India, a nation of nearly 1.4 billion people, is often perceived as a massive consumer market ripe with opportunities. However, a close examination of consumption trends reveals a far more concerning picture. A new report from Blume Ventures highlights that nearly a billion Indians lack the disposable income necessary for discretionary spending, leaving only about 130-140 million individuals – a population comparable to Mexico – as the true consuming class. This stark economic reality raises significant concerns about the sustainability of India’s consumer-driven growth narrative.
A Narrowing Consumer Market
While an additional 300 million Indians are classified as ‘emerging’ or ‘aspirant’ consumers, their spending habits remain cautious. The advent of digital payment systems has facilitated transactions, but these consumers are only beginning to open their wallets. More troubling is the finding that India’s consuming class is not widening but deepening. This means that while the wealthy are accumulating more wealth, the overall size of the affluent consumer base is not expanding at the expected rate.
This trend has resulted in an increased focus on ‘premiumisation’ – brands are shifting their strategies towards catering to the affluent few rather than the broader population. The impact of this shift is evident in the booming sales of ultra-luxury gated housing and premium smartphones, while lower-end variants struggle to find buyers.
The share of affordable homes in India’s overall housing market has plummeted from 40% five years ago to just 18% today. Similarly, branded goods are claiming a larger market share, and the ‘experience economy’ – marked by the selling out of exorbitantly priced events of international artists such as Coldplay and Ed Sheeran – is flourishing, despite the high ticket costs.
The Widening Inequality
The report further reinforces the widely accepted notion that India’s post-pandemic economic recovery has been K-shaped – where the rich have become wealthier while the lower-income groups have suffered a decline in purchasing power. However, this trend predates the pandemic and therefore highlights a deeper, structural issue. Since 1990, Indian has significantly more unequal. The top 10% of the population now controls around 57.7% of the national income, up from 34% in 1990, whereas the bottom 50% has seen its share shrink from 22.2% to just 15%.
A major contributor to this widening wealth gap is the stagnation of middle-class incomes. According to data from Marcellus Investment Managers, wages for the middle 50% of India’s tax-paying population have remained flat in absolute terms over the past decade, effectively halving their real-time income when adjusted for inflation.
This financial strain has led to a drastic decline in household savings with the Reserve Bank of India (RBI) warning that net financial savings among Indian households are approaching a 50-year low. As a result, products and services traditionally associated with middle-class consumption are likely to face significant challenges in the coming years.
Job displacement
The middle-class squeeze is further exacerbated by job losses and stagnation in the white-collar employment. The Marcellus report highlights that AI and automation are increasingly replacing clerical, secretarial, and other routine roles, leading to a reduction in supervisory positions within the manufacturing sector.
The government’s recent economic survey has also raised alarms about labor displacement, particularly in India’s service-driven economy, where a large portion of the workforce is engaged in low-value-added IT services that are most susceptible to technological disruption.
This shift in employment dynamics poses a significant threat to India’s long-term economic stability. As the country relies heavily on domestic consumption, a decline in disposable incomes due to job losses and automation could have severe macroeconomic implications. India’s economic growth trajectory is expected to be severely disrupted if these worst-case projections materialize, threatening the aspiration of millions who are already struggling to maintain their financial standing.
Manbilas Singh is a talented writer and journalist who focuses on the finer details in every story and values integrity above everything. A self-proclaimed sleuth, he strives to expose the fine print behind seemingly mundane activities and aims to uncover the truth that is hidden from the general public. In his time away from work, he is a music aficionado and a nerd who revels in video & board games, books and Formula 1.
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