Who are the middle class in India?

The 'middle class' is an over-used expression and difficult to pin down, since it is defined not just in terms of income, but also as values, cultural affinities, lifestyles, educational attainments and service sector employment. Using income, one way of defining middle class is in terms of how much of income is left over for discretionary expenditure, after paying for food and shelter. If more than one-third is left, that qualifies one for inclusion in the 'middle class'.

This is the way the Economist recently defined middle class, and quoted Surjit Bhalla's forthcoming work (The Middle Class Kingdoms of India and China) to the effect that a third wave of middle-class emergence is currently under way globally. The first was in nineteenth century Western Europe, the second was in the baby boomer (1950-80) generation in developed countries, and the third is the consequence of income growth in countries like India and China.

When India opened up in the early 1990s, the middle class was often cited to sell the attractiveness of India's domestic market. Figures of 300 million were bandied about, but producers realized to their chagrin that this market was elusive and did not, in fact, exist. Depending on the product, the market might very well be 30 million.

In part, the problem arises from using income as the criterion in defining middle class, ignoring heterogeneity beyond income categories. But let's ignore that story, which has been told very well by Rama Bijapurkar (We are like that only).

For two different reasons, 30 million is now approaching 300 million.

One, income distributions are positively skewed. Therefore, once the thick part of a distribution passes above the threshold, suddenly there is a disproportionately high increase in the numbers of the 'middle class'.

Two, a disproportionate distribution of income growth can raise the numbers of the middle class. When income growth occurs, the share of the middle class in the total population increases to more than 50%. The Economist quotes NCAER to tell us that the middle-class share in India's population will increase from 5% in 2005 to 20% in 2015 and more than 40% in 2025.

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