Photo: Sonu Mehta/HT
Photo: Sonu Mehta/HT

Opinion | The big muddle over India’s middle class

The country’s potential as a consumer market has been high on hype since the 1990s. The reality is that it will take a long haul for the middle class to gobble great quantities of goods

Since the early 1990s, India has been viewed globally as the next China, poised to emerge as a massive market for just about everything money can buy. The most fabled part of this emergence story has been the country’s middle class, a group portrayed by many a PowerPoint slide-show as larger than America’s, raring to lead lives of comfort denied in past decades by a mix of socialist policies and cultural austerity. The economy’s liberalization was the point at which old certitudes were tossed aside. Globalization, led by exposure to the West, played its own role. Multinational corporations stormed in. Consumption didn’t just turn proudly conspicuous, it began to boom. As if the soul of a nation long suppressed had found utterance again, and it yearned for material advancement. Nearly three decades on, business leaders who had rubbed their palms in anticipation of sales curves going exponential know better than to take grand figures at face value. The Indian middle class is in no position to rival either China’s or the US’s, and on recent trends, does not even appear to be playing catch-up.

If foreign companies are no longer quite so bedazzled by our consumer product market, it’s partly because India’s growth prospects have dimmed. Less remarked upon is the gap between what the West considers “middle class" and what we do. In the US, a family living in a temperature-controlled house with all the usual durables and a sedan or SUV in the garage would qualify. In the UK, the term itself arose only to distinguish such folk from the poor as well as the aristocracy. Here, it loosely refers to those marked out by education and an acquaintance with English, and while this group has been large and expanding, it’s no match for the West’s on income and lifestyle. Fancy gizmos, snazzy vehicles and holidays abroad are largely for the well-off, an elite that’s still rather small. According to the Credit Suisse Global Wealth Report 2019, just 1.8% of Indians have assets worth more than $100,000, which is less than what a three-bedroom flat would cost in a big city. It also reports that every fifth household has assets worth over $10,000, and if this is taken as our middle class, then that’s some 260 million people, but certainly not among the lot who’d buy an iPhone, say, without blinking.

Income criteria could be used, too. Data from the National Council of Applied Economic Research (NCAER) has been in popular use for estimates. Its definition considers households that earn between 2 lakh and 10 lakh—at 2001-02 prices—annually as middle-class, and this has been used to variously argue that anything from a tenth to over a third of the country is now in this category. What should be clear is that the NCAER income bracket does not describe the sort of homes that marketers can realistically aim upmarket products at. As foreign car makers and other companies have discovered, the Indian income pyramid is steep, rather than the flat sort they are accustomed to in the West, and so sales projections cannot quite be made on the basis of a global template of a market’s emergence. Luxury products have done very well over the recent past. But middle-class products seem to have stagnated in various categories. At this rate, it will take a long haul for the bulk of India to become a vast market.