How India’s Middle-Class Definition Is Changing: Rs 1 Crore Isn’t Rich Anymore
Nidhi | Jan 07, 2025, 22:17 IST
Highlight of the story: The middle class in India, once seen as the backbone of the nation’s economic growth, is grappling with rising living costs, stagnant wages, and a tax system that feels disconnected from their realities. This article delves into the challenges faced by this vital demographic, exploring how outdated definitions and widening economic disparity have left them burdened and overlooked. It calls for an urgent redefinition of the middle class and meaningful policy reforms to ensure they regain their rightful place as the engine of India’s progress.
The middle class in India has long been celebrated as the engine of the nation’s growth, powering consumption, driving innovation, and anchoring economic stability. But today, this vital demographic finds itself at a crossroads. As the cost of living soars and incomes stagnate, their aspirations are shrinking, their struggles growing, and their significance seemingly overlooked. The outdated definitions that once defined the middle class now feel woefully inadequate. This begs a pressing question: In an era of rising inequality and shifting economic realities, what does it truly mean to be middle class in India today—and is the system still working for them?
Traditionally, India’s middle class was defined as households earning between ₹5 lakh and ₹30 lakh annually—a range that once symbolized financial stability and upward mobility. However, this definition has become outdated in an era of soaring expenses for education, healthcare, and housing. Research from 2017 pegged the middle class within the income bracket of ₹3.1 lakh to ₹10 lakh annually, but this fails to account for current economic challenges.
Moreover, the tax regime exacerbates the problem. Those earning over ₹10 lakh are taxed at the highest rate of 30%, and surcharges push this even higher. Even the recent tweaks in the new tax regime, which raised the threshold to ₹15 lakh, fail to ease the burden on families struggling to save or spend amid rising costs.'
The Household Consumption Expenditure Survey (2023-24) highlights the financial strain on urban households:
40% of income goes to food,6% to education,6% to healthcare, and8.5% to transportation.This leaves little room for discretionary spending, savings, or investments in aspirations like homeownership and quality education. Finance Minister Nirmala Sitharaman has acknowledged these challenges, stating, “I am also from the middle class... and understand their problems.” This statement resonates with millions of households struggling to balance rising expenses with stagnant incomes.
Sitharaman has emphasized her commitment to easing the burden on the middle class. She noted during the Budget 2024 deliberations, “I want to relieve the middle class, but I have limitations too,” pointing to steps such as increasing the standard deduction rate. She also affirmed that Prime Minister Narendra Modi’s government listens to the voices of the middle class and aims to balance fiscal responsibility with relief for this segment.
The growing wealth disparity in India further underscores the middle class’s plight. According to the World Inequality Report:
The top 10% of Indians control 57% of the nation’s wealth.The bottom 50% own just 13%.The rich have thrived, benefiting from pro-business policies and lower corporate taxes. Meanwhile, the poor continue to struggle for basic survival. The middle class, caught in between, bears the heaviest burden—they are too “rich” to qualify for subsidies but too “poor” to enjoy the benefits of wealth.
Imagine a family earning ₹12 lakh annually in a metro city. Despite being in the so-called “affluent” bracket, they face high rent, skyrocketing school fees, medical expenses, and rising food prices. After taxes and expenses, their financial anxiety persists. This is the paradox of the Indian middle class—a group that contributes heavily to the economy but feels left out of its prosperity.
They wake up early to catch overcrowded trains, make sacrifices to send their children to decent schools, and skip vacations to save for emergencies. They balance dreams of upward mobility with the reality of grinding workdays. They’re the invisible majority who power India’s economic engine, but whose contributions often go unacknowledged. The unfairness of their plight is a silent wound, made worse by a system that takes more than it gives back.
The numbers may show India growing at 6.4%, but the middle class feels the pinch in every grocery bill, every school fee, and every EMI payment. They are not asking for luxury—they just want their hard work to pay off, to be able to save for their children’s future and their own dignity in retirement.
The definition of the middle class in India is no longer just an economic question; it’s an existential one. What does it mean to be “middle class” in a society where the rich grow richer, the poor struggle for basics, and the middle is left to carry the burden of both? Is the middle class still the engine of growth, or has it become a casualty of an unbalanced system?
Nirmala Sitharaman’s acknowledgment that the middle class deserves more support is a start, but it is not enough. This is not just about tweaking tax brackets or offering standard deductions—it’s about redefining priorities. It’s about recognizing that the middle class is more than a source of revenue; it’s the heart of India’s economic and social fabric.
