India, a nation of 1.4 billion people, is facing a growing economic paradox while its economy continues to expand, nearly a billion people lack the disposable income to participate in discretionary spending. According to a recent report by Blume Ventures, only about 130-140 million Indians belong to the “consuming class,” a market size comparable to Mexico, while another 300 million remain “emerging” consumers, hesitant to spend beyond necessities.
The report highlights a fundamental shift in India’s consumer market: instead of broadening, it is deepening. The wealth gap is widening, with the top 10% of Indians now holding 57.7% of the national income, compared to 34% in 1990. Meanwhile, the bottom half of the population has seen their share of national income shrink from 22.2% to just 15%.
One of the defining consequences of this shift is the rise of “premiumisation” a trend where brands focus on high-end consumers instead of catering to mass markets. Sales of ultra-luxury gated housing and premium smartphones have surged, while affordable housing has dwindled from 40% of the market five years ago to just 18% today. Similarly, concerts featuring international artists like Coldplay and Ed Sheeran continue to sell out, underscoring the growing influence of high-income consumers.
However, for the majority, financial conditions have deteriorated. Middle-class wages have stagnated, and the Reserve Bank of India (RBI) reports that household financial savings have hit a 50-year low. The post-pandemic recovery has been K-shaped, benefiting the rich while leaving the poor behind. The middle class, once the backbone of India’s consumption-driven economy, is under immense pressure, with its real income halving over the past decade due to inflation-adjusted stagnation.
Compounding the issue is a decline in white-collar jobs due to automation. The Marcellus Investment Managers report notes that AI-driven automation is displacing clerical and supervisory roles, particularly in India’s IT sector. The government’s economic survey has raised concerns about this trend, warning that widespread job losses in services-driven industries could negatively impact overall consumption, potentially derailing India’s long-term economic growth trajectory.
In the short term, a record harvest and a $12 billion tax relief package could provide a modest boost to consumption, potentially increasing GDP growth by over 0.5%. However, the underlying structural challenges rising inequality, middle-class erosion, and job automation pose significant long-term threats. Addressing these concerns will be critical if India is to maintain its economic momentum and ensure inclusive growth.
