Despite being home to 1.4 billion people, India’s consumer class is far smaller than commonly believed, with only about 130-140 million people—roughly the size of Mexico’s population—having the spending power to drive business growth, according to a new report by Blume Ventures.
An additional 300 million Indians fall into the “emerging” or “aspirant” consumer category, but their spending remains cautious, driven largely by the ease of digital transactions rather than significant increases in disposable income. Meanwhile, nearly a billion Indians lack money for discretionary spending, highlighting a growing wealth divide in Asia’s third-largest economy.
Rather than expanding, India’s consumer market is deepening, meaning that the wealthy are spending more, but their numbers aren’t significantly increasing. This trend has fueled “premiumisation”—where brands focus on high-end products rather than mass-market offerings. Luxury real estate, premium smartphones, and exclusive events like Coldplay and Ed Sheeran concerts have seen booming demand, while sales of affordable housing and lower-end consumer goods have slumped.
The report reinforces concerns that India’s post-pandemic recovery has been K-shaped—with the rich getting richer while the poor struggle with declining purchasing power. Economic inequality has been worsening for decades, with the top 10% of Indians now holding 57.7% of national income, compared to 34% in 1990. Meanwhile, the bottom 50% have seen their share drop from 22.2% to just 15%.
Beyond declining incomes, India’s consumption slowdown is exacerbated by record-low household savings and rising debt. Many lower-income consumers had relied on easy credit to maintain spending after the pandemic, but recent crackdowns on unsecured lending by the Reserve Bank of India (RBI) have tightened access to loans, further dampening demand.
Two short-term factors may slightly boost spending: a record harvest expected to improve rural demand, and a $12 billion tax break announced in the latest budget. However, these are unlikely to dramatically change the trajectory of India’s economy.
Long considered the engine of India’s consumer economy, the middle class is facing stagnant wages and job losses. According to Marcellus Investment Managers, the middle 50% of India’s tax-paying population has seen its income stagnate in absolute terms over the past decade, effectively cutting their real earnings in half when adjusted for inflation.
At the same time, white-collar jobs are shrinking as artificial intelligence and automation reduce the need for clerical and supervisory roles, particularly in manufacturing and IT services—two key employment sectors.
The Indian government’s latest economic survey has warned that job losses due to automation and AI pose a serious risk to the country’s long-term economic growth. Given that India is a consumption-driven economy, a decline in consumer spending caused by income stagnation and rising unemployment could have major macroeconomic consequences.
If these challenges persist, India’s economic trajectory could fall off course, with fewer opportunities for business growth, start-ups, and investment in a consumer market that is not as large or as accessible as once assumed.