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Manish Swarup/Associated Press
A rainbow over the skyline in Mumbai, Friday, Sept. 7, 2012.

Indians might find this hard to believe, but a recent report labeled Mumbai and Delhi as two of the world’s cheapest major cities to live in.

Mumbai shares the title of the world’s cheapest city with Karachi, in Pakistan, according to the “Worldwide Cost of Living 2013” survey by the Economist Group’s Economic Intelligence Unit.

Delhi is right behind, at 129 on the list of 131 cities. After Delhi comes Algiers, Bucharest, Colombo and Panama City, the report says.

Income inequality is one of the reasons why India ranks low, the report says. Because per person spending is low in Indian cities and many people can’t afford expensive goods, there is a smaller increase in prices than in Western countries, the report says.

The study compared prices consumers pay for goods and services in “supermarkets, mid-priced stores and higher-priced specialty outlets.” The list includes food, clothing, household supplies, housing rent, transport and utility bills, private schools, domestic help and recreational costs, converting them into U.S. dollars. The cost of living index is calculated with New York as the base of 100.

The study found that Mumbai, with a cost of living index of 44, has one of the lowest average prices for a loaf of bread ($0.86) and a pack of 20 branded cigarettes ($1.79). In Tokyo, the most expensive city with a cost of living index of 152, the average price of loaf of bread is $9.06 while a pack of branded cigarettes is $5.57.

According to the report, the five most expensive cities in the world are Tokyo and Osaka in Japan, Sydney, Oslo and Melbourne.

The report found that Asia is home to more than half the world’s 20 most expensive cities. Six of the cheapest cities are also in Asia, it says.