The middle class doesn’t need promises—they need relief. Imagine a tax system that doesn’t penalize those earning between ₹10 lakh and ₹1 crore with disproportionately high rates. Imagine public services—schools, hospitals, transport—that match the taxes they pay. Imagine a system that sees their struggles, respects their contributions, and invests in their future.
Reducing tax rates for incomes between ₹10 lakh and ₹1 crore from 30% to 20% could unleash a wave of spending, savings, and investment. Improving access to quality education and healthcare could ease the burden of private costs. Offering targeted incentives for homeownership or retirement savings could restore faith in the system.
India’s middle class is not just a statistic; it’s a story of dreams, sacrifices, and resilience. These are the people who believe in the promise of hard work, who send their children to school hoping for a better tomorrow, who wake up every day to keep the wheels of the economy turning. But today, they feel betrayed by a system that has left them behind.
As India aims to become a $5 trillion economy, the middle class cannot be an afterthought. Finance Minister Sitharaman herself said, “The middle class is critical to our economy.” Now, it is time to prove it. By easing their burden, recognizing their struggles, and restoring their faith, we can build not just an economy, but a nation where everyone has a chance to thrive. The middle class deserves more than recognition—they deserve a future they can believe in.
Historical Context: Defining the Middle Class
Moreover, the tax regime exacerbates the problem. Those earning over ₹10 lakh are taxed at the highest rate of 30%, and surcharges push this even higher. Even the recent tweaks in the new tax regime, which raised the threshold to ₹15 lakh, fail to ease the burden on families struggling to save or spend amid rising costs.'
Rising Costs: Shrinking Aspirations
40% of income goes to food,6% to education,6% to healthcare, and8.5% to transportation.This leaves little room for discretionary spending, savings, or investments in aspirations like homeownership and quality education. Finance Minister Nirmala Sitharaman has acknowledged these challenges, stating, “I am also from the middle class... and understand their problems.” This statement resonates with millions of households struggling to balance rising expenses with stagnant incomes.
Sitharaman has emphasized her commitment to easing the burden on the middle class. She noted during the Budget 2024 deliberations, “I want to relieve the middle class, but I have limitations too,” pointing to steps such as increasing the standard deduction rate. She also affirmed that Prime Minister Narendra Modi’s government listens to the voices of the middle class and aims to balance fiscal responsibility with relief for this segment.
Is This Definition Aligning with the People?
The top 10% of Indians control 57% of the nation’s wealth.The bottom 50% own just 13%.The rich have thrived, benefiting from pro-business policies and lower corporate taxes. Meanwhile, the poor continue to struggle for basic survival. The middle class, caught in between, bears the heaviest burden—they are too “rich” to qualify for subsidies but too “poor” to enjoy the benefits of wealth.
Imagine a family earning ₹12 lakh annually in a metro city. Despite being in the so-called “affluent” bracket, they face high rent, skyrocketing school fees, medical expenses, and rising food prices. After taxes and expenses, their financial anxiety persists. This is the paradox of the Indian middle class—a group that contributes heavily to the economy but feels left out of its prosperity.
They wake up early to catch overcrowded trains, make sacrifices to send their children to decent schools, and skip vacations to save for emergencies. They balance dreams of upward mobility with the reality of grinding workdays. They’re the invisible majority who power India’s economic engine, but whose contributions often go unacknowledged. The unfairness of their plight is a silent wound, made worse by a system that takes more than it gives back.
The numbers may show India growing at 6.4%, but the middle class feels the pinch in every grocery bill, every school fee, and every EMI payment. They are not asking for luxury—they just want their hard work to pay off, to be able to save for their children’s future and their own dignity in retirement.
The Question of Identity
Nirmala Sitharaman’s acknowledgment that the middle class deserves more support is a start, but it is not enough. This is not just about tweaking tax brackets or offering standard deductions—it’s about redefining priorities. It’s about recognizing that the middle class is more than a source of revenue; it’s the heart of India’s economic and social fabric.
A Call for Urgency
Reducing tax rates for incomes between ₹10 lakh and ₹1 crore from 30% to 20% could unleash a wave of spending, savings, and investment. Improving access to quality education and healthcare could ease the burden of private costs. Offering targeted incentives for homeownership or retirement savings could restore faith in the system.
Conclusion: The Time to Act is Now
As India aims to become a $5 trillion economy, the middle class cannot be an afterthought. Finance Minister Sitharaman herself said, “The middle class is critical to our economy.” Now, it is time to prove it. By easing their burden, recognizing their struggles, and restoring their faith, we can build not just an economy, but a nation where everyone has a chance to thrive. The middle class deserves more than recognition—they deserve a future they can believe in.