India’s 63 biggest cities are now home to more than a quarter of its middle class. They also generate 29% of the country’s disposable income that drives demand for goods and services, fuelling an economic boom, Surojit Gupta & Sidhartha write in the first part of this series exploring the rise of India’s middle class
Rapid urbanisation is triggering significant changes across cities, which are emerging as growth centres and swelling the ranks of India’s middle class.
The textile city of Surat in Gujarat has shown the sharpest growth in the number of super-rich households between 2015-16 and 2020-21.
A pan-India survey by think tank People Research on India’s Consumer Economy (PRICE) has shown startling results and provides an insight into the income demographics and changes taking place in the country’s cities, which are seen as the engines of growth for Asia’s third largest economy.
The survey focused on 63 cities with a population of more than 10 lakh in 2021, and the results showed that the million-plus cities account for a large share of the country’s middle class (27%) and rich (43%). These cities generate 29% of the country’s household disposable income, 27% of total spending and 38% of total savings, according to the survey results.
It has put various groups into se ven categories based on annual household income, where the average household size is taken as 4. 6. The categories range from ‘destitute’ (annual household income below Rs 1. 25 lakh or $1,700 in 2020-21) to the ‘super-rich’ (income over Rs 2 crore or $270,000 in 2020-21). Households with an annual income of Rs 5 lakh-Rs 30 lakh ($6,700-$40,000) form the middle class.
Boomtowns and niche cities
Based on their population, rate of urbanisation and per capita household consumption, the 63 cities are categorised as metros (9), boomtowns (16) and niche cities (38). There’s also a fourth category: ‘rest of urban’.
“Less than 2% of the country’s destitutes live in India’s top 63 million-plus-population cities versus 98% in the rest of India. And, despite their low population share, 55% of the country’s super-rich, 44% of the sheer-rich, 42% of the clear-rich, 37% of the nearrich and 27% of the middle class live in these cities,” said Rajesh Shukla, managing director and CEO of PRICE and author of the study, “The Rise of India’s Middle Class”.
The survey results show that in metros and boomtowns, the middle class makes up more than half of the households, while in niche cities it accounts for over 40% of all households. The aspirers category (annual household income of Rs 1. 25 lakh to Rs 5 lakh at 2020-21 prices) is a crucial segm ent for the take-off of basic consumer durable goods, and it forms 45% of the households in the million-plus cities. The nine metros include Mumbai, Delhi, Kolkata, Bengaluru, Chennai, Hyderabad, Surat, Ahmedabad and Pune. They are the largest markets in terms of household disposable income and total consumption expenditure, and serve as India’s consumption centres.
The 16 boomtowns, which are emerging as large markets with young populations and the fastest growth in disposable income, are Bhopal, Coimbatore, Indore, Jaipur, Kanpur, Kannur, Kochi, Kozhikode, Lucknow, Madurai, Malappuram, Nagpur, Nashik, Thiruvananthapuram, Thrissur and Tirupur.
High spending power
There are 38 niche cities with a population of 1 million-2.5 million that display a very high level of spending per household, according to the survey. The list includes Agra, Aligarh, Allahabad, Amritsar, Asansol, Aurangabad, Bareilly, Bhubaneswar, Chandigarh, Dhanbad, Durg, Bhilainagar, Guwahati, Gwalior, Hubli-Dharwad, Jabalpur, Jalandhar, Jamshedpur, Jodhpur, Kollam, Kota, Ludhiana, Meerut, Moradabad, Mysore, Patna, Raipur, Rajkot, Ranchi, Saharanpur, Salem, Siliguri, Solapur, Srinagar, Tiruchirappalli, Vadodara, Varanasi, Vijayawada, and Visakhapatnam.
Comparing Mumbai and Delhi, the survey results show that Mumbai had 2. 7 lakh super-rich households as against 1. 8 lakh in Delhi. Surat had 31,000 super-rich households and recorded the fastest growth in the number of such households at 14. 1% between 2015-16 and 2020-21.
Middle class majority in metros
In the metros, nearly 55% of households were middle class and 13% were rich while 32% were aspirers. Only 1% were destitute households. The fastest growth in middle-class households between 2015-16 and 2020-21 at 8. 4% was recorded in Malappuram in Kerala, although it was largely due to a low base. According to a report by the government think tank Niti Aayog, India is the second largest urban system in the world with almost 11% of the total global urban population living in its cities.
“In absolute numbers, the urban population in India is more than (in) highly urbanised regions across the globe. The country has reached a turning point in its journey of economic transformation wherein half of the country would be ‘urban’ in a few decades. Urban growth is expected to contribute to 73% of the total population increase by 2036 (MoHFW, 2019),” says a Niti Aayog report.
