Recently the Finance Minister Said, India's middle class will drive 93% of consumption by 2036, to become the engine of next decade's growth.
Accounting for around 31% of India’s population, the middle class is expected by the OECD to emerge as the world’s largest by 2035, positioning it as an engine of future growth. Yet, many households remain trapped in the ‘missing middle’ excluded from welfare support while lacking sufficient financial security to absorb adverse shocks.
The “Consumer City” Phenomenon: Estimates from the World Economic Forum reveal that 93% of urban consumer growth is shifting away from traditional Tier-1 mega-cities (Delhi, Mumbai, Kolkata, Bengaluru, Chennai) toward 500 emerging “consumer cities.”
Surge in Spending Capacity: The middle and affluent classes are projected to command 93% of all domestic spending by 2036 (up from 80% in 2026), with over 20% of core demographic cohorts (Gen X, Millennials, Gen Z) spending $45 or more daily by 2035.
However, a fundamental paradox lies beneath these growth projections. A significant portion of this demographic remains trapped in the "missing middle" a structural vulnerability where households are excluded from state-sponsored welfare and poverty-alleviation safety nets, yet lack the accumulated wealth and formal financial security required to absorb severe economic shocks.
Financial Vulnerability and ‘Missing Middle’
→ The Healthcare & Insurance Gap: As highlighted in NITI Aayog’s report on Health Insurance for India’s Missing Middle, millions of non-poor, informal, and self-employed households lack comprehensive health and life risk protection, though they have coverage but they are insufficient.
→ Catastrophic Out-of-Pocket Expenditure (OOPE): Medical expenses can rapidly erode savings and wealth. As per recent govt data Out-of-pocket expenditure remained 39.4% of total health spending in 2021–22 (MoHFW), which means the family is One Hospitalization away from Poverty.
→ Income Insecurity & Technological Disruption: Due to rise in AI adoption and automation in service sector, Structural job loss, wage stagnation, the Middle class is facing continuous Venerability.
→ The Retirement Security Deficit: In the coming decade the population non-working and aged will increase significantly and Private-sector middle-class households often lack assured pensions.
→ Rising Leverage and Debt Exposure: Rising aspirations are increasing dependence on loans and EMIs. Expansion of housing, education and personal loans reflects growing leverage among middle-income households.
Facing a convergence of job disruption, wage stagnation, and rising debt, the middle class may no longer be the engine of growth it once was if it is not addressed well.