03 January 2010

The Size of India's Middle Class

Question: How big is India's middle class?
Answer: 5% (Yes, only five percent)

2001: NCAER

Income ClassMonthly Family Income*% of Total Population
Poor< Rs 7,500
72%
Lower ClassRs 7,500 – Rs 17,000
22%
Middle ClassRs 17,000 – Rs 85,000
5%
Rich> Rs 85,000
0.5%

2005: McKinsey

Income ClassMonthly Family Income*% of Total Population
Poor< Rs 7,500
54%
Lower ClassRs 7,500 – Rs 17,000
41%
Middle ClassRs 17,000 – Rs 42,000
4%
Upper ClassRs 42,000 – Rs 85,000
1%
Rich> Rs 85,000
0%

McKinsey also makes forecasts for the relative sizes of the different income classes for the years 2015 and 2025:

Income Class20152025
Poor35%22%
Lower Class43%36%
Middle Class19%32%
Upper Class1%9%
Rich1%2%

So McKinsey's picture is roughly like this:

Year
Middle Class
Lower Class
Poor
2005
5%
40%
55%
2015
20%
45%
35%
2025
40%
35%
20%
  • Middle class will increase from 5% to 40%.
  • Poverty will go down from 55% to 20%.
  • Lower class will hover around 40%.
*The original data gives the annual incomes. I have converted them to monthly incomes, and rounded them off.

7 comments:

Offstumped said...

Hello Dheeraj,

This is from Offstumped Community portal http://www.offstumped.in
We would like post this blogpost on offstumped under uncovered news category, with of course proper credentials and pingback. If it ok with you?

Indian said...

It is OK with me :-)

Offstumped said...

Dheeraj,

Just to let you know, heres where we have posted your article.
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Offstumped said...

Dheeraj, offstumped again. A reader comments

Sudhir says:
January 9th, 2010 on 4:10 am edit

Interesting forecast.

Could you pls say more about the currency units used? Are they real (as in inflation adjusted w.r.t. some base year) or nominal (i.e. meaningless)?

In any case, governments everywhere have a vested interest in understating the true extent of inflation, simply because many govt liabilities such as employee pay, allowances and pensions have an inflation index built in.

What cheers me is the fact that the proper middle class in India (the ‘bike’ economy) and the upper middle class (the ‘car’ economy) are showing sustained growth rates far in excess of population growth. Their share in the popn hence simply has to grow as a matter of mathematical identity.

Let us drink to that. Jai Ho.

We thought we should allow you to take this up. Would you be interested to answer? If you do, please do so here
http://www.offstumped.in/2010/01/07/the-size-of-indias-middle-class/

Offstumped said...
This comment has been removed by the author.
Indian said...

Note #4 in McKinsey's report:

"In our study we adapted a methodology, from India’s National Council of Applied Economic Research (NCAER), defining the middle class as households with a disposable income of 200,000 to 1,000,000 rupees ($4,380 to $21,890) a year in real 2000 terms."

Anonymous said...

When we set our standards and labels, we need to take into account -how many people per family? One or two people with an income of 35,000 is very different than a family of 8 with the same income.