middle class: Pre-budget survey: Aspirations and disappointments of Indian middle class consumers

Examples of this approach cited by the FM included the hike in the bank deposit insurance amount and the SWAMIH scheme. While there is no denying the importance of these schemes in making the middle class’ lives incrementally better, the question that still remains is what this economy-wise key section of people really wants.

A recent ET Online survey tried to find an answer to this question. The survey of around 2,000 people had two questions that concerned this consumer category. One was “What has disappointed the middle class the most?”, and the other was “How can the govt help the middle class save more money?” Here is a look at what the survey found.

As many as 33.6% of those polled think that the lack of jobs is the most disappointing aspect. 28.4% respondents are most disappointed with the poor state of public infrastructure in India.

Delay in tax reform is the top deal-breaker for 28.2 per cent of participants. That India doesn’t have adequate social safety nets finds takers among around 10 per cent of respondents.

According to 38 per cent of respondents, a better social security system is the best way to help the middle class save more money. To over 30 per cent of them, allowing more deductions under Section 80(C) — a recurring hot topic in India during every tax filing season — would be the best course of action.

18.2 per cent participants back lower taxes on petrol & diesel, while 13.1 per cent want the government to raise interest rates for bank savings accounts and fixed deposits.

ET Online

Who in India is middle class?
While the historical definition of a middle class person meant anyone who, socio-economically, is between the propertied class and the working class, economists now define middle class in terms of income and consumption indicators.

Indicators like car ownership, income, access to social safety nets (job guarantee, pension or healthcare) broadly put this segment at 10 per cent of India’s population. But their disproportionate spending power makes them a force to reckon with for the Indian economy.

The government, as per its official reckoning, counts around 30 crore people as middle class consumers.

After the first two waves of the pandemic, however, economists estimate this number to have fallen by roughly a third. As a huge number among them were forced to fall back on their savings, many who had graduated to the middle class over time eventually fell out of that category.

Why this section is crucial
The upper segment of the Indian middle class accounts for the majority of demand — both urban and rural — in the country.

In a country where consumption constitutes three-fifths of GDP, the economy has historically relied heavily on spending by middle class consumers.

Various common estimates define the upper middle class as people living on $6-10 per person per day.

Revival of near-term consumption demand in India will majorly depend on the top fifth of the middle class, according to an UBS Securities India report released towards the end of last year.

Historically, the uppermost 20 per cent of this segment has been the prime mover behind as much as 59 per cent of the discretionary spending in rural India. In urban India this goes even higher — a whopping 66 per cent.

More than half of this important consumer class largely saw income continuity all through the pandemic, data from various sources shows. According to economists, given the rising improvement in demand for vehicles, property, personal care and consumer durables, etc., these consumers are all set to become a critical driver of the economy in the near term.