Invisible Indian middle class

Indian Middle Class

When Indian story is compared with the China story, a major source of optimism is India’s rapidly growing middle class which offers immense opportunities to the players who are facing the challenge of dwindling demand in China or who completely missed the China train. Still, a lot of people doubt this Indian middle-class opportunity narrative and questions given the meagre disposable income for a large section of the population, can middle class actually drive the growth wagon?

There has been a persistent debate about size and potential of Indian middle class and multiple views have emerged about what constitutes Indian middle class and what it has to offer to the country and the rest of world.

How Large is India’s Middle Class

Once described as ‘Bird of Gold’ opportunity by McKinsey, Indian middle class has different meanings for different stakeholders. Back in 2011, National Council for Applied Economic Research had put the size of Indian middle class to be at 267 million in 2016 and then more than double to 547 million individuals by 2025. Recently HSBC estimated around 300 million Indians to be part of the global middle class. Most management consultants agree that Indian middle-class today stands somewhere between 300-400 million individuals.

The Optimism Angle

India appeared at the top of The Credit Suisse Emerging Market Consumer Survey 2017 indicating a high level of consumer confidence and a shift from non-branded to branded consumption typical symptoms of middle-class consumption pattern. The year 2018 witnessed entry of global giants like Walmart and Ikea in Indian consumer goods market and a renewed push by existing players like Amazon demonstrating their high level of confidence in Indian middle class’ ability to generate demand and drive their graphs exponentially upward.

As millions are pulled out of poverty because Indian governments’ sustained efforts at poverty alleviation and middle-class incomes surge, Indians are spending more and more on attainable comforts. They are buying more and more consumer durables, fast moving goods and services like travelling, eating and amusement. This has resulted in sustained strong growth in these segments.

Most global leaders in new-age commerce like Apple, Facebook, Uber, Alibaba etc are upbeat about this growth story. More and more investment is being committed by these players. Amazon had committed a $5 billion tranche to reinforce their presence. And others are following the lot. Domestic players are already scaling up their operations with more players entering organized retail space and boosting their research and development expenditure to match the Indians’ enhanced taste for finer quality and appetite to buy bigger, better and more.

The players who had in the past enjoyed a fast-growing economic scenario in China and South-East Asia like Samsung, Lenovo, Xiaomi are camping in India in search of greener pastures. They are establishing their manufacturing and research and development facilities in India to get the maximum of this opportunity. This is going to result in a big push for manufacturing, services and high-end services segments further pushing growth and income levels in India and in turn, boosting disposable incomes of Indians to higher levels. Thus Indian middle class is the engine which will push India out of the vicious cycle of poverty and propel it onto a journey of prosperity.

Apart from boosting consumption and demand and thereby driving economic growth Indian middle class is also helping in the script of Indian story in many different ways. More Indians are attending college, more people are opting for higher research is driven education and thus helping the knowledge ecosystem to enhance its capabilities. Today India is among the top countries which produce the largest number of PhD scholars. As these Indians travel to various parts of the world, particularly global North they are giving a distinct but certain boost to India’s image as a knowledge-driven economy. India’s emergence as a constant supplier of educated middle-class manpower is helping many countries to bridge their talent and capacity deficit and contributing in worldwide recognition of Brand India.

Within India, an aware middle class has challenged mediocre standards in each and every sphere of life be it economy or politics. Politicians are being held accountable and institutions are getting strengthened. Corruption as a norm in public life is no longer an Indian reality as Indian middle class plays their role of an alert watchdog through their LED and LCD screens installed in Indian middle-class drawing rooms. A reliable supply of English speaking highly educated human resources has boosted capabilities in Public and Private organizations to the best class in standards.

Some Flagging Issues

Concerns raised about Indian middle class’ ability to steer this growth saga and whether a large middle class in its true sense exists at all in India are centred around prevalent income levels and its ability to spend. Those who are sceptical about this ability points towards examples like major e-commerce platforms’ ability to generate volume and translate volumes into profits as most of these platforms still rely heavily on large discounts. Most websites are still in English a language understood by only one-tenth of the population. In 2017 as Indian E-commerce industry grew at 25-30 per cent, it can’t be said to grow at a way higher than the global rate of 20 per cent.

But when seen in the right perspective some of these concerns can’t stand the power of reason. One can argue that for HUL, dutch MNC Unilever’s Indian subsidiary, sales haven’t grown at all in past few years. But revenue has been growing for HUL since 2011 at an annual average rate higher than 8 per cent. The stagnation in sales in dollar terms can be explained by Dollar’s rapid appreciation against Rupee. And above all, a general slowdown cannot be attributed to the complete absence of a middle-class consumer group.

If one was to accept economists Sandhya Krishnan and Neeraj Hatekar’s (“Rise Of The New Middle Class In India And Its Changing Structure”, Economic & Political Weekly, 2017) opinion middle-class incomes in India are not only well above poverty line in India, sufficiently high according to global standards(developed world) also. Thus by any standard India’s middle-class opportunity is not only realistic but a lucrative one also.

 

Pradeep

Pradeep

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