New Delhi: India’s middle class is set to emerge as its largest group by 2047, also contributing the most to the nation’s income, according to a report made public this Wednesday by the People’s Research on India’s Consumer Economy (PRICE), a not-for-profit think tank.
The report, titled ‘The Rise of India’s Middle Class’, further projects that India, presently the world’s fastest-growing major economy according to the World Bank, will sustain this position with an average annual economic growth rate of 6-7 per cent until 2047.
The middle-class population is estimated to reach 102 crore out of the projected total population of 166 crore in 2047, constituting approximately 61 per cent, the report predicts. In contrast, the middle-class population stood at 43.2 crore in 2021.
These findings are derived from a statistical analysis of primary data collected through PRICE’s ICE 360 pan-India surveys of 200,000 households conducted across three cycles in 2014, 2016, and 2021.
For the projections in the latest PRICE-ICE 360 report, 40,000 households were selected out of a sample of 2,00,000, which were then divided into eight groups based on annual income at 2020-21 prices. The report further uses population growth, household disposable income growth, and rate of urbanisation to project income distribution for 2030 and 2047.
The survey defined the middle-class as households with an annual income of between Rs 5 lakh and Rs 30 lakh. This category was further divided into “seekers”, or those earning between Rs 5-15 lakh annually, and “strivers” who earn Rs 15-30 lakh.
Similarly, the report classified the wealthy into three income groups: near-rich (Rs 30-50 lakh per annum), sheer rich (Rs 1-2 crore per annum), and super-rich (more than Rs 2 crore).
The households with the lowest income levels were categorised as “destitutes” with an income of less than Rs 1.25 lakh a year, followed by “aspirers”, defined as households earning between Rs 1.25 lakh to 5 lakh per annum.
“By 2047, if political and economic reforms have their desired effect, the India income pyramid will have a smallish layer at the bottom comprising the Destitute and Aspirer groups, a huge bulge of the middle class and a big creamy ‘rich’ layer on top,” says the report.
It further notes that the “average annual household disposable income is set to rise to about Rs 20 lakh at 2020-21 prices” by 2047.
In its projections for 2030, the report says that the country’s demographics will “change to a rudimentary diamond where a significant part of the low-income class moves to be a part of the middle class.”
Notably, the report highlights that the sheer rich and super-rich income groups experienced growth rates exceeding 10 per cent between 2016 and 2021, while the middle class witnessed growth rates ranging from 4 to 7.5 per cent. On the other hand, the destitute category saw a contraction of 0.6 per cent during the same period, indicating upward mobility. However, income inequality in India remains substantial, according to the report.
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Rural India becoming richer
The growth rates of the upper-income classes, including “aspirers” and categories above it, were higher in rural areas than in cities between 2016 and 2021, according to the report.
Super-rich households in rural areas nearly doubled between 2016 and 2021, while other upper-income categories also experienced substantial growth rates of 6-10 per cent.
Destitute households in rural areas decreased by 1.6 per cent during the same period. The report, however, did not outline the reasons for this.
Meanwhile, in urban areas, the destitute category witnessed a significant 7.6 per cent increase between 2016 and 2021. The middle-class and rich households also did not experience as much growth in urban areas compared to rural regions.
The report highlights that the wealthiest households were concentrated in cities, while the poorest were based in villages. However, the other groups, such as seekers, strivers, and the near-rich, were nearly equally divided in rural and urban areas.
Illiteracy on decline
Rich households registered a higher percentage of graduates, while destitute households had the highest percentage of illiterate individuals, according to the report. However, even within destitute households, only 15 per cent qualified as illiterate, with 37 per cent having received education up to the primary school level.
“The linkage between education and income is very evident. As families rise up the income ladder, education levels also rise,” says the report.
The link between education and improved job prospects becomes even more pronounced when considering the primary source of income for rich households.
With the growing presence of the private sector in the country, salaried private jobs have emerged as the largest income source for middle-class and rich households, says the report. Public sector jobs are not far behind, and self-employed businesses also form a major chunk of the income for the rich categories, the report adds.
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Income inequality still high
Wealth inequalities become evident through spending patterns and access to amenities across different income groups, as highlighted by the report.
“The huge inequality that exists between poor and rich households is evident in their annual average spending,” says the report.
In 2021 on average, a poor household spent Rs 82,300 a year against Rs 20.47 lakh per annum in a rich household – almost 25 times more, according to the ICE 360 survey’s data.
While poor households spent an average of around 67 per cent of their income on food in 2021, this was only 51 per cent for the middle class and 44 per cent for the rich. This suggests the heavier burden on poor households when it comes to meeting basic needs.
In stark contrast, the rich focus around 50 per cent of their income on discretionary expenses such as holidays, consumer goods, and higher education, the report adds.
As for the middle class, they make up the “country’s biggest contributor in terms of income, spending, and savings,” it claims.
“Although marketers and companies looked at this class from a purely economic perspective, their emergence has impacted the socio-cultural fabric of the nation,” the report adds.
Poor have mobiles, not water & toilets
While electricity connection has experienced significant growth, access to safe drinking water remains a “luxury” that only the middle class and the rich can afford, according to the report.
In 2021, only 30 per cent of destitute households had access to tap water, and over 50 per cent either lacked toilets or had toilets without running water, the report said.
However, inequality is somewhat bridged when it comes to digital connectivity. The report indicates that 85 per cent of destitute households own mobile phones, and at least 39 per cent have internet access. Furthermore, most people have access to electricity, with 90 per cent of poor households having ceiling fans.
(Edited by Smriti Sinha)
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