The narrative of India’s economic growth as one of the fastest in the world is compelling. Yet, beneath the surface, India’s middle class, often heralded as the driving force of its consumption-driven economy, faces a reality that is becoming increasingly challenging to ignore. Despite steady GDP growth rates, consumption patterns and purchasing power among middle-income households show clear signs of stagnation or even shrinkage.

This dichotomy between impressive macroeconomic numbers and the lived realities of a sizable portion of the population should be at the forefront of India’s economic discussions. Historically, the middle class has been pivotal in shaping demand, spurring industries ranging from FMCG to automotive and driving the nation’s domestic consumption. However, recent reports from both consumer goods and automotive sectors indicate troubling trends. Many FMCG companies have noted a marked slowdown in sales within the middle-income segment, highlighting the diminishing consumption capacity of what was once their primary market. Auto dealers, too, are struggling with high inventories, a symptom of waning demand that contradicts the notion of broad-based prosperity.

While luxury segments like SUVs continue to attract affluent buyers, entry-level car sales are declining, suggesting that many middle-income households are unable to participate in this apparent economic success story. This gap between GDP growth and real, distributive prosperity reflects a K-shaped economic recovery, where the benefits of growth accrue disproportionately to the wealthy. Meanwhile, the middle and lower segments face stagnating wages and shrinking savings, rendering them vulnerable to economic shocks. Even in rural areas, wage and consumption stagnation has persisted for nearly a decade, compounding urban consumption woes.

If India is indeed progressing rapidly, why is this growth not reaching the broader population, especially the middle class? One troubling explanation is that GDP growth numbers may not fully capture economic well-being at the household level. Official consumption expenditure data has shown that consumption growth trails significantly behind GDP growth, indicating that income increases are either not evenly distributed or are not translating into tangible purchasing power. Household savings have also stagnated, undermining the expectation that income growth would lead to increased savings. A closer look at the middle class’s struggles in India’s growth narrative reveals a misalignment between reported economic success and the actual welfare of the populace. India’s middle class, crucial to sustained economic growth, cannot be left behind if we hope for a stable and inclusive economy.

Policies addressing income disparity and fostering wage growth are essential to restore the middle class’s vitality. Moreover, an honest re-evaluation of economic metrics and the ways growth is measured may help build a more realistic picture of progress. Ultimately, sustainable economic growth demands more than impressive GDP figures. It requires a conscious effort to ensure that growth is inclusive and meaningful for all citizens, especially middle-income households that represent the backbone of India’s economy. This, planners would do well to remember, is a group that pays its taxes.