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Shrinking middle class in India?-Data show Growing Middle class!

 Key Findings from the SBI Eco wrap Report(25th Oct 2024)

  • Income Inequality is Decreasing: The report uses the Gini coefficient to demonstrate a decline in income inequality in India. The shift is most noticeable in lower income brackets, with a substantial portion moving into higher income groups. This aligns with a rightward shift in the income distribution curve.

  • ITR Filings are Increasing: The number of ITR filings has significantly increased, indicating a growing tax base. This growth is particularly evident in previously untapped states (Uttar Pradesh, Bihar, etc.), suggesting broader economic participation.Below is the chart which shows No. of tax payers in Different income Group in AY2014 and AY2024 which clearly shows that the bulk have moved up from Rs.1.5lac to Rs5 lac to Rs.2.5 lac to Rs.10 lac(highlighted in yellow colour)

  • Growth in 'Crorepati' Taxpayers: The number of taxpayers earning over ₹1 crore has increased significantly, highlighting the expansion of India's high-income segment.

  • Female Labor Force Participation is Rising: The report documents a notable increase in women's participation in the workforce, notably in agriculture, which is particularly striking.

  • courtesy :SBI Eco wrap Oct 24 report
    The report highlights significant income growth, particularly among lower and middle-income groups. While the increase in ITR filings and the shift in the income distribution curve strongly suggest rising incomes , it shows the potential for spending with good disposable incomes.Whether it is spent or saved in MFs or Stock market needs to be analysed before prematurely jumping to say that middle class is shrinking, and that too without any basis.

  • courtesy:SBI Eco wrap Oct 2024-self explanatory which shows that Income disparity coverage is the improvement in disparity in AY24 over AY15 clearly demonstrating that the income of the middle class has moved up.


  • SBI Eco wrap published in Oct 24 clearly establishes that Indian middle class is widening on the basis of income shown in personal ITR filings in Fy23-24 which is based on hard facts and not on conjectures. Moreover SIPs in Mutual Funds are also growing at a faster clip and all this read together show that middle class is only growing. Any skew in FMCG consumption may get straightened in a quarter or two if it is real.Many FMCG products are sourced thro e Commerce platforms and so a comprehensive report is required to understand the slow down in Private consumption.RBI restrictions on Credit card spending and unsecured personal loans might have also dampened the consumption a little bit. Some may be waiting on the wings for RBI to cut interest rates to take up Housing loans or contract any additional loans. Loan Growth rate of 11.5% in middle of Oct 24 may be low compared to 19% growth in May 24 but still high compared to 2021 period.


    "Mutual funds, particularly through SIPs (Systematic Investment Plans), have become increasingly popular in India. In August 2024, the number of folios increased by 3.16%, reaching 14.3 crore." writes India Today-11th Sep 2024.



It further goes on to say"The journey of the industry has been impressive—it took 50 years to build Rs 10 lakh crore in AUM from 1963 to 2013, but in just six more years, it reached Rs 23 lakh crore by 2019. As of August 2024, the AUM has tripled to Rs 66.70 lakh crore, demonstrating strong investor confidence.

Hitesh Thakkar, Acting CEO of ITI Mutual Fund, highlighted the growth,and said, "Mutual fund investment is a cost-effective, transparent option for retail investors to participate in India's growth."

According to data released by Groww, some interesting trends have emerged in August 2024.

There has been a 200 basis point (BPS) increase in inflows into large-cap funds compared to small and mid-cap funds. However, inflows into sectoral and thematic funds decreased by 15% compared to the previous month, indicating a shift in investor interest."

The lastest SIP nos in Sep 2024 show that the SIP inflows are above Rs24500 cr, thereby sustaining the momentum and growth.In a media statement, Venkat Chalasani, Chief Executive, AMFI said, "The steadily increasing SIP contribution of Rs 24,508.73 crore in September 2024 highlights the shifting investor sentiment towards disciplined and long-term wealth accumulation."

With respect to increase of SIP numbers, Groww said that it shows growing financial awareness among India's youth. "They are using disciplined investment methods to manage market fluctuations and build long-term wealth. SIPs provide a structured way to invest, helping individuals benefit from compounding over time," it said. According to the Groww, they added more than 1.58 million new SIPs (around 1/4th of the total) in September 2024.

Considering the above data points, there is no evidence for shrinking of middle class and on the contrary, there is enough proven data and information by research teams like that of SBI, which establish the widening of middle class.

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