No. 58, Sept. 2014

No. 58
(Sept. 2014):

A Middle-Class India?

A Middle-Class India?


Is India undergoing a transformation into a ‘middle-class society’?

The notion that India has a giant middle class is not new. Two decades ago, the National Council for Applied Economic Research (NCAER) estimated what it called the Indian ‘middle income group’ to be nearly 40 per cent of the population (283 million for 1989-90).1 While the NCAER did not use the term ‘middle class’, its estimate was widely taken as evidence of just that. This ‘middle-income group’ was seen as a vast untapped market for foreign firms entering India.

A marketing pundit writes:

The story put out was that there was a sleeping beauty called Middle Class India, comprising 250 million to 300 million people, who had money and a burning desire to consume, and nothing decent to buy. And with just one kiss from Prince Charming, that is to say, with the mere availability of ‘never seen before’ goods and services, there would be a huge release of demand pent up for decades. Of course this did not happen and by early 2000, the talk of the existence of the Great Indian Middle Class had considerably subsided. However, after lying dormant for a while, the idea of the Great Indian Middle Class is resurfacing...2

Later, in 2004, the NCAER produced a separate estimate for what it called the “middle class”: just 5.7 per cent of the population in 2001-02.3

In the 1990s, the mirage of a giant Indian middle class had served to attract foreign investors. But today, talk of the middle class has more serious domestic political implications. It is being used to promote two linked ideas: One, that the economic policies of the last two decades have created widespread prosperity, and not merely a prosperous elite. Two, that we therefore need no longer worry about poverty, but can instead focus on aggressive neoliberal ‘development’.

The influence of these ideas, in one form or another, may indeed extend beyond the middle class, especially if perspectives based in the material reality of Indian society are not adequately disseminated.

Claims that India has a giant middle class, or projections that India’s population will become predominantly ‘middle class’, are now backed by a powerful chorus of economists and research firms, to the point where they are frequently cited as established facts. S.L. Rao, NCAER director during the 1990s, now writes:

I anticipated, as is evident from the figures today, that the pyramid would gradually develop into a ‘fat lady’, with a smaller bottom of destitute and aspirants, a bulge in the middle formed of climbers and consuming classes, and a big ‘head’ of the ‘rich.’4

In the following article we look at the findings of a number of studies on India’s middle class.5

Shallow understanding
On closer examination, it emerges that estimates and projections of a ‘middle class India’ are based on  a shallow understanding of Indian society. They are for the most part simply computations (and in some cases fanciful projections) of the size of the different strata of consumers. Quite apart from any problems of methodology in making such computations, the basic flaw in most of these studies is that they do not explore the structure of employment and the existing social organization of production as such. Thus they are mere mathematical exercises, having little to do with economics or sociology.

Nevertheless, within their limited frame (of consumption strata), these studies do share a striking finding: they find only a small class in India with consumption levels higher than the poverty lines in the developed countries. While various indicators do show that there is a rapidly-growing section with plenty to spend, the same indicators also show that this spending section, though sizeable in absolute numbers, is very small as a proportion of India’s population.6

At the same time, data regarding incomes and assets reveal that they are concentrated in a small elite.

The structure of employment does not support the claim of a ‘middle class India’. Rather, it reveals that the overwhelming majority of the country’s working people are employed in insecure, sweated work. India’s labour market differs starkly from that of the advanced capitalist countries. Labour here is largely engaged in petty production in the unorganized sector (self-employment and other subsistence employment), where productivity levels are stagnant or falling. Even within the organized sector, there is actually a rise in informalization of labour in recent years. There is not a clear dividing line between employment and unemployment for most of the workforce, with much of the workforce under-employed, and poverty afflicting even those officially classified as ‘employed’. There is fairly rigid duality between sectors and within sectors, in terms of productivity and wages. 

The anatomy of Indian society, its political economy, thus presents a very different picture from the ‘middle class India’ we encounter in such studies. Indeed the course Indian society takes will ultimately be determined not by the rise of the ‘middle class’, but by the struggle between the opposing ends of the class hierarchy. Which side the intermediate sections join would be determined by the actual course of that struggle.


