Simone Lawson
India's middle class is a complex and evolving socioeconomic group, with income levels that vary significantly across regions. The definition of the middle class in India is often debated and carries different meanings in different contexts. While middle income typically refers to a household's level of income, the middle class is associated with a certain level of education, lifestyle, and consumption patterns. This group's purchasing power has increased, with rising disposable incomes and access to credit, enabling them to afford premium lifestyles. However, stagnant earnings and inflation have also burdened this group with household debt. The middle class in India is a diverse and dynamic segment of society, navigating financial aspirations and constraints, and their purchasing power and economic status have implications for the country's economic growth.
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What You'll Learn
Middle-income vs middle class
In India, the middle-income group is defined as households with an annual income between 7.5 and 15 lakhs INR. However, the definition of the middle class takes into account not only income but also social and economic status, lifestyle, and consumption patterns. According to a 2021 report, the Indian middle class consists of 31% of the population who earn between 5 and 30 lakhs per annum. This discrepancy between the definitions of middle-income and middle-class groups highlights the fact that a person or household can be in the middle-income group without necessarily being part of the middle class.
The middle class is often associated with a certain level of education, lifestyle, and consumption patterns. They typically have access to a range of amenities such as healthcare, education, and housing, and are employed in white-collar jobs. In India, the middle class is defined as households with an annual income between 6 and 18 lakhs INR, although some sources place this definition at between 5 and 30 lakhs per annum.
The distinction between middle-income and middle class is important in determining the economic growth of a country like India. As a country's income level increases, the income elasticity of car ownership increases, and eventually declines as it transitions to a high-income country. This phenomenon is known as the "middle-income trap". In India, the number of registered motor vehicles grew at a CAGR of 8.3% from 2012 to 2022, outpacing the CAGR of GDP during the same period, which was around 5.5%. This indicates that car ownership has increased faster than income growth, potentially due to rising disposable incomes and easier access to credit.
While India's middle-income group is growing and becoming more prosperous, there is still a significant gap between this group and the middle class. This gap presents a challenge for India's economic growth and development. The issue of stagnant earnings and the impact of inflation on middle-class incomes further complicate the situation. As the middle class strives to maintain their lifestyle, household debt levels have become a concern for the RBI.
In conclusion, while the terms "middle income" and "middle class" are often used interchangeably, they refer to distinct concepts in the Indian context. Middle income refers primarily to a person's or household's level of income, while middle class encompasses social and economic status, lifestyle, and consumption patterns. Addressing the gap between these two groups is crucial for India's economic development, and understanding the unique challenges faced by each group is essential for effective policymaking.
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Income thresholds
The definition of "middle class" in India is complex and subjective, and it is constantly evolving. While income is a crucial factor, the term "middle class" in India also encompasses broader economic and social factors, such as financial security, savings, and discretionary spending. The cost of living varies significantly across India's regions, with cities like Mumbai and Delhi having much higher living costs than rural regions. This means that the income required to maintain a middle-class standard of living differs greatly depending on where one lives.
Various organisations have proposed different income thresholds for defining the middle class in India. The National Council of Applied Economic Research (NCAER) defines middle-class households as those earning between Rs 5 lakh and Rs 30 lakh per year (around $6,000 to $36,000). However, a 2021 report found that 31% of the population who earn between 5 and 30 lakhs per annum comprise the Indian middle class. The Household Consumption Expenditure Survey suggests that the middle 30% only spend around 2.3 lakhs annually.
The World Bank provides a global framework for income classification, but it may need to be adapted to local realities in India. According to the World Bank, a person with an income of between $1,036 and $12,615 per year is considered to be in the middle-income group. In India, the middle-income group is often defined as households with an annual income between INR 7.5 lakh and INR 15 lakh. However, some sources state that the middle class in India includes households with an annual income between INR 6 lakh and INR 18 lakh.
It is important to note that the terms "middle income" and "middle class" are not interchangeable. Middle income refers specifically to a person's or household's level of income, while middle class encompasses social and economic status, including factors such as education, lifestyle, and consumption patterns. In India, there is a significant gap between the middle-income group and the middle class. According to a report by the Reserve Bank of India (RBI), only about 30% of the middle-income group is part of the middle class.
Additionally, India's unorganised sector, which employs a large portion of the workforce, presents challenges due to the lack of documented income, making standard economic measures less effective. This further complicates the definition of the middle class in India.
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Economic and social status
In India, the terms "middle income" and "middle class" are often used interchangeably, but they have different meanings and implications for economic growth. Middle income refers to a person's or household's level of income, while middle class refers to their social and economic status, which includes their level of education, lifestyle, and consumption patterns.
There are various definitions and income thresholds for what constitutes the middle class in India. According to a 2021 report, 31% of the population who earn between 5 and 30 lakhs per annum comprise the Indian middle class. The Household Consumption Expenditure Survey, on the other hand, suggests that the middle 30% only spend around 2.3 lakhs annually. The National Council of Applied Economic Research (NCAER) defines middle-class households as those earning between Rs 5 lakh and Rs 30 lakh per year (around $6,000 to $36,000). The Pew Research Center defines the middle class as households with an annual income between INR 6 lakh and INR 18 lakh, while the World Bank and the National Statistical Office (NSO) define the middle-income group as households with an annual income between INR 7.5 lakh and INR 15 lakh. The upper middle class typically includes households with an annual income between INR 20 lakh and INR 50 lakh.
