Summary
- Real incomes for India’s middle class have barely grown, with just 0.4% CAGR over the past decade, even as living costs surged.
- Credit dependency is rising: EMIs and card debt are fueling lifestyles once sustained by savings and steady salaries.
- With no state support or fiscal cushion, the middle class is absorbing economic shocks invisibly—while being politically ignored.
The Well-Dressed Decline Beneath India’s Economic Boom
They own smartphones, holiday once a year, and stream Netflix on fiber broadband. On the surface, India’s middle class appears to be thriving. But beneath the surface lies a financial fragility camouflaged by consumption. Over the last ten years, the average income of middle-class Indians—those earning ₹5 lakh to ₹1 crore—has grown at a dismal 0.4% CAGR. In the same period, food prices have nearly doubled, and healthcare and education costs have spiked dramatically.
Bengaluru-based entrepreneur Ashish Singhal gave voice to this frustration when he called India’s middle-class salary growth “the biggest scam no one talks about.” His viral LinkedIn post painted a sobering picture of a class that is outwardly stable but inwardly stretched. According to Singhal, this isn’t an economic collapse—it’s a “well-dressed decline.” Behind every EMI payment and restaurant bill lies a trade-off: skipped doctor visits, foregone savings, rising credit dependency.
India’s middle class is swelling in number—set to rise from 31% of the population in 2021 to 60% by 2047. But while the segment expands demographically, it’s shrinking financially. Caught between subsidy-supported poverty and investment-powered wealth, the middle-income group is left holding the burden of rising prices, muted wage growth, and policy indifference. This UnreadWhy editorial examines the crisis the headlines miss: the invisible economic erosion of India’s middle class.
Middle-Class is in debt trap.
— Indian Tax Payer (@indtxpyr) March 27, 2025
HNI's are moving abroad.
Vikisit Bharat likely to have only poor, who'll be dependent on govt(s).
Politicians will grow rich & powerful.
Everyone else will be at their mercy !
.. 1/2 pic.twitter.com/OHJgNUUs7Z
Flat Salaries vs Surging Costs: A Decade of Imbalance
- Middle-class income growth has stagnated at 0.4% CAGR over 10 years.
- Inflation has steadily outpaced wage increases, especially in food, fuel, and education.
- India’s CPI inflation averaged 6.7% between 2021–2024, directly impacting household budgets.
- Medical costs have seen double-digit inflation, with limited access to affordable private healthcare.
India’s booming economic story often overlooks the stagnant center. While the top 1% rides the wave of capital markets and the bottom quintile receives direct state aid, the middle class is left to grapple with rising costs unaided. Between 2012 and 2024, food inflation rose by nearly 80%. Education fees in private institutions doubled in several metros, while medical costs grew by an average of 12% annually.
Meanwhile, salary hikes in key urban sectors like IT, consulting, and BFSI have barely kept pace with inflation. Structural issues—such as automation, layoffs in tech, and limited upskilling—have further capped real wage growth. According to CMIE data, urban job recovery post-COVID has been concentrated in gig and contract roles, offering little long-term security or growth.
While GDP and Sensex surge, middle-class households cut corners. The problem isn’t lack of work—it’s that work doesn’t pay enough anymore to fund the rising cost of simply staying middle class.
Credit is the New Salary: Aspiration Funded by Debt
- Household debt in India now stands at 40% of GDP, with middle-class borrowers leading the trend.
- Credit card spending grew by over 30% in top metros in FY24, as per CIBIL.
- EMIs are replacing savings, driving a culture of financial fragility beneath visible consumption.
- Zomato orders, travel, and gadgets mask a deep cut in emergency funds and insurance cover.
India’s middle class is living on borrowed time—and borrowed money. With salaries barely growing, consumer credit has filled the gap. EMIs on phones, TVs, education loans, and even groceries are common. Once a badge of upward mobility, credit is now a necessity.
Anecdotal and statistical evidence converge: households are spending more, but saving less. The RBI reported a decline in net financial savings in FY24, as more families diverted income toward loan repayments and short-term expenses. Even as consumption keeps the economy afloat, the foundation is shifting—from income to borrowing.
And the emotional toll is mounting. Delayed healthcare, postponed marriages, skipped vacations, or over-reliance on credit cards—each decision reflects invisible stress. Financial advisors report growing demand for debt consolidation advice, while psychiatrists point to rising middle-income anxiety linked to financial uncertainty.
This aspirational class is still spending—but they are now doing mental math for every meal delivery and fuel refill. It’s not the end of aspiration, but the beginning of quiet despair.
The Policy Vacuum: Why the Middle Class Has No Safety Net
- Welfare programs largely cater to the poor; tax benefits increasingly favour corporates and the ultra-rich.
- The salaried middle class pays some of the highest effective personal tax rates in the country.
- There are no targeted healthcare subsidies, education support, or job-loss safety nets for this group.
- Budget policies in 2023 and 2024 offered little relief despite rising inflation and muted wage growth.
India’s middle class remains economically vital but politically invisible. It pays most of the direct taxes, drives demand for urban goods and services, and powers the white-collar economy. Yet it remains structurally unsupported.
Unlike farmers or BPL households, there are no direct subsidies for the middle-income group. They are expected to fund their children’s education, healthcare, and retirement from post-tax income. Even the 2020 introduction of the “simplified” income tax regime—with fewer deductions—ended up hurting salaried professionals who previously claimed deductions on insurance, tuition, and rent.
Worse, welfare programs like Ayushman Bharat exclude most middle-class families. Job security is thinning, but India lacks unemployment insurance or retraining programs for laid-off professionals. The result? A growing segment that is overtaxed, under-supported, and politically underrepresented.
Ashish Singhal’s words echo a harsh truth: “The poor are being supported. The rich are scaling. The middle class is just expected to absorb the shock—in silence.” And this silence could prove dangerous if not addressed.
A Shrinking Buffer in a Growing Economy
India’s middle class is not just an income group—it is a psychological space. It represents ambition, aspiration, and dignity. Yet today, that space is shrinking. Salaries are flatlining, costs are soaring, and the state offers no cushion. Worse, cultural expectations force this group to maintain a façade of prosperity—further deepening debt cycles and stress.
The danger is not immediate collapse but cumulative erosion. Left unchecked, this slow bleed will compromise household health, future investment, and even social mobility. As a policy priority, it’s not flashy—but it’s essential. Protecting the middle class means preserving India’s most productive, tax-compliant, and aspirational cohort.
Structural interventions—like inflation-indexed tax slabs, affordable urban healthcare, middle-class-centric education credits, and safety nets during employment transitions—are overdue. If India’s growth story is to be sustained, it must rest on more than credit-fueled consumption. It must rest on real financial dignity.
