India’s once-thriving middle class is now grappling with economic challenges that have significantly impacted their consumption patterns.
According to a report by Marcellus Investment Managers, the slowdown is rooted in three primary factors: technological disruptions, a cyclical economic downturn, and deteriorating household balance sheets.
Routine and repetitive jobs that once formed the backbone of middle-class employment are increasingly being replaced by automation and technology.
Marcellus highlights how clerical and supervisory roles in offices and factories have seen a sharp decline.
P.C. Mohanan, former acting chairman of the National Statistical Commission, noted that many managerial roles have disappeared due to cost-cutting measures like outsourcing and automation. Adding to this, Wipro Chairman Rishad Premji emphasized the disruptive role of AI, saying, “There are going to be some jobs that will disappear,” signaling a future where white-collar jobs face increasing vulnerability.
India’s post-COVID growth spurt has slowed, pushing the economy into a cyclical downturn. Corporate earnings in Q2 FY25 recorded the steepest slump in two decades, apart from crises like the 2008 financial crash. While such downturns are typical in free-market economies, their impact on the middle class has been severe, further curbing consumption.
Rising household debt has worsened the situation. According to RBI data, net household savings as a percentage of GDP are at their lowest level in nearly 50 years. While gross savings remain steady, mounting unsecured loans have pushed net savings into the red, leaving families with less disposable income.
FMCG companies, often seen as proxies for urban consumption, have flagged a visible slowdown in middle-class spending. Nestlé India’s MD, Suresh Narayanan, recently pointed out the “shrinking middle class” as a key factor behind decelerating sales. “The growth in the food and beverages sector, which used to be double digits, is now down to 1.5% to 2%,” he said.
Similarly, Hindustan Unilever reported muted volume growth, citing lower consumption in urban markets. “Urban growth has trended downward, especially in larger cities,” said CEO Rohit Jawa, adding that demand across channels has slowed significantly.
The urban middle class, which drives two-thirds of FMCG sales, has been disproportionately affected. Elevated food inflation, high interest rates, and shrinking discretionary income have made it harder for this segment to maintain previous spending levels.
Marcellus notes that while the cyclical downturn may stabilize in the coming quarters, technological disruptions and declining household savings pose more persistent threats.