India, home to 1.4 billion people, faces a stark economic reality: nearly 1 billion citizens lack discretionary spending power, according to a report by venture capital firm Blume Ventures. The report highlights that only about 130-140 million Indians constitute the “consuming class,” the key market for startups and businesses. Another 300 million are classified as “aspirant consumers”—they have begun spending more due to digital payment accessibility but remain cautious buyers.
India’s post-pandemic recovery has been described as “K-shaped,” where the wealthy have grown richer while the lower and middle classes have lost purchasing power. The country’s top 10% now control 57.7% of the national income, up from 34% in 1990. Meanwhile, the bottom half has seen its income share fall from 22.2% to 15%. Wage stagnation has worsened the problem, with the middle 50% of tax-paying Indians experiencing no real income growth in a decade. Adjusted for inflation, this means their earnings have effectively halved, reducing their ability to save or invest.
The Rise of Premiumisation and the Experience Economy
With wealth concentrating at the top, India’s consumer market is shifting toward “premiumisation.” Companies are focusing on high-end products instead of mass-market goods, leading to a surge in luxury housing and premium smartphones, while affordable housing has dropped from 40% of the market five years ago to just 18% today.
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This trend is also evident in India’s booming “experience economy.” High-priced tickets for international artists like Coldplay and Ed Sheeran are selling out quickly, showing that wealthier consumers are willing to spend on entertainment and leisure. Branded products are capturing a larger market share, further reflecting the deepening divide in spending power.
Declining Savings and the Burden of Debt
The consumption slowdown is being worsened by declining financial savings and rising debt. The Reserve Bank of India (RBI) has cracked down on unsecured lending, which had fueled spending post-pandemic. Many in the “emerging consumer” category relied on borrowing, and restrictions on such loans are expected to impact overall consumption. Net financial savings among Indian households are now at a 50-year low, further reducing the middle class’s ability to drive economic growth.
Despite these challenges, short-term spending may see a slight boost due to a record rural harvest and a $12 billion tax rebate announced in the recent budget. However, economists warn that these measures will not be enough to counter long-term structural issues.
Automation and Job Losses Threaten Future Growth
Beyond declining incomes and savings, India’s labor market faces another major challenge: automation. White-collar jobs, particularly in clerical and secretarial roles, are disappearing due to artificial intelligence and technological advancements. The number of supervisors in manufacturing has also declined significantly.
The government’s latest economic survey warns that labor displacement from automation could have macroeconomic consequences, as India’s economy is heavily reliant on consumption. If job losses continue to rise, the drop in consumer spending could derail the country’s economic trajectory.
While India remains one of the world’s fastest-growing economies, the growing wealth gap and shrinking middle class pose serious challenges. Without targeted policies to address income stagnation and job security, economic inequality will continue to deepen, reshaping India’s consumer landscape in the years to come.