The middle class in India is associated with certain aspirations and lifestyles. They are usually able to afford a range of amenities such as healthcare, education, and housing, and may aspire to invest in luxury items, premium lifestyles, and international travel. The rise of disposable income, access to easy financing, and global exposure have redefined the aspirations of the Indian middle class. They value comfort, convenience, and status symbols, and are willing to pay for premium amenities, contemporary designs, and sustainable living solutions. This is particularly true for younger consumers, who are driving the trend towards premiumisation and boutique experiences.
However, it is important to note that the concept of the middle class in India cannot be strictly confined to income percentages due to regional disparities, inflation, and the varying cost of living across regions. The income needed to maintain a middle-class standard of living in cities like Mumbai and Delhi, where living costs are high, is significantly greater than in rural regions. Additionally, the unorganised sector, which employs a large portion of India's workforce, presents challenges due to the lack of documented income, making standard economic measures less effective.
In conclusion, while there are various definitions of the middle class in India based on income thresholds, the middle class in India is also characterised by their social and economic status, which includes their level of education, lifestyle, and consumption patterns. As India continues to develop, bridging the gap between the middle-income group and the middle class will be crucial for the country's economic growth and development.
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Financial security
The concept of the middle class in India is complex and cannot be strictly confined to income percentages. It is associated with a certain level of education, lifestyle, and consumption patterns. Financial security is a crucial aspect of being middle class, as it enables individuals and families to withstand economic shocks without falling into destitution. This includes having sufficient savings, such as at least six months' worth of expenses set aside, and maintaining adequate health and term insurance.
In recent years, the rise of disposable income, access to easy financing, and global exposure have transformed the aspirations of India's burgeoning middle and upper-middle classes. They increasingly seek experiences that exude exclusivity, quality, and status, such as upgrading to luxury SUVs, investing in designer fashion, or choosing high-tech gadgets. This shift is particularly pronounced among younger consumers, who prioritize self-investment in boutique fitness, gated communities, and sustainable products.
However, it is important to note that the cost of living varies significantly across India's regions. A family's income might afford them a comfortable life with savings in a Tier 2 city, but it may barely cover basic expenses in a metropolitan city like Mumbai or Bengaluru. This regional disparity makes defining the middle class based solely on income challenging.
The Indian middle class is often defined by various income thresholds, with some sources stating that households earning between Rs 5 lakh and Rs 30 lakh per year (around $6,000 to $36,000) are considered middle class. Other sources suggest a range of Rs 6 lakh to Rs 18 lakh, or Rs 7.5 lakh to Rs 15 lakh, for middle-class households. These discrepancies highlight the evolving nature of the middle class in India and the need for a comprehensive framework that considers broader economic and social factors beyond income.
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Disposable income
The middle class in India is defined as households with an annual income between INR 6 lakh and INR 18 lakh, though some sources state that the range is between INR 7.5 lakh and INR 15 lakh. According to a 2021 report, 31% of the population who earn between 5 and 30 lakhs per annum comprise the Indian middle class.
The rise in disposable income in India has led to a shift in consumer behaviour, with middle-class families embracing premium lifestyles. This is evident in the growing market for luxury SUVs, designer fashion, and high-tech gadgets. The increase in disposable income has also contributed to the growth of the tourism industry, with more Indians engaging in foreign travel and seeking international experiences.
In recent years, there has been a significant increase in the number of middle-class households in India. Between 2001 and 2017, the number of middle-class households increased from 49 million to 140 million. By 2025, India's middle class is expected to reach 583 million if high economic growth is maintained and the government undertakes reforms. This growth in the middle class has been driven by increased disposable income, which has enabled families to purchase non-essential items and services.
However, it is important to note that middle-income households in India are not necessarily part of the middle class. The middle class is associated with a certain level of education, lifestyle, and consumption patterns. They typically have access to a range of amenities such as healthcare, education, and housing. While the middle-income group in India is growing and becoming more prosperous, there is still a significant gap between this group and the middle class.
The increase in disposable income among India's middle class has had a significant impact on the economy. With higher disposable incomes, middle-class consumers are expected to play a more critical role in the global economy by increasing their consumption of consumer goods, improving healthcare, and providing more for their children's education. This phenomenon is not unique to India and is also observed across other nations.
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Frequently asked questions
There is no clear consensus on the income level that constitutes the middle class in India. Various sources provide different income thresholds, ranging from INR 5 lakh to INR 18 lakh per annum. The National Council of Applied Economic Research (NCAER) defines middle-class households as those earning between INR 5 lakh and INR 30 lakh annually. The World Bank classifies the middle-income group in India as households with an annual income between INR 7.5 lakh and INR 15 lakh. According to a report by the Pew Research Center, the Indian middle class consists of households earning between INR 6 lakh and INR 18 lakh per year.
The definition of middle class in India goes beyond income and encompasses broader economic and social factors. These include financial security, savings, discretionary spending, lifestyle, and consumption patterns. The cost of living varies across different regions, with higher living costs in cities like Mumbai and Delhi, which influences the income needed to maintain a middle-class standard of living.
The ambiguity in defining the middle class in India has sparked debates and discussions. Some argue that the concept of a large middle class in India is questionable due to income disparities and the widening gap between the rich and the poor. The blurring of income brackets and the evolving economic landscape in India have further complicated the traditional classifications of middle class.
