words the exchange rate between two countries should be the rate that equalises the prices of an identical basket of goods and services in each country.
The Big Mac PPP, an index by the Economist, is the exchange rate that would mean hamburgers cost the same in America as abroad. Dividing the actual exchange rate by the PPP would give the number of times the currency is overvalued.
A Big Mac costs Rs 100 at Colaba. It costs US$ 3.10 in New York. In other words Rs 100 buys me US$ 3.1 worth of goods. Hence US$ 1 would buy me Rs 80/3.1 or Rs 25.81 worth of goods. Hence the PPP would be Rs 25.81 to 1 US$. And ideally this should be the Rs-US$ exchange rate.