The ‘middle class’ in the political arena
Three years ago, the media termed the Hazare-led anti-corruption agitation as the political ‘coming of age’ of the Indian middle class. That agitation did not last, but middle class political mobilization did. Indeed, several commentators attribute Narendra Modi’s electoral success to the support of a middle class impatient for change.

It is clear that the middle class has become more vocal and politically active; but some writers go further, and assert that its ranks have swelled greatly in recent years as a result of the economy’s rapid growth. Indeed, they claim, so large has the middle class become that vote-seeking political leaders can now jettison talk of removing poverty and hunger, and substitute it with talk of ‘growth’ and ‘development’.

The BJP manifesto for the recent general elections typifies this shift. Under the heading “Neo-Middle Class – Meet Their Aspirations”, it states:

India has a large middle class with immense understanding, talent and purchasing power. In addition, a whole new class has emerged. Those who have risen from the category of poor and are yet to stabilize in the middle class, the ‘neo middle class’. This class needs proactive handholding. Having moved out of poverty, their aspirations have increased. They want amenities and services of a certain standard. They thus now feel that Government facilities and services are not up to the mark, and hence resort to the private sector for things like education, health and transport. This is obviously costly, putting the neo middle class into a daily dilemma. As more and more people move into this category, their expectations for better public services have to be met.7

Interestingly, in the passage quoted above, the BJP winds up tacitly endorsing the policies pursued in the previous decade of Congress rule, during which, the BJP implies, a new class emerged from poverty. Indeed, Rahul Gandhi talked of this same class, and tried specifically to woo it in his campaign, but evidently without success.8 By the BJP’s account, the new challenge passed on to it, like a baton in a relay, is to satisfy the aspirations of this ‘neo-middle class’. Finance minister Jaitley, in his first Budget speech, promised them speedy decisions:

Those who have got an opportunity to emerge from the difficult challenges have become aspirational. They now want to be a part of the neo middle class. Their next generation has the hunger to use the opportunity that society provides for them. Slow decision-making has resulted in a loss of opportunity.

There is a further, subtle implication to the ‘neo-middle class’ formulation, now that the BJP is in power: Those who oppose the BJP’s version of ‘development’ and ‘speedy decision making’ (for example, villagers who resist land acquisition) are warned that they must reckon with the political weight of this new, increasingly muscular class and its aspirations. (For example, the BJP-led government in Rajasthan proposes to penalize, even jail, those who oppose land acquisition.9) Modi, in his first parliamentary speech, declared that “we must make development a mass movement.” And who can forget the course of earlier BJP-led “mass movements”?

In the wake of their debacle in the general elections, Congress leaders have more or less accepted the BJP line. According to Congress leader Manish Tewari, the Congress-led government failed to maintain equilibrium between rights-based entitlement schemes for the rural poor and the ability to do substantive work for the middle class; “that can make the critical difference between a victory and defeat”. Tewari said that industry and the middle class turned against the party as the UPA government continued with populist steps, allowing Narendra Modi to corner what he considered two critical blocs.10

The Congress Working Committee resolution echoed these sentiments: “…We failed to read the profound changes that had taken place in the country during the 10 years since the UPA was voted to form the government — changes that were, in large measure, due to the policies, programmes and legislation that had ushered in an era of rapid growth, empowerment of the people and high expectations."11

An international phenomenon
Just as India was not the only country that experienced rapid growth and sudden subsequent recession in the previous decade, it was also not the only country in which the ‘middle class’ suddenly became politically active. This class figured prominently in the ‘Arab Spring’ demonstrations in Tunisia, Egypt, and other countries, as well as in anti-government demonstrations in Thailand, Iran, Ukraine, Venezuela and Brazil (although the guiding political force of the protests was not middle class).

