Consider these statistics.
The middle class is the fastest-growing main segment of the Indian population in percentage and absolute terms, increasing at a rate of 6.3% annually from 1995 to 2021. It currently accounts for 31% of the population and is projected to reach 38% by 2031 and 60% by 2047. When India turns 100, the middle class will consist of more than one billion people. These figures are derived from PRICE ICE 3600 surveys utilising primary data sources.
Now, consider.
Today, Western multinational corporations, particularly those in the FMCG industry, travel to India in search of volume development. India's market size exerts a powerful draw. Imagine when, in addition to even greater volumes, they come to India in search of profit margins; such a massive middle class will undoubtedly provide India with enormous purchasing power and the capacity for enormous discretionary spending.
Imagine domestic companies effortlessly expanding into international powerhouses, aided by enormous domestic scale. Increasing disposable incomes and the rise of the middle class will transform India into a consumption juggernaut.
Imagine that more than half of India's population is middle class, with a typical middle-class preference for quality education and a typical middle-class mentality of striving cautiously, steadily, but resolutely to make a class leap. Such a large number of college-educated professionals will undoubtedly unleash massive innovation and enterprise.
That would be the equivalent of a dozen Bengalurus sprouting throughout India, with mohallas likely possessing their own unicorns. Add a dozen Hyderabads, where Indian technologists will not perform menial tasks for the world's largest corporations. They will not manage the back offices, but rather the cerebral offices.
Class and religious conflicts that have a negative impact on India's economic potential are likely to lose their potency as the middle class comes to dominate political discourse. Politics, particularly electoral politics, will likely revolve around middle-class concerns like health, education, infrastructure, and employment. As urbanisation increases, ancient forms of social affiliations such as caste will weaken, creating an egalitarian India and empowering a significant portion of India's population that is currently bound by limiting discourses.
When the pyramid of India transforms into a diamond
The People Research on India's Consumer Economy (PRICE), an independent, non-profit think tank and facts tank, collected primary data for its PRICE ICE 360° surveys in 2014, 2016, and 2021, encompassing over 40,000 rural and urban households from 25 states. The findings depict an entirely new portrait of India.
According to the survey, by the end of this decade, the structure of the country's demographics will shift from an inverted pyramid, indicating a small rich class and a very large low-income class, to a rudimentary diamond, in which a significant portion of the low-income class moves up to join the Middle Class.
As a result, the income pyramid will have a thin layer at the bottom consisting of the Desti- tute and Aspirer groups, a massive bulk of the Middle Class, and a thick layer of Rich individuals on top. The growth rate is significantly greater for the upper income groups than for the lower income groups. In fact, the growth rate for the lowest income categories could be negative.
Aspirants, the middle class, and the wealthy
The population of the Destitute and Aspirer categories is projected to decrease from nearly 928 million in 2020-21 to 647 million in 2030-31 and then to 209 million in 2046-47, according to the survey estimates. The top income segment – the Rich – will increase from 56 million to an estimated 169 million and 437 million by 2046-47, while the Middle Class will increase from 715 million in 2030-31 and 437 million in 2020-21 to nearly 1.02 billion in 2046-47.
Strivers, a subset of the Indian Middle Class with an annual household income between Rs 15 lakh and Rs 30 lakh, grew at a rate of 6.4% per year between 2015-2016 and 2020-2020. During this time period, the Seekers, a subset of the Middle Class earning between Rs 5 lakh and Rs 15 lakh annually, have grown by 4.8% annually.
Despite the fact that the Middle Class has grown at a rapid rate, the most significant fact is that the Rich have grown even more swiftly. For example, the number of Super Rich households earning over Rs 2 crore in 2020-21 has increased from 1.06 million households (6.1 million consumers) in 2015-16 to 1.81 million households (10.2 million consumers) in 2021.
This represents an annual increase of 11,3 percent. Even more rapidly, the number of Super Rich households is projected to increase to 9.1 million households (46.7 million consumers) by 2030-31, and to 32.7 million households (150 million consumers) by 2046-47. In 2020-21, it is estimated that the category of the Rich, or those with a family income of over Rs 30 lakh, will consist of approximately 11 million households with 56 million consumers, compared to approximately 7 million households with 37 million consumers in 2015-16. This will increase to 35 million households and 170 million consumers by 2030-31. In addition, by 2046–2047, there will be 100 million households and 437 million consumers.
Between 2015-16 and 2020-21, the number of destitute households, or those with an annual family income of less than Rs 1.25 lakh at prices for 2020-21, has decreased marginally. By 2030, the number of such households will decrease to approximately 20 million, and by 2046-47, it will fall to 7.2 million, primarily in rural India. As a result of slower income growth for urban households between 2015-16 and 2020-21, the proportion of urban middle-class households decreased from 56% in 2015-16 to 52% in 2020-21.
The development of the middle class
Absolute incomes may be higher among the wealthy, but the numerical strength of the Indian middle class suggests that it will become the driving force of the Indian economy, while its aggregate purchasing power will create one of the world's largest markets, according to a survey. The discretionary spending power of this expanding segment of the population could stimulate investment and generate employment, thereby bolstering economic growth.
The implications will be significant if reforms are implemented and India's middle class grows to more than one billion people, according to the survey. The middle class plays a crucial role in the social and economic fabric of a country because it engages in a greater variety of economic activities than any other segment of the population. The middle classes function as employers and employees, consumers and producers, and political change agents. This is especially true in the West, where the middle class is indispensable to the functioning of democracy.
Comments