Douwe Osinga's Blog: Priceless India

Sunday, March 9, 2008

India is by all means a lot cheaper than Switzerland. Sure, things in Switzerland are more reliable, cleaner and generally of higher quality, but it doesn’t close the gap. I think the World Bank puts it a factor 4.5 or so and seems about right. It’s 39 rupees to a franc these days, but if you pretend it is 10 to a franc, prices seem somewhat comparable.

India is not always that cheap though. If you are tall and white, prices sometimes change. Major sites are still quite often dually priced. Locals pay 10 rupees, foreigners pay 2 dollars or 100 rupees (which isn’t the same, but those prices believe in the eternal 1 dollar is 50 rupees). And if you think that that isn’t fair since the income gap between the average Indian and the average American isn’t a factor ten, you are right of course. It is way more.

Rickshaw drivers of course have their own multiplier, or really it seems to be a constant. Usually when I ask they say it is 150 rupees, independent on how far it is. Whether this is because they think this is a nice price for a white guy, or whether they usually don’t really understand where I want to go and 150 should get me anywhere isn’t totally clear to me.

Touts, according to Lonely Planet are another factor that drive up prices. They pick you up at the bus stop or train station and guide you to a hotel, seemingly for free and are paid a commission by the hotel for the favor. Sometimes taxi drivers double as touts too and not just for hotels. Tourist shops do this sort of thing too. Often taxi drivers are quite open about it and agree to knock off a little from the price if you visit a shop for 10 minutes. ‘No pressure to buy, just look’

I thought about whether Lonely Planet is right about that this adds to price. I think it depends on the deal the taxi driver has, that is, if the taxi driver gets a fixed amount per visitor he brings, then the price should remain the same. For the shop the money paid to the taxi is ‘sunk-cost.’ Whether I walk in alone or with the taxi doesn’t matter once I am there; the shop wants to maximize their profit in either case so will do the same thing.

If the taxi gets a percentage of the total price, things are different. Now taxi drivers margin is paid out of whatever I pay, so most likely the price will have to go up (if however the shop keeper makes a deal where the taxi driver only gets a percentage of anything I pay over say 100 rupees, the price might actually go down). The lesson is clear: ask the driver what the structure of the deal is before getting in.