Explained: Why is the Indian Middle Class Struggling?

The Indian middle class are bearing the brunt of a slowing economy, buoyed by skyrocketing inflation and slowing household spending. The cracks among the section can be seen through various parameters of the economy.

As per Elara Securities, wages for listed non-financial companies fell by about 0.5% in the September quarter. Inflation has also reduced the disposable income, thereby pushing families to cut down their expenses on daily essentials and capital expenditure like cars.

Poor consumption patterns also dented corporate earnings, wherein FMCG leaders including Hindustan Unilever and Nestlé India reported poor urban demand. Maruti Suzuki saw its urban sales shrank by 2% in the first half of the fiscal year.

Overall economic growth is also set to take a hit in the September quarter as GDP is estimated at 6.5% which is less than RBI’s projection of 7%. Nikhil Gupta and Tanisha Ladha of Motilal Oswal noted in a report saying, “Subdued income growth is the main factor behind weak consumer finances.”

Real estate prices surged by about 23% across the nation, wherein cities like Mumbai and Bengaluru are reported steeper increases. Higher rents and utilities have reduced the purchasing power of urban class, thereby causing a dent on their discretionary spending.

Personal final consumption expenditure (PFCE) fell to 55.8% of GDP in 2023-24 as compared to 58.1% in 2021-22.