Soon India is going to leave behind China in the race of middle class population which is increasing at an astonishing pace. According to the report by Goldman Sachs India will beat China in the number of middle class persons and likely to reach at the top in 2030. According to BBC, India is estimated to have the biggest middle class population by 2030. Strength of the middle class by 2020 will be 200 million and by 2030 it will be 475 million in India.
This seismic shift is bringing lots of changes in the society in terms of quality of life, urbanization, purchasing power, inflation, level of education, number of consumer goods etc.
One of the main reasons for this mass change is the improved level of education. Middle class is divided into upper and lower class and both these classes understand the importance of education. Even poor who can afford education knows the power of education. Right education is the only key to success and to improve the quality of life. Parents are keen to send and educate their children to have a better life than theirs. This is leading to a paradigm shift in the society. With this and economic growth, per capita income of Indians is also going up. In 2012-13 there was 11.7% rise in the per capita income as compared to the last fiscal year and the change was from Rs 5,130 to Rs 5,729 per month.
Another reason for this enormous middle class population is the economic reforms in 1991 that has substantially improved India. In 1985, 93% of the population in India was living below Rs 90,000 a year. In 2005 it stood at 54%. This improvement and growth has resulted in the expansion of middle class and since then there was no looking back.
Middle class resulted in the urbanization and it is expected that by 2025 the urban population in India will be 318 million. Urbanization needs infrastructural development, provision of basic facilities, jobs and lot more. Though urbanization is happening all across India, but major boom in the economy has been noticed in metros and some smaller places like Hyderabad, Bangalore, Ludhiana and Chandigarh.
Emerging middle class and its increasing buying power mean growth in the consumer goods market. Recently there is an increase in the sale of consumer goods such as mobile phones, LCDs, and products of personal care. It is expected that India will have an altogether a new consumer market by 2025.
To reap the benefit of young and financially sound consumers, India must work on infrastructure, healthcare and education sector, and must modernize her financial system. India will become the fifth largest consumer economy and this will benefit the nation as well as world. Such a growth will bring many people out of poverty. Companies will work more and hire new employees to fulfill the demands of new consumers.
But on the other hand there will be a rise in the price of almost everything and so inflation is bound to happen. Buying more means less saving at the end of the day. The rise in the household expenses will impact lower middle class adversely.