GREAT INDIAN MIDDLE CLASS
India's middle class is rapidly acquiring critical mass wherein it will influence the way the country earns, spends, invests and votes. EPISODE #99
Dear Reader,
A very Happy Monday to you.
Last week I had flagged the new report by PRICE (People Research on India’s Consumer Economy) as part of the story on ‘India’s Techade’. The PRICE report revealed that the already sizeable Indian middle class was poised to nearly double in the next decade. Thereafter it will grow to a staggering 1 billion by 2047.
As a follow-up I interviewed Rajesh Shukla, the CEO and Managing Director of PRICE, for this week’s episode on StratNews Global. The conversation triggered so many new insights. I figured the topic may be worth revisiting. Especially since the middle class is the force multiplier in any economy.
So this week I return to the topic of the Great Indian Middle Class, its rapid rise and what it means for a country which has long flattered to only disappoint. Do read and share your feedback.
The cover picture this week is sourced from Unsplash and is clicked by Anurag Gautam. You may recall the picture used to be a familiar sight in Delhi in the 1970s and 1980s, when personal mobility, especially that enabled by Hamara Bajaj, was the calling card of middle class aspirations—guess the story endures as aspirations gather flight.
You would be glad to note that last week’s newsletter, India’s Techade, did exceptionally well. Glad that it resonated with so many readers.
A big shoutout to Lakshmisha, Balesh, Gautam, Abhijit, Premasundaran, Aashish and Vandana for your informed responses, kind appreciation and amplification of last week’s column. Gratitude also to all those who responded on Twitter and Linkedin. Reader participation and amplification is key to growing this newsletter community. And, many thanks to readers who hit the like button😊.
INDIA’S MIDDLE CLASS CHECKS IN
In the last few weeks two research reports have held up a mirror to the fundamental demographic pivot underway in India. Something that rarely draws attention in mainstream media.
The first was the 2022 report on global poverty released by the United Nations Development Programme (UNDP), the designated UN body to lead the fight against poverty across the world. Among other things, it revealed that India had successfully lifted 415 million out of poverty in 16 years ended 2021—to be sure it was a confirmation of what a section of Indian academics had been arguing.
And then there was the PRICE (People’s Research on the Indian Consumer Economy) report, which disclosed that India’s middle class would nearly double to 715 million by 2030-31. It doesn’t stop there. It goes on to argue that this cohort would grow to a staggering 1 billion by 2047.
Actually, you have to see both revelations together. Then you would realise that India is trading up.
Many among the poor—the largest cohort for the last 75 years—are escaping poverty, even as some of them are going on to ascend the social ladder to join the middle class—which in any case has got many layers and is not a homogenous entity.
A structural makeover of this magnitude is rare and has huge attendant implications—especially for the polity of the country and its consumer economy. The only other example that comes to mind is China, where it powered the economic makeover while miraculously preserving its inherited polity.
Exactly why countries and foreign companies are queueing up to invest in India. They are betting on a future when this cohort would grow several times over and generate unprecedented purchasing power.
Morgan Stanley, the global financial services firm, acknowledged this formally when they argued that the next decade was India’s. I wrote about in detail last week. Sharing the link below if you wish to read it afresh.
The Significance
The middle class has always been considered to be the source of dynamism of any economy. Unlike the poor they enjoy surplus income. Freed of the drudgery of poverty, their aspirations get flight—which only feeds on itself.
As a guest for my upcoming episode (telecast is scheduled this Thursday at 7 pm) on StratNews Global, Rajesh Shukla, the CEO and MD, explained that the origins of the middle class date back to the BC era.
According to him, it was the Greek philosopher Aristotle who flagged the importance of this cohort. He identified three outstanding characteristics:
The middle class defines and drives the polity;
(Aware of rights) their presence ensures good governance;
And, a large middle class creates and influences the space for dialogue and hence minimises conflicts.
In contemporary society the middle class is also the backbone of the consumer economy. They influence and shape it.
And as Rajesh puts they play a critical social role too:
“If the middle class is large then they are a cementing agent in the society, which link the poor to the rich.”
Shrinking Aspirational Disconnect
The PRICE report also makes some interesting revelations.
For example ownership of a mobile or access to the Internet is no longer the preserve of a few. In the post-Jio world the price of data has plunged (India probably provides the cheapest data in the world). This combined with the spread of broadband even to rural India meant that Internet access is no longer the preserve of metros.
At the same time the price of handsets have dropped, a secondary market for used mobiles has emerged enabling easier ownership. The numbers speak for themselves.
The PRICE report reveals that in terms of mobile ownership there is near saturation across all cohorts, including the poorest of the poor.
However, in the case of Internet access the divide persists—but as PRICE reveals it is smaller than what we have come to believe anecdotally.
Connect the dots and you have what Morgan Stanley coined in its report: reduction of aspirational disconnect.
“Social media creates aspirations and e-commerce fulfills them. Earlier, having a large retail presence was restricted to major cities.
Today, large e- commerce companies cover more than 80% of pincodes, making access to products easier for smaller towns.
The gap between urban and rural consumers is narrowing due to rising incomes (partly from direct benefit transfers) and financial penetration, as well as access to information given rising digital adoption. This, in our view, is reducing the aspirational disconnect of the past.”
The PRICE report too alludes to this shrinking of the rural-urban divide. In fact, Rajesh dwells on it in fair detail in the interview.
In the final analysis it is clear that India is in the midst of profound changes. Among them the most striking is the rise of the middle class and shrinking of absolute poverty.
Yes it is great news for the consumer economy. Frankly, I am more excited about the promise—which some readers flagged last week in the comments section—of a more responsible polity that makes accountability (both for citizens and politicians) non-negotiable.
Not only will it strengthen Indian democracy—the largest in the world—it will also enable a fairer framework to negotiate crucial trade-offs (like development vs environment) as India embarks into unprecedented territory.
Recommended Viewing
Sharing my latest post on StratNews Global.
This time it was on how India has evolved a new playbook to break into the lucrative business of space.
The guest last week was Narayan Prasad, COO, Satsearch—the Netherlands-based firm trying to build the global marketplace for the space industry.
Very patiently Narayan unpacked the importance of the latest satellite launch by the Indian Space Research Organisation. From what he laid out before us it is clear that the moolah is in the downstream and not the satellite launch business.
It was heartening to note that there are about 175 Indian start-ups that have already lined up to take a stab at the commercial opportunity thrown up by the new contours of the space economy. In fact, Hyderabad-based Skyroot Aerospace is poised to launch India’s first private rocket.
Do watch the conversation and share your feedback. Sharing the link below:
Till we meet again next week, stay safe.
Informative article with very interesting analysis!!
Interesting follow up to last week's article Anil, as more information on the subject has been shared. Successive US Presidents before Biden, have commented on the rapid growth of the middle class in India; hence this important development has been under discussion in knowledgeable groups. Added to the growth of the middle class in India, is their savings and small and sometimes substantial amounts of gold jewelry which can give an additional boost for investment when the mindset changes to utilize the hidden potential. FM in her budget has obliquely touched upon the hidden potential in the hands of the vast number of middle class people. A very well written and composed article Anil. 👏