India’s rising middle class

India’s middle class is on the rise. The proportion of households in India with an annual income of USD 10,000 to USD 35,000 is expected to nearly double from 24% in 2021 to 46% by 2031. One key driver of this growth is India’s digitalization efforts. Notably, over the last ten years, the number of people in India without electricity has decreased from almost 300 million to just 30 million. Over that same period, the number of internet users has increased from 125 million to more than 800 million. Digitization, government sponsored incentive programs, and a strong education system has also helped the startup ecosystem, and as of May 2023 there are 108 Indian unicorns, private firms valued over USD 1 billion. Increased foreign direct investment in India is expected to serve as a key driver of future growth. Given geopolitical risk and rising wages in China more firms are looking to India as a manufacturing base which introduces opportunities to up-skill the laborer force. This supply chain transformation has significant potential, given that India’s share of global merchandise exports in 2021 was only 1.8%, compared to 15.1% in China. As these factors help expand the middle class, we can expect increased consumption and production in India, leading to McKinsey’s estimated 8% annual GDP growth until 2030.

Source: Morgan Stanley, 2023.