Pod Insights Finshots Daily India’s middle class journey: A post-Independence Day special About this episode In today’s episode on 16th August 2025, we trace the journey and rise of India’s middle class from independence to the present day. Take the first step in insuring your family. Book a FREE call with this link - https://ditto.sh/vx51ji
Transcript 0:00 Speaker 00 Hello folks, you're listening to Finshots Daily and in today's episode, we trace the journey and rise of India's middle class from independence to the present day.
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0:51 Speaker 00 While the poor are offered addiction as a way to escape thinking too much, working people are encouraged to shop. Now, this is a quote from the book Where We Stand: Class Matters by Bell Hooks and it perfectly describes how the poor find temporary escape in distraction while the middle class gets sold the dream of moving up in life. Buy a better phone, a bigger fridge or maybe just a fancier dinner out, look successful and feel like you've climbed up the economic ladder. And it's this urge to upgrade that makes them the engine of consumption in any country, fueling the economy one purchase at a time. In India, this engine is getting bigger by the year. Today, the middle class makes up nearly a third of our population. By 2047, when independent India turns hundred, the share is expected to nearly double,
1:36 Speaker 00 making up close to sixty percent of the country. But here's the thing, there's no single definition of who qualifies to be middle class. A decade ago, any household with a disposable income of six to seven lakh rupees a year, that's after saving and paying taxes, could call itself middle class. But things have changed over the years. Researchers at the People Research on India's Consumer Economy or PRIZE today define it as economically secure households unlikely to slip into poverty and earning anywhere between five lakh and thirty lakh rupees a year. Now, that is a wide range and that's because it's the total income they're talking about. If you knock off savings and essentials from it,
2:18 Speaker 00 it leaves an average of around five to six lakh rupees per household for discretionary spending. Even the government's new tax regime quietly acknowledges that anyone earning between 4 to 12 lakh rupees a year deserves a tax break. So, they have more cash to spend. More money in their pockets means more demand for everything from bikes to branded clothes. So, yes, this is the class that's not constantly worried about survival but is always aspiring to move up. And they're the reason why so many sectors boom. But how did they come about in the first place? Well, let's now take a trip down the memory lane and trace the journey from the days of independence to now. 1947 to 1990, the rise of India's middle class.
3:03 Speaker 00 Before independence, India's middle class was tiny. We're talking about a sliver of British trained elites such as lawyers, teachers, doctors and civil servants. In 1947, the country had 35 crore people. Most were still reeling from partition, struggling for food, shelter and stability. Only 1 to 5% of this population consistently had food on their plates, chappals on their feet and a place that they could call home. That was the middle class. For years, this group stood apart. They had the right connections and access to respectable jobs, living lives far removed from the broken, poverty-stricken India outside their circles. But these circles weren't expanding very quickly.
3:45 Speaker 00 That's because the government, meanwhile, focused on building dams, steel plants, coal mines and automobile factories but shielded them from foreign competition with stiff import tariffs. The license raj kept business under tight control, requiring permits for almost everything. Banks and key industries were nationalized and economic growth limped. For context, India's share of the world economy, which had already fallen from 24% in 1700, that is during the end of the Mughal rule, to 4% in 1950, stagnated further to around 3.5% for decades. Per capita income barely grew 1.3% annually. Then came the early 1980s.
4:26 Speaker 00 The private sector started adding jobs and a new middle class that was defined not just by profession but also by consumption emerged.
4:35 Speaker 00 Many came from families who had grown up barefoot, without electricity or enough food, but now had small, yet stable jobs or little shops. They made enough to send their children to English medium schools so they could one day grow up to become doctors, engineers or accountants. Owning a Bajaj Shetek scooter, a black and white TV or even a pair of jeans became symbols of success. It was like the middle class was catching up with the West but in their own traditional way. From a circle of less than two crore in 1947, their numbers grew to about seven crore by the early 1980s. As a New York Times article describes it,
5:13 Speaker 00 “Between 1970 and 1980, annual sales of scooters, motorcycles and mopeds nearly quadrupled to more than 400,000. Sales of cars and jeeps nearly doubled to 60,000 annually from 1975 to 1981. Television sets have tripled to more than 2 million since 1977. And in a new buying craze, Indians are purchasing 20,000 videocassette recorders a month. Hundreds of video libraries have sprung up in the big cities. Between 1978 and last year, production of cookies, a luxury food increased nearly 50%. Wristwatches 20% to 5.3 million and toothpaste 23%.
5:56 Speaker 00 Soft drink sales doubled to 1.7 billion bottles. Cosmetics and beauty aids have become a hundred million dollars a year business. But despite all this consumption, growth just wouldn't take a leap until liberalisation happened. 1991 to 2010: How Liberalisation Further Fueled the Middle Class. Until 1990, India's GDP growth had always remained under 4%. But other Asian economies such as Thailand, Indonesia and South Korea were growing at a much faster pace, anywhere between 6 to 9% a year. Faced with a balance of payments crisis, the government unleashed economic reforms.
