Over 1 bn Indians to make up the middle-class when India will turn 100, finds PRICE survey

As India will turn 100 three years on, the number of Indians in the middle-class category is set to exceed 1 billion, a survey has found.

According to People Research on India’s Consumer Economy (PRICE), an independent, not-for-profit think-tank, the middle-class will make up 1.02 billion of India’s projected population of 1.66 billion by 2047. That’s the year that marks 100 years of India’s independence and its target to emerge as a developed nation.

The strength of the middle-class category stood at 432 million in 2020-21, PRICE said. “By the end of this decade, the structure of the country’s demographics will change from an inverted pyramid, signifying a small rich class and a very large low-income class, to a rudimentary diamond, where a significant part of the low-income class moves up to become part of Middle Class,” it added in the report, The Rise of India’s Middle Class: A Force to Recon With, released on July 5.

The report is based on analysis of primary data collected by PRICE through its ICE 360° pan-India survey. The latest survey is based on 40,000 households from 25 Indian states.

PRICE assumes an annual population growth rate 0.79 percent for India from 2021 to 2031 and 0.51 percent for 2031 to 2047, down from 1.26 percent between 2016 and 2021, to arrive at its estimates. The other key parameters are: 1. Annual household growth (1.47 percent from 2021 to 2031 and 1.04 percent from 2031 to 2047, down from 1.87 percent between 2016 and 2021); 2. Real annual household disposable income growth (6.76 percent from 2021 to 2031 and 6.20 percent from 2031 to 2047, up from 3.47 percent between 2016 and 2021); and 3. Urbanisation rate (39.9 percent from 2021 to 2031 and 50.0 percent from 2031 to 2047, up from 35.2 percent between 2016 and 2021).

PRICE defines a middle-class Indian as one earning between Rs 1.09 lakh and Rs 6.46 lakh per year in the 2020-21 prices. However, there is no universal definition of who falls in the coveted middle-class. This has led to multiple debates and discussions over the years about this category, which is considered to be the “driving force” behind India’s future growth.

“Absolute incomes may well be higher among the rich, but the numerical strength of the Indian middle class suggests that it will become the driving force of the economy, while its aggregate purchasing power will result in the creation of one of the largest markets in the world,” the report said.

Other segments

The number of Indians classed as ‘rich’ – with each household earning more than Rs 30 lakh per year – will rise to 437 million by 2046-47 from 56 million in 2020-21.

According to PRICE, the category of rich Indians which has seen the fastest growth in numbers in the five years ending 2020-21 has been the ‘super rich’ – or those more than Rs 2 crore annually.

At the same time, ‘destitute’ Indian households – making less than Rs 1.25 lakh per year – have decreased only marginally to 45.2 million in 2020-21 from 46.5 million in 2015-16. Worryingly, the poor in urban areas have increased every year in this five-year window by 7.3 percent, while those in rural India have declined by 1.6 percent per year. However, PRICE estimates that the number of destitute households will fall to just 7.2 million by 2046-47.

Also read: Demographic dividend under threat as Indians head back to farms

Usurprisingly, inequality reigns, with 21 percent of those in the destitute income group having jobs which they can lose without a notice. PRICE further found that expenditure of destitute households ends up exceeding their income by about Rs 10,000 in a year, wit long-term indebtedness a major concern” for low-income households.

“Among low-income households, almostt 31 percent of informal borrowers and 37 percent of formal borrowers are unsure as to when they will become debt-free,” PRICE said.