A new report by venture capital firm Blume Ventures highlights a stark economic reality in India, revealing that nearly a billion people in the country lack discretionary spending power. Despite India’s 1.4 billion population, only about 130-140 million individuals form the core consumer base, comparable to Mexico’s size. The report underscores the widening economic disparity, with wealth concentrating among the rich while the middle class faces stagnation.
A recent report by Blume Ventures, a venture capital firm specializing in early-stage investments, reveals a startling economic reality: despite India’s 1.4 billion population, nearly a billion people have little to no discretionary spending power. The study sheds light on the country’s consumption trends, economic inequality, and shifting market dynamics.
According to the report, only around 130-140 million Indians constitute the core consumer class, making India’s consumer market comparable in size to Mexico. Another 300 million people are classified as “emerging” or “aspirant” consumers, hesitant to spend due to financial constraints despite easier access to digital transactions.
Wealth Concentration and Market Trends
The findings indicate that India’s economic growth is not broad-based. The consuming class is “deepening” rather than “widening,” meaning the wealthy are getting richer while the middle class remains stagnant. This trend is reshaping India’s consumer market, driving businesses toward “premiumisation,” where brands focus on high-end products rather than mass-market affordability.
The report highlights that sales of ultra-luxury gated homes and high-end smartphones are booming, while their budget-friendly alternatives are struggling. Affordable housing, which made up 40% of India’s market five years ago, now accounts for just 18%. Luxury goods and entertainment experiences, such as high-priced concert tickets for international artists like Coldplay and Ed Sheeran, continue to see strong demand.
Economic Inequality and Consumption Trends
Blume Ventures’ analysis aligns with the long-held belief that India’s post-pandemic recovery has been K-shaped—where the wealthy prosper while the poor see their purchasing power decline. Data shows that in 1990, the top 10% of India’s population controlled 34% of the national income. That share has now surged to 57.7%, while the bottom 50% has seen its income share shrink from 22.2% to 15%.
Recent economic challenges have exacerbated the problem. Financial savings among Indian households have hit a 50-year low, and rising debt levels further strain disposable income. The Reserve Bank of India (RBI) has tightened restrictions on unsecured lending, which previously fueled spending among aspirant consumers. This move is expected to curb short-term consumption growth.
In the immediate term, two factors could provide some relief: a projected rural demand boost following a record agricultural harvest and a $12 billion tax rebate announced in the recent budget. While these measures may marginally boost India’s GDP, experts caution that they will not significantly alter long-term economic headwinds.
A report by Marcellus Investment Managers further supports Blume Ventures’ findings, stating that India’s middle class is shrinking due to stagnant wages. Data shows that the middle 50% of India’s tax-paying population has seen little to no income growth in a decade, meaning real wages have effectively halved when adjusted for inflation. The resulting decline in financial security suggests that products and services catering to middle-class households will face increasing challenges in the coming years.
Job Market and Automation Concerns
Another alarming trend is the increasing difficulty of securing white-collar jobs in urban areas. The Marcellus report points to the growing impact of artificial intelligence (AI) and automation, which are replacing clerical and supervisory roles in industries such as manufacturing and IT services. The decline in supervisory positions, in particular, reflects a shrinking workforce in mid-level managerial roles.
The Indian government has acknowledged these challenges in its recent economic survey. It warns that AI-driven labor displacement could pose significant risks for India’s predominantly service-based economy, where many IT jobs remain vulnerable to automation. The survey further states that a prolonged decline in consumption due to shrinking incomes and job losses could disrupt India’s economic growth trajectory.
With India’s consumer base increasingly skewed toward premium products and the middle class facing mounting economic pressures, businesses and policymakers must navigate these shifting dynamics carefully. While short-term stimulus measures may provide temporary relief, structural changes will be necessary to ensure a more equitable and sustainable economic future for India.
