Wednesday, November 29, 2006

How Big is the Middle Class in India?

The answer to all nebulous questions begins with a tag – “it all depends..”. This time it starts with your definition of “Middle Class”.

The MW Dictionary says that the Middle Class is “a fluid heterogeneous socioeconomic grouping characterized by a high material standard of living, morality and respect for property”. Thats quite a mouthful but it is still subjective.

In the Indian context, NCAER considers the Middle Class as households with an annual income between Rs. 2 – 10 Lakhs (~$4000 to $20,000). The next slab is the “Rich (> Rs.10L), and below the middle class you have “Aspirers” (0.9 – 2L) and “Poor” (below 0.9L).

It goes on to say that of the 188 million households (2005), the middle class is 10.7 million (just 5.6%), while the vast majority is poor households (72%). If you assume that a household has six persons, the middle class is no more than 64 million of the total population of 1.13 billion.

However, reports based on National Sample Survey Organization (NSSO) go on an altogether different trip. The 55th NSS puts the 1999-2000 consumption figures at Rs.7,20,932 Crores (~$ 160b), and says that 42% of this comes from the middle class (241 million people, 23% of total pop.). There were 128.3 million urbanites in the ‘great Indian middle class’, with average consumption levels of Rs. 14,513 /capita/annum (~$322). Villages accounted for the remaining 112.8 m.

Times Asia puts the figure at 250m (2004). Marketing gurus claim that it has crossed 300m – the entire population of USA…

So, the answer to the big question still remains vague. The only thing you have for sure is the tag – “It all depends..”

Interesting Links:

The Hindu, 22 May 2005
Who is this middle class?

BusinessLine Saturday, Jan 22, 2005
The Great Indian Middle Class and its Consumption Levels

National Council of Applied Economic Research (NCAER), New Delhi
The Great Indian Market, August 2005

Rediff.Com July 02, 2005
Middle class in India has arrived

Time Asia: 29 Nov 2004
The Respect They Deserve
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