Though it is tricky to generalize about these protests, they tended to focus on questions such as ‘misrule’ and ‘corruption’, rather than develop on clear-cut class lines. As a result, any hopes that these protests would result in progressive change have been belied; rather, they have frequently paved the way to reactionary outcomes. In some cases, in fact, such as in Venezuela and Ukraine, the US clearly fueled ‘middle class’ protests as part of a drive to carry out reactionary regime change, whereas the working class and other down-trodden sections appear to have been ranged against these ‘middle class’ protests.12

These demonstrations have taken place largely in what are nowadays termed ‘emerging market economies’. International bodies used to call the latter ‘less developed countries’ or ‘developing countries.’ On the other hand, critics and opponents of the existing world order preferred to refer to them as ‘underdeveloped countries’ or the ‘Third World’, implying a barrier between them and the developed countries, or even implying that the ‘developed’ countries, by their actions, had caused the underdevelopment of the countries in Africa, Asia and Latin America.13 By contrast, the term ‘emerging markets’ conveys the triumphal image of societies surfacing from shadows of non-markets into the sunlight of global capitalism, and proceeding to converge with the advanced economies.

As part of that process of convergence, says the leading investment bank Goldman Sachs, “rising incomes in the BRICs [Brazil, Russia, India and China] will create a massive new middle class.”14 Terming the BRICs countries “middle class powers”, one writer suggests that India accordingly adopt a new policy for international negotiations: That is, instead of trying to champion the interests of the large group of developing countries, it should pursue “interests of its own to project and protect.”15

Thus there appears to be a connection between the current theories of the economic rise of the middle class and the political outcomes desired by those who advance them. Indeed, claims of a burgeoning middle class in the BRICS bolster the attempts of the US and other advanced countries to shift multiple burdens on the Third World. This is evident in negotiations regarding climate change as well as in the World Trade Organization.

Regardless of whether the predictions of a middle class boom are credible, they have an effect on those who look forward to that boom. To the extent the better-off sections of the ‘emerging economies’ were themselves convinced that they would soon join the developed world, the recession and turmoil of the last six years must have come as a rude shock. That shock might have convinced some of them of the need for authoritarian rule in order to revive the earlier rapid growth.16




1. NCAER, Consumer Market Demographics in India, 1993. This middle income group was further divided into lower middle (27 per cent of the population), middle (10 per cent), and upper middle (2.6 per cent). The NCAER’s estimate of the ‘middle income’ group continued to swell over the years: by 2007-08 it was put at 62 per cent of the population. (back)

2. Rama Bijapurkar, We Are Like That Only, 2007, p. 84. (back)

3. It defined ‘middle class’ as those whose incomes were between Rs 2,00,000 and Rs 10,00,000 at 2001-02 prices. Rajesh Shukla, How India Earns, Spends and Saves: Unmasking the Real India, NCAER, 2010, pp. 99-100. (back)

4. S.L. Rao, (back)

5. A list of the studies reviewed is provided at the end of this article. (back)

6. See Appendix: “Putting Middle Class Consumption in Perspective: Some Figures”. (back)

7. (back)

8. Rahul Gandhi claimed there was a new class comprising about 70 crore people (700 million, or about 55 per cent of the population) who were above the poverty line but had an income below that of the middle-class: “We will bring 70 crore people into middle class in the next five years.” However, in place of Modi’s assertive slogan of ‘development,’ Rahul Gandhi’s catch phrase was the vague term ‘empowerment.’ , still marked by remnants of its old anti-poverty and pro-‘rights’ rhetoric. Where Modi conjured up an aspiring, restless, ‘neo-middle class’ horde, Rahul numbered among his new class “barbers, small farmers, auto and taxi drivers, security guards, washermen, rickshaw pullers and anganwadi workers.” - (back)

9. (back)

10. Times of India, 31/5/14. (back)

11. (back)

12. Re: Ukraine, see Boris Kagarlitsky, “East Ukraine: The logic of a revolt”, (back)

13. Andre Gunder Frank, The Development of Underdevelopment, 1966. (back)

14. Goldman Sachs Global Economics, “Is this the BRICs decade?”, 20/5/14. (back)

15. Sanjaya Baru, “Emerging middle class nations”, Business Standard, 28/12/09. (back)

16. Arundhati Roy remarks: “The massive, steeply climbing GDP of India dropped rather suddenly and millions of middle-class people sitting in the aircraft, waiting for it to take off, suddenly found it freezing in mid-air. Their exhilaration turned to panic and then into anger. Modi and his party have mopped up this anger.” -- (back)




All material © copyright 2015 by Research Unit for Political Economy