Rise in Middle-Class Vulnerability

Strong economic growth and poverty reduction in India coexist with a growing vulnerable middle class facing low income stability and weak mobility.

About the Middle Income Class

Meaning: The middle-income class refers to households earning above the poverty line but below high-income or affluent levels.
Poverty Reduction: India’s poverty rate fell from over 50% a decade ago to about 30% as per World Bank estimates.
Informal Earnings: 94.11% of informal workers earn less than ₹10,000 per month, indicating persistent low and unstable incomes.
Job Losses: Manufacturing lost nearly 24 million jobs (2016–2021), showing weak job creation despite economic growth.
Income Inequality: Top 1% captures over 22% of income, with 271 billionaires holding wealth equal to nearly one-fourth of national income.

Drivers of Middle-Class Vulnerability in India

Jobless Growth: India’s manufacturing lost ~24 million jobs (2016–2021) despite strong GDP growth, limiting employment-led upward mobility.
Wage Stagnation: Real wages have remained largely stagnant even as productivity rises, weakening income gains for salaried workers.
Informal Economy: 94.11% of informal workers earn below ₹10,000/month (e-Shram), reflecting low income security and volatility.
Sectoral Shift: 46% workforce remains in agriculture, producing only 18% of GDP, showing low productivity and a reverse labour movement.
Income Inequality: Rising concentration of wealth and income among a small elite is widening socio-economic inequalities across Indian society.

Implications of Rising Middle-Class Vulnerability in India

Consumption Slowdown: The middle class drives nearly 60% of domestic consumption, and income insecurity weakens demand and slows overall economic growth.
Savings Decline: Net household financial savings have fallen to around 5% of GDP due to inflation and rising retail debt pressures.
Rising Inequality: Top 1% captures over 22% of national income (World Inequality Lab), significantly widening wealth and income disparities across society.
Socio-psychological Stress: Financial distress increases mental health issues. E.g., suicides rose from 4,970 (2018) to over 7,000 (2022) per NCRB data.
Skill Drain: Families cut education and healthcare spending while skilled professionals increasingly migrate abroad due to a lack of stable jobs.

Government Schemes Addressing Middle-Class Vulnerability

PM Jan Dhan Yojana (PMJDY): Aims to ensure universal financial inclusion through bank accounts, enabling DBT transfers and reducing dependence on informal finance.
PMKVY: Focuses on skill training and certification to enhance youth employability and bridge the education–job market mismatch.
PLI Scheme: Aims to boost domestic manufacturing, attract investment, and create formal jobs in key strategic sectors.
MGNREGA: Provides guaranteed rural wage employment to enhance livelihood security and reduce income instability.
PM SVANidhi: Offers collateral-free working capital loans to street vendors, promoting self-employment and financial inclusion.

Challenges of Rising Middle-Class Vulnerability

Employment Insecurity: Less than 10% workers hold formal jobs, while manufacturing lost nearly 24 million jobs between 2016 and 2021.
Income Volatility: Approximately 94.11% of informal workers earn less than ₹10,000 per month, limiting their savings and long-term financial stability.
Stalled Mobility: Youth unemployment stands near 45%, and graduate unemployment around 29%, weakening upward economic mobility opportunities.
Human Development Deficit: Child stunting (35.5%) and wasting (18.7%) continue constraining future productivity and intergenerational economic advancement.

Way Forward to Address Middle-Class Vulnerability

Measurement Reform: Adopt multidimensional welfare indicators measuring distance from reasonable living standards beyond conventional poverty thresholds.
Manufacturing Expansion: Promote labour-intensive industries capable of absorbing nearly 12 million annual workforce entrants and generating formal employment.
Social Protection: Extend pensions, insurance, and income security to informal workers constituting over 90% of India’s workforce.
Wage-Productivity Link: Ensure productivity gains translate into real wage growth, reversing stagnation among salaried and informal workers.
Human Capital Investment: Reduce child stunting (35.5%) and wasting (18.7%) through stronger nutrition, healthcare, and education interventions.

“The true measure of progress is not wealth creation, but economic security for ordinary families.”
India’s rise will be meaningful when its middle class shifts from surviving uncertainties to driving resilient and inclusive prosperity.

Reference: The Hindu

PMF IAS Pathfinder for Mains – Question 692

Q. India is lifting people out of income poverty, but not sufficiently enabling upward mobility and economic opportunity. Critically examine the challenges and policy measures needed to build an aspirational and resilient middle class in India. (250 Words) (15 Marks)

Approach

Introduction: Write a contextual introduction about middle-class vulnerability.
Body: Write about growth without mobility, highlighting the challenges and policy measures needed to build an aspirational and resilient middle class in India.
Conclusion: Emphasis on inclusive and employment-led growth to ensure upward mobility and resilience of India’s vulnerable middle class.