Indian middle class: Origin and Relevance to India Inc.

A lot has been said and written about the great Indian middle class. The sheer number of people that is the source of India’s enormous domestic demand and thereby the promise of a large market for a mind boggling array of products and services.

If one were to characterize and predict the behavior of this middle class, it would be important to understand how it emerged in the first place.

The seeds of emergence of the middle class lay in the one time behemoth public sector units run by the government. A vast number of people enjoyed a government position, with its permanent employment contract, guaranteed pensions and health care and a host of other fringe benefits that translated to security and predictability of income in the absence of any other social security mechanisms. This gave rise to a class of people with its own set of behavior and attitudes which went on to shape what we term as ‘middle class today.

The emergence of the private sector and the rapid decline of public enterprises coupled with a drastic reduction in the annual intake of people proved to be a watershed in the evolution of the middle class – both in its composition and outlook. During the end of the last century, IT services created a rich and wide employment channel for technology graduates and concepts like upper middle class and nuclear family emerged from this cauldron of events. We have seen the emergence of an educated young generation coming out from smaller pocket towns and cities, settling down and acclimatizing to life in the metros. The last few years have witnessed multiple industry verticals creating employment opportunities for this middle-income group, vis-à-vis Insurance, Telecom, Retail banking, Retail, ITES, BPO, Aviation to name a few. This has in turn created a confident young generation with high spending power and life on credit, as in the more developed western world.

Thus a new generation of middle class now straddles India’s social map and almost swamps it by their sheer numbers. The diversity in employment opportunities combined with the absence of a single dominant monolith like the public sector, suggests that the emerging middle class is going to be a lot more heterogeneous in its behavior than its earlier evolutionary avatar. This heterogeneity in consumer demand and expectations will provide shape and direction to future products and services coming out of India.