Indian middle class, defined as households earning between Rs 5 lakh and Rs 30 lakh annually, currently accounts for 31% of India’s population. However, this number is expected to surge to 60% by 2047, according to Rediffusion’s ‘Rising to a Billion’ report.
The shift signifies not just financial stability for millions but also an evolving consumer base that is set to power India’s growth in the decades to come.
According to the report, the middle class has grown at an average annual rate of 6.3% from 1995 to 2021. The rapid rise of this economic segment is fueled by increasing incomes, urbanization, and greater access to education and technology.
By 2031, it is projected to comprise 38% of the population, playing an increasingly dominant role in shaping market trends and consumer behaviour. India’s consumer spending will jump from $1.9 trillion to $5.2 trillion by 2031, with the Middle Class driving 55% ($1.82 trillion) and rich households contributing 31% ($1.03 trillion).
Indian Middle Class: Global Consumer Powerhouse
As the middle class expands, it is set to transform India into a global consumption powerhouse. The demand for goods and services, from daily essentials to premium products, will skyrocket.
Domestic and international businesses are already taking note of this shift, investing heavily to cater to this segment’s evolving aspirations. From housing and automobiles to education and healthcare, industries across the board will witness a surge in middle-class participation.
The middle-class population comprises two key segments: seekers (Rs 5 lakh – Rs 15 lakh) prioritizes essentials such as food, education, and healthcare, ensuring basic financial security for their families. ‘Strivers’ (Rs 15 lakh – Rs 30 lakh), meanwhile, focuses on home ownership, premium goods, and access to better educational opportunities.
Challenges Looming Over Growth
Despite this rise in spending power, financial pressures persist. The increasing costs of living, inflation, and stagnant wages have become major hurdles, limiting discretionary spending and long-term savings, the report highlighted.
Inflation and Stagnant Wages
Inflation remains a pressing concern, with food inflation hitting 9.7% in 2023. Corporate profits have been rising faster than wages, leading to financial stress among middle-class households.
Rising Debt Burden
Household financial savings have plummeted from 11.5% of GDP in 2021 to just 5.1% in 2023, as more families rely on loans to manage expenses.
Skyrocketing Healthcare and Education Costs
Healthcare expenses are rising at an alarming rate of 14% annually, with 62% of medical costs being out-of-pocket. Education, another major expense, takes up 20-30% of an average family’s annual income, making quality schooling increasingly unaffordable for many.
Housing Affordability Crisis
The dream of home ownership is becoming more elusive, with property prices surging by 46% over the past four years. This has put enormous financial strain on middle-class families seeking stability through real estate investments.
Job Insecurity in a Changing Economy
According to the report, a major challenge looming over the middle class is job security. A staggering 47% of Indian employees fear job loss, especially in sectors heavily impacted by automation and artificial intelligence, such as IT and manufacturing. The COVID-19 pandemic exacerbated this insecurity, pushing millions into economic hardship, from which many are still struggling to recover.
Call for Policy Intervention
Experts emphasize that addressing these challenges is critical to ensuring the sustainability of India’s middle-class expansion. The report underscores the need for targeted policy interventions in areas such as:
Job Creation: Government and private sector initiatives must focus on creating stable, well paying employment opportunities to counter job insecurity.
Inflation Control: Economic policies must tackle inflation to protect household purchasing power and ensure sustainable growth.
Affordable Healthcare and Education: Stronger government investment in public healthcare and education is necessary to relieve financial pressure on middle-class families.
Fair Taxation: A balanced tax policy that does not disproportionately burden the middle class is essential to maintaining financial stability.