DELHI — Over the past several decades, the Indian middle class has rapidly expanded and is set to continue its growth to form what could become one of the largest middle classes in the world. In the process, millions of people are being lifted out of poverty by the benefits they create through working to further India’s economic development.
To understand how the Indian middle class hit its most recent growth spurt and what effects it could have on the country, it is important to understand what defines this class categorization.
Unlike in many other countries in the world, the middle class in India is a wide-ranging grouping. A typical member of the Indian middle class spends between $2 and $10 per day.
Within the $2 to $10 range, there are two groups, a lower- and an upper-middle class. The lower-middle class typically spends between $2 and $6 per capita per day, and the upper-middle class individual spends between $6 and $10 per day.
The $2 per day lower bracket allows the inclusion of people who have recently begun professions with low entry barriers. These professions include vendors, food industry workers and leather workers.
The rapid development of the Indian economy that fuels the middle class’s growth has perplexed economists for many years. Analysis by chief India economist of HSBC Pranjul Bhandari indicates high levels of state investment as the cause. His analysis shows that, since 2011, the country’s year-to-year state investment has increased by approximately 21 percent.
A majority of this investment is directed toward infrastructure and improving education systems to train a higher quality workforce. By directly investing in the Indian people, the state promotes economic growth while attracting the attention of foreign investors.
The increase in the size of the Indian middle class indicates its connection to economic expansion. According to Euromonitor International data, the number of homes with disposable incomes over $10,000 increased from 2.5 million in 1990 to 50 million in 2015, demonstrating that the middle class has grown exponentially and increased its spending power in recent decades.
The economic growth in the middle class directly connects to the Indian economic growth rate of 7.6 percent predicted by the International Monetary Fund in 2016. Further evidence indicates that rapid growth will continue. The World Economic Forum ranked India’s economy 39th among the world’s most competitive economies for the 2016-2017 year, marking a 16-place increase from the previous year.
In addition to working to lift people out of poverty, the expansion of the Indian middle class will fuel the global economy. India could be home to the largest middle-class consumer market in the world by 2030, according to the Brookings Institute. The Institute expects the middle class in India to add a total of 1 billion people by 2039.
This dramatic increase in the size of the Indian middle class will become increasingly important as it enables millions of Indians to escape poverty and spurs global economic activity.
– Garrett Keyes
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