Kamal Ghorui
There is a particular kind of Indian optimism that survives every data point. It lives somewhere between the annual appraisal and the Diwali bonus, between the polite nod in a townhall and the quiet calculation on an EMI sheet. It is the optimism that says things will sort themselves out because they always have.
And yet, if one listens carefully, beneath the noise of quarterly growth, unicorn valuations and the ceremonial ringing of stock exchange bells, there is a softer, more persistent sound. The sound of compression.
Not collapse, not crisis. Something more civilised, more middle class – Compression.
Indian middle class, that broad, aspirational band earning somewhere between Rs 5 lakh and Rs 1 crore a year, now finds itself in a three-sided negotiation where none of the parties appear particularly inclined to concede.
The first of these is work, or more precisely, the curious absence of it in the places where it was once most reliably found. India continues to produce graduates at an industrial scale, each year sending out nearly eight million young people armed with degrees, expectations and a family WhatsApp group waiting for good news. What they encounter instead is a labour market that has grown selective to the point of indifference. White-collar hiring, particularly in sectors that once acted as generous absorbers of ambition, has slowed to a crawl. A degree, which was once a ticket, now behaves more like a lottery coupon.
Into this delicate arrangement enters artificial intelligence, not with the theatrical flourish of science fiction but with the quiet efficiency of a cost accountant. A few roles here, a few redundancies there, a gradual trimming of what used to be called entry-level opportunity. The ladder, one suspects, is still there. It is simply missing a few of the lower rungs.
The second negotiation is with income, and this is where the discomfort becomes more intimate. For a long time, the Indian middle class operated on a simple and rather comforting assumption: that effort would be rewarded with progression, and progression would, in time, resemble prosperity. What has happened instead is something far subtler. Incomes have grown, but they have grown with all the enthusiasm of a Government of India file moving through a particularly contemplative department.
If one were to compare the salary of a reasonably successful salaried professional from a decade ago with that of today, the difference is present but not transformative. Meanwhile, the world around that salary has not been nearly as restrained. Education has become more expensive, healthcare more unpredictable (we have lived through a pandemic in this decade), housing more ambitious and lifestyle inflation has arrived dressed as necessity. The result is not poverty, which would at least be dramatic, but a persistent sense of running in place. The middle class has not stopped moving. It has simply stopped getting ahead.
And then comes the third negotiation, the one that reveals itself not in boardrooms or policy papers but in bank statements. Savings, that old Indian middle-class virtue once spoken of with near moral reverence, have quietly retreated. In their place has come borrowing, not as a strategic instrument of wealth creation, but as a rather practical tool of continuity. Consumption, which was once the outcome of surplus, is now increasingly financed by the promise of future earnings.
This is how one arrives at a situation where households are saving less than they have in decades, even as access to credit has expanded with admirable enthusiasm. Personal loans, credit cards, buy-now-pay-later schemes: these are no longer financial products so much as lifestyle enablers. One does not save up for the television; one negotiates its monthly existence.
It is, in many ways, a perfectly modern arrangement; and like most modern arrangements, it works beautifully until it does not.
What makes this moment particularly interesting is that none of these shifts, taken individually, appear catastrophic. Jobs have not disappeared entirely. Salaries have not collapsed. Credit is still available, often with a reassuringly friendly interface. But when placed together, they begin to form a pattern that is harder to ignore.
A workforce that is growing faster than the opportunities available to it. An income curve that has flattened just as the cost curve has steepened. A consumption engine that is being fuelled less by surplus and more by leverage.
This is not a trivial matter for an economy like ours. The middle class is not merely a demographic category; it is an economic engine. It drives consumption, underwrites housing markets, funds education systems, and, not incidentally, pays a significant share of taxes with admirable punctuality. When this engine begins to hesitate, even slightly, the effects travel.
One sees it in small decisions first. The holiday that becomes shorter. The upgrade that is postponed. The investment that is deferred with the quiet assurance that next year will be better. These are not acts of distress. They are acts of adjustment. And yet, history has an inconvenient habit of reminding us that large shifts often begin as a series of entirely reasonable adjustments.
There is a line that tends to surface in moments like these: for every crisis, someone missed the early signals. Not because the signals were invisible, but because they were polite.
The Indian middle class today is surrounded by such polite signals. None of them urgent but all of them persistent.
It would be reassuring to believe that this is merely a phase, that growth will accelerate, incomes will catch up, and the old compact between effort and reward will be restored with interest. That may yet happen. Economies, like people, are capable of surprising recoveries. However, it would be equally prudent to acknowledge that something more structural may be underway- that the nature of work is changing, that the rewards of growth are being distributed differently and that consumption itself is being re-engineered.
Compression, after all, is not always a prelude to collapse. Sometimes it is simply the system adjusting to a new equilibrium. The only question is whether that equilibrium will feel, to the middle class that must live within it, like stability. Or like standing still.
Sources and further reading
- World Inequality Lab — Income and Wealth Inequality in India, 1922–2023
- RBI — Household Financial Savings and Debt Trends(various bulletins and annual reports)
https://www.rbi.org.in/Scripts/QuarterlyPublications.aspx?head=Household+Financial+Savings
- CMIE — Unemployment Data and Labour Market Indicators
- PLFS (Periodic Labour Force Survey) — Government of India
https://microdata.gov.in/NADA/index.php/catalog/284
- Marcellus Investment Managers — Household savings and consumption trends commentary
https://marcellus.in/blogs/rbis-report-flags-canaries-in-the-coalmine/
- Search Engine Journal — Impact of Google AI Overviews on CTR
https://searchengineland.com/google-ai-overviews-drive-drop-organic-paid-ctr-464212
- McKinsey Global Institute — Future of Work / Automation and Jobs
- IMF / World Bank — India macroeconomic outlooks and consumption data
https://www.imf.org/en/countries/ind
https://www.worldbank.org/ext/en/country/india
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