India's Middle Class Faces Economic Struggles: 3 Key Threats to Its Survival
India's middle class, long a powerful driver of economic growth, is fighting for survival. In a report, Marcellus Investment Managers said the once-thriving middle class now faces three key threats: technological disruptions, a cyclical economic downturn, and deteriorating household balance sheets. These forces have brought a marked change in consumption patterns and are putting immense pressure on the financial stability of middle-class families.
- Technological Disruptions and Job Losses in India's Middle Class
Rapid technological changes, including automation, coupled with the growth of artificial intelligence (AI), are fast altering the job landscape in India. Jobs like those that involved clerical and supervisory roles at offices and factories also used to form the backbone of the Indian middle class. Today, these jobs are being increasingly taken over by machines and AI systems. The result has been massive job losses, coupled with significant job insecurity for the middle class.
P.C. Mohanan, former acting chairman of the National Statistical Commission, said cost-cutting measures such as outsourcing and automation eliminated many managerial jobs. Meanwhile, Wipro Chairman Rishad Premji warned that AI disruptions will continue to impact certain traditional white-collar jobs. The increasing danger of job automation in this regard is seen as a major threat among the Indian middle class, which has supported so much financial stability from such jobs.
- Cyclical Economic Downturn Affecting Middle-Class Consumption
The post-COVID economic recovery of India has been experiencing a slowdown, pushing the economy into a cyclical downturn. It is being reported that corporate earnings in Q2 FY25 have witnessed the sharpest decline in two decades and are at their deepest slump since the 2008 financial crisis. While economic downturns are common in free-market economies, their impact on the Indian middle class has been more devastating. The economic slowdown has reduced disposable income, thereby impacting urban consumption patterns.
- Declining Household Savings and Rising Debt
Household debt has risen in the country to further worsen the financial situation of the middle class. According to numbers released by the Reserve Bank of India (RBI), net household savings as a share of GDP are at their lowest levels in nearly 50 years. This decline in savings, along with rising unsecured loans, has plunged many middle-class families into financial distress. As a result, families have less disposable income and therefore start cutting expenditures, which further aggravates the drop in consumption.
The slowdown in middle-class spending is most evident in the so-called FMCG sector, often considered the barometer of urban consumption. Nestlé India's MD, Suresh Narayanan, attributed the "shrinking middle class" as a leading reason for the decelerating sales in the food and beverage industry. A sector that was once growing at a double-digit pace is struggling to maintain its momentum, with its growth rates nosediving to just 1.5% to 2%.
Similarly, Hindustan Unilever also reported muted growth, citing lower consumption in urban markets. Its CEO Rohit Jawa said the deceleration of growth in urban areas has been particularly sharp in bigger cities, where the middle class forms two-thirds of FMCG sales.
What's Ahead for India's Middle Class
Though the cyclical downturn might stabilize in the next few months, the technological disruptions and declining household savings will remain long-term threats for the Indian middle class. Policymakers will have to think out of the box to respond to these pressing concerns if they want to help secure the future of the middle-income segment.
Conclusion: The Future of India's Middle Class
India's middle class stands at a crossroads with a perfect storm of challenges: **job automation, economic slowdown, and high levels of debt. These factors are reordering consumption patterns and weakening the financial resilience of millions of families. As the economic contours in India continue to change with each passing year, it would be critical for the country to negotiate these changes in ways that can preserve the economic welfare of the *middle-income population*.
Keep your finger on the pulse of the latest in economic trends that is impacting India's middle class and understand how technological disruptions, economic downtrends, and household leverage are together setting the course for the future in this very important demographic. Continue reading on our blog for more detailed information.
• India middle class
• Technological disruptions in India
• Cyclical economic downturn in India
• Household savings in India
• Indian economy slowdown
• Artificial Intelligence impact on jobs
• Automation and job loss India
Consumption patterns of middle-class people FMCG slowdown: India Unsecured loans in India Economic challenges for Middle-class India Post-COVID economic recovery: India