The Flawed Narrative of India’s ‘Middle Class’: What the Financial Times and Marcellus Missed

The Flawed Narrative of India’s ‘Middle Class’: What the Financial Times and Marcellus Missed

If you've recently come across headlines proclaiming the “death of India’s middle class” or its “stagnant income”, chances are you've read the latest claims by the Financial Times and Marcellus Investment Managers. Their widely circulated conclusion? Middle-class incomes in India have grown at just 0.4% per year over the past decade.

But here’s the twist: that figure, while technically correct under certain definitions, doesn’t tell the full story. In fact, it may be painting a dangerously misleading picture of India's economic evolution.

Let’s unpack why.

Averages Can Lie – Like a River That’s “Three Feet Deep on Average”

Imagine standing in a river that's "three feet deep on average". Sounds safe, right? Until you realize one part is knee-deep and the next is a six-foot drop. That’s exactly the kind of statistical illusion created by clubbing together people earning ₹5 lakh per year with those earning ₹1 crore. It smooths out the extremes and blurs economic reality.

This is precisely the mistake made by the Financial Times and Marcellus in their recent analysis. Their version of India’s “middle class” lumps in those earning ₹40,000 a month with actual crorepatis. The result? A distorted average that fails to reflect the diverse and layered truth of Indian incomes.

The Illusion of Stagnation: What the Numbers Actually Say

The claim of stagnant incomes rests on nominal figures—not adjusted for inflation—and doesn't account for increased formalisation in the economy.

According to income tax records, the number of people filing returns in the ₹5 lakh to ₹1 crore bracket has jumped from 55 lakh in 2011-12 to nearly 4 crore in 2023-24. That’s a nearly 7x increase in just over a decade.

So while income growth per person might look tepid on paper, the sheer explosion in the size of this income segment suggests something else is happening: more Indians are entering the formal economy and reporting income transparently.

Growth Is Uneven, Not Absent

To be clear, this is not an argument that everything is rosy. India’s economic story is riddled with contradictions:

• Two-wheeler sales are flatlining.

• Household savings are falling.

• Over 2,000 state-run welfare schemes are cushioning the poor.

• A large workforce is migrating back to agriculture—a sign of economic distress.

But none of this supports a binary story of "collapse" or "boom." The reality is far more nuanced. Income growth is uneven, not uniform. The challenges are real, but they coexist with progress in formalisation, tax compliance, and digital inclusion.

The ‘Middle Class’ Isn’t a Monolith

Another major flaw in the FT-Marcellus report is the casual, imprecise use of the term “middle class.” In India, being “middle class” is often more of a mindset than a measurable economic status. Someone with two houses, regular vacations, and a fat mutual fund portfolio might still call themselves “middle class” simply because there are others who earn more.

Without a clear, consistent definition, any sweeping generalisation about the middle class is bound to mislead.

What Should We Really Be Asking?

Instead of asking whether India’s middle class is “stagnant,” we should be asking:

• Who do we mean when we say ‘middle class’?

• How do we define real growth versus reported income?

• Are we looking at pre-tax, post-tax, or disposable income?

• What role does inflation-adjusted (real) income play in the analysis?

• How do regional disparities affect the cost of living and perceived prosperity?

Until we answer these questions, we’ll continue to be misled by averages and blanket terms.

Conclusion: Beyond Headlines, Into Reality

India’s middle class isn’t vanishing—it’s evolving. The economic reality is complex, layered, and often contradictory. Simplistic narratives may grab attention, but they fail to capture the lived experience of millions of Indians navigating rising costs, growing aspirations, and shifting financial foundations.

So, next time you hear that India’s middle class is "stagnant," take a closer look at what’s being measured—and how.