New Delhi: 

This middle class is comparable to Indonesia in terms of size. However, the third group, which has the highest number of people--roughly 100 crore Indian citizens--is at the bottom of the pyramid. In terms of population size, this group is comparable to sub-Saharan Africa, and according to the report, this largest chunk of the Indian population has no money to spend on discretionary goods or services such as entertainment and recreation.  A minority of 3 crore households or nearly 14 crore people are driving consumption in the Indian economy, which is comparable to the population of Mexico, while 100 crore people living at the bottom of the pyramid have no money to spend on discretionary goods and services, showed a new report.

According to a report by Blume Ventures, the Indian consumer market can be divided into three groups: the rich class, the middle class, and the poor. While the rich class, or Indian consumers driving consumption in the country, have a per capita income of 15,000 US Dollars, in excess of 13 lakh rupees per year, the middle class, which has 7 crore households or 30 crore people, has an annual per capita income of 3,000 US Dollars or 2.62 lakh rupees per year.

This group has 20.5 crore households or 100 crore people and has a per capita annual income of 1,000 US Dollars, a little over Rs 87,400 or a monthly income of around Rs 7,300.

Moreover, India's 14 crore people form the key market for Indian startups, as most startups begin their business by catering to this group and then expand to the second group—the middle-class segment of 30 crore people.

One noteworthy aspect of India’s middle class is that it is an emerging aspirational class. “They are heavy consumers and reluctant payers. OTT, media, gaming, edtech, and lending are relevant markets for them,” said the authors in the report.

The annual report has been prepared by Sajith Pai, Anurag Pagaria, and Nachammai Savithiri of Blume Ventures, a Mumbai-based venture capital firm. Noting the spending pattern of this aspirational class, the report said India’s domestically developed UPI payment system and AutoPay feature have unlocked small-ticket spending and transactions from this group.

India’s rich account for less than 10 per cent of the country’s population but contribute two-thirds of discretionary consumer spending. While India’s middle class makes up 23 per cent of the population, it contributes only one-third of discretionary spending.

On the other hand, India’s 100 crore people have no share in discretionary spending and rely on their savings for expenses.

Moreover, the urban top 10 per cent of the population spends heavily on consumption compared to the other two groups.

For instance, in food expenditure, the urban top 10 per cent spend three times more than the per capita average. For fuel and light, their spending is four times more, and for home and personal care products, their expenditure is 4.5 times more than the per capita average.

However, as one moves beyond basic essentials like food and fuel, the spending gap becomes even wider. For example, the urban top 10 per cent spend five times more on clothing, six times more on packaged food, seven times more on consumer services, eight times more on conveyance, and nine times more on education than the per capita average.

India’s widening wealth gap—the gap between the rich and the poor growing wider—is also reflected in the report. It highlights how India’s high growth rate is not benefiting its poor, despite the country being the fastest-growing major economy.

The report emphasises that India’s top 10 per cent drive the country's economic engine, but this group is not expanding in size, only in wealth. This means the rich are getting richer, but their numbers are not increasing significantly.

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