India reaps a demographic dividend and its middle class surges ahead

Good news for the Indian economy.

Marcus Roberts | Aug 3 2016 | comment

Despite some concerns in certain quarters that India's prolific population growth and fertility is declining, India is poised to become the most populous nation on Earth (a shift which may mark the first time that China does not occupy that position). This brings with it geopolitical and symbolic implications, but India's population growth also helps to fuel a growing economy.

One of the measures of this growing economy is the dramatic expansion of its middle class. According to Quartz magazine, India's middle class doubled in size in the years 2004-2012. A study by two Mumbai University economists, Neeraj Hatekar and Sandhya Krishnan, studied 789 Mumbai households and found that nearly half of India's 1.2 billion people are now classed as middle class (because they spend between $2 and $10 per day). This growth is largely in the “lower middle class” group (those spending between $4 and $6 per day); which has been swollen by people throughout urban and rural areas. These newcomers are carpenters, street vendors, wall painters and drivers, and are those who are moving out of poverty in sectors where there are fewer barriers to entry and where it is easier to find job opportunities.

Now, all such figures must be taken with a grain of salt, particularly when comparing numbers across studies. There are a varierty of methods and classifications used and it is difficult to accurately determine how large any such economic group is. These difficulties must be particularly exacerbated in such a large and diverse country as India.

However, if the trend is that the middle class is growing (and it seems hard to argue that it isn't when one study is stating that it has doubled in size – surely it can't be so wrong!) in both absolute numbers and as a proportion of the population, then this is good news for India's economy and for its people. If more Indians are spending more money then that is good for the country as a whole. And it suggests that India's economic and global rise is continuing. It is also an example of a demographic dividend that India is reaping, at a time when its northern neighbour, China, is faced with an ageing population, and a shrinking workforce.

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