How One Billion Indians Have No Disposable Income

India’s Economic Divide: Who is Really Spending?

India’s 1.4 billion population is often viewed as a massive consumer market. However, a new report reveals a stark reality—one billion Indians lack the financial means to spend on non-essential goods and services.

This means that only about 130-140 million Indians make up the country’s true consumer class, roughly the same size as Mexico’s population. An additional 300 million fall into the “emerging consumer” category, slowly increasing their spending habits due to the rise of digital transactions and credit availability.

However, India’s consumer economy is not expanding in size—instead, it is becoming more concentrated among the wealthy.

Why Brands Are Targeting the Wealthy (Premiumisation Trend)

India’s economy is shifting towards “premiumisation”—where brands are focusing on luxury and high-end products instead of mass-market offerings.

Key Indicators of This Trend:
Affordable housing now makes up just 18% of India’s market, compared to 40% five years ago.
Luxury brands, high-end smartphones, and designer fashion are seeing record sales.
Experience-based spending is booming—with premium concert tickets for international artists selling out instantly.

According to Sajith Pai, co-author of the report, companies that fail to adapt to this trend are losing market share, while brands catering to high-income customers are thriving.

The Rich Are Getting Richer—And The Middle Class is Shrinking

India’s economic inequality is growing at an alarming rate:

In 1990, the top 10% of Indians controlled 34% of national income.
By 2024, they now control 57.7% of the national income.
Meanwhile, the bottom 50% saw their share drop from 22.2% to just 15%.

The Reserve Bank of India (RBI) reports that household savings are at a 50-year low, while rising debt and wage stagnation are squeezing middle-class spending power.

Will India’s Middle Class Rebound? Short-Term and Long-Term Outlook

While India’s middle class is struggling, two short-term factors could boost spending:

A record agricultural harvest could increase rural incomes, leading to higher consumer demand.
A $12 billion tax cut in the recent government budget is expected to stimulate economic activity.

However, experts warn of long-term challenges, including:

AI-driven job losses: Many white-collar jobs in finance, IT, and customer service are being replaced by automation.

Declining financial security: Wages have stagnated, while household savings continue to fall.

Limited upward mobility: With fewer job opportunities, the middle class is shrinking instead of growing.

According to India’s Economic Survey, these trends could slow the country’s long-term economic growth, unless structural changes are implemented.

India’s Two-Speed Economy

India’s economy is at a crossroads. Wealthy consumers continue to thrive, while the middle class and lower-income groups struggle with shrinking purchasing power.

For businesses, the premium market is booming, but for India’s overall economic health, rebalancing consumer spending is critical.

Will the next decade see a resurgence of India’s middle class, or will economic disparity continue to grow? That will determine whether India’s consumption-driven economy remains sustainable in the long run.