6:37 Speaker 00 Import barriers fell, foreign investments flowed in and private industry was unleashed. The result was a boom. GDP growth shot up and stabilized at 6 to 7% a year. And for the first time, millions of jobs appeared in new industries. Technology and services boomed. Call centers, software companies and multinationals opened offices in cities. Young college grads for the first time saw high-paying white-collar jobs in IT and finance. Not just that, even folks like carpenters, street vendors, decorators and drivers moved up to be included in the lower-middle class since most of these sectors had and still have minimal barriers to entry,
7:19 Speaker 00 allowing many from poor households to easily move up to this group. So naturally, with higher incomes, the middle class exploded. The number of Indian households with substantial disposable incomes rose sharply. The size of the middle class in India had grown to over 30 crore people according to Deutsche Bank research. So, yes, far more people could afford consumer goods. Shopping malls, branded stores and smartphones, all once only seen in Hollywood films, began appearing in Indian cities. In 1991, even owning a car was luxury. But by 2010, affordable models like the Maruti 800 and Tata Nano made four-wheelers common in urban life.
8:03 Speaker 00 Rural India also felt the change. Better roads, TV satellite dishes and mobile phones started appearing in villages for the very first time. The liberalization era meant that the middle class grew not just in numbers, but also in confidence. Credit cards, bank loans and easy consumer finance emerged, further fueling spending. And by this time, India was on its way to becoming a middle-income economy.
8:31 Speaker 00 2011 to present day. India's middle class today and how they could power its leap to developed status. Today's Indian middle class is nothing like it was in 1947. Back then, it was a small-city-based crowd. Now it's spread across big metros and small towns, covering everyone from shopkeepers to software engineers, teachers to traders. And there's one thing that really binds them together: cheap internet and a smartphone. A recent survey says eighty-five percent of households have one and even in rural India, three out of four mobile users own a smartphone. Banking, shopping, paying bills, streaming cricket, even attending classes, all from a device that can cost less than ten thousand rupees.
9:15 Speaker 00 This is the aspirational India you hear about and it doesn't want to stay a middle income economy forever. The government has also sweetened the deal over the years. Tax labs are a little kinder now. A decade ago, the middle class was shelling out anywhere between ten to twenty percent in income tax. Now that's dropped to five to fifteen percent and from this financial year, that is FY26, anyone earning below twelve lakh rupees won't have to pay a rupee in tax. Now, that leaves the middle class with more money in hand and when you've got forty-three crore people, that's about a third of the country with cash to spend, you can see why they're so important to the economy. Some even call them affluent Indians.
9:59 Speaker 00 The kind who'd happily take a vacation, book flights instead of trains, binge on OTT shows and swipe credit cards without thinking twice. This lifestyle has grown thanks to cheaper data, better financial awareness, rising incomes and a taste for premium products. But here's the thing, there's still an ongoing debate whether India's middle class is actually growing or shrinking. Sure, the number of poor has gone down but the average income of middle class hasn't moved much. In fact, their spending power might have taken a hit. To put things into perspective, back in 2012, Indian households saved eight times more than they owed in debt. Now that's halved to just four times.
10:41 Speaker 00 And increasingly, middle-class lifestyles are being bankrolled by credit instead of actual earnings. A recent Indian Express report paints a worrying picture. Credit card defaults overdue by ninety-one to three sixty days have jumped forty-four percent in a single year, hitting nearly thirty-four thousand crore rupees. That's a lot of unpaid bills, which means that some middle-class families might be living their dream life on borrowed money quite Literally. And it's not hard to see why. Essentials and luxuries alike have gotten pricier. Food prices bite, even if inflation data suggests that they're cooling. And buying a home affordably is a thing of the past.
11:22 Speaker 00 In Delhi, for example, one crore gets you a basic thousand square feet apartment. That's more than twelve years of the average salary, assuming you earn at least eight lakh rupees a year and without even factoring in the interest cost of loan. So, yes, the middle class is still spending, but it's not always clear if it's from deep pockets or deep debt. The truth is probably somewhere in between the booming and struggling extremes. Since the middle class is already huge, even a small percentage increase in size looks modest. Plus, the pandemic may have briefly reversed some of the gains. But one thing is clear, the middle class is a big deal.
12:04 Speaker 00 They form a huge market for companies and a broad tax base for the government. And as they grow, they'll expect better education, healthcare and jobs. In the coming years, whether their numbers double or just change in composition is something we'll have to wait and see. But there's no doubt that the middle class will keep influencing what people in India buy and how the economy runs in ways that were unimaginable back in nineteen forty-seven. Thank you for listening to today's episode. And if you want to share your feedback or suggestions, do drop us an email to [email protected] . Until next time.
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