Prakash Bhasi, a 54-year-old technician at a packaging firm in Mumbai, sits at a roadside tea stall, staring at his phone. The screen displays a bank alert: his savings account balance is down to a few thousand rupees. Until two years ago, Bhasi’s annual household income of ₹22 lakh ($26,000) comfortably supported his family of three, including a ₹45,000 monthly EMI for their 1BHK apartment in Navi Mumbai and ₹10,000 sent to his aging parents in Coimbatore. But now, with vegetable prices up 30% and his company slashing bonuses amid fears of layoffs, Bhasi’s financial cushion is gone. “I go to the market with ₹500 and come back with almost nothing,” he says, his voice heavy with resignation. “This wasn’t the life I planned.”
Bhasi’s story is not unique. Across urban India, the middle class—long heralded as the engine of the country’s economic miracle—is grappling with a perfect storm of large-scale layoffs, stagnant wages, and soaring prices for essentials like food, fuel, and housing. As Asia’s third-largest economy projects a robust 7.2% GDP growth for the financial year ending March 2025, the reality on the ground tells a different story: a demographic that accounts for roughly a third of India’s 1.4 billion people is being squeezed, threatening the nation’s consumption-driven growth model.
A Job Market in Turmoil:
The Indian middle class, broadly defined as households earning between ₹5 lakh and ₹30 lakh annually ($6,000-$36,000), has historically relied on stable salaried jobs in sectors like IT, manufacturing, and financial services. But the job market is unraveling. In October 2023, the Centre for Monitoring Indian Economy (CMIE) reported an unemployment rate of 10.1%, the highest in two years, with urban areas hit hardest. Tech giants like Infosys and Wipro announced they would skip campus hiring for 2023-24, while startups, once a beacon for young professionals, have shed thousands of jobs amid funding droughts.
Take the case of Anjali Sharma, a 29-year-old software engineer in Bengaluru. In January 2025, she was laid off from a mid-sized IT firm that cited “automation efficiencies” as the reason. Sharma, who earned ₹12 lakh annually, had taken a ₹20 lakh loan for her wedding and a car. Now, with no job offers after three months of searching, she’s dipping into her savings to cover EMIs. “I thought IT was a safe bet,” she says, her voice cracking. “Now I’m competing with hundreds for roles that pay half my old salary.” Her story echoes a broader trend: technology, particularly AI, is replacing routine white-collar jobs, leaving even skilled professionals vulnerable.
The layoffs aren’t limited to tech. In Mumbai, Paradigm Realty, a mid-sized builder, has scaled back projects and staff as India’s real estate market grapples with oversupply and declining affordability. Parth Mehta, the firm’s managing director, told reporters in 2020 that “the blood in the finance system has got completely choked,” a sentiment that persists as housing sales and launches contracted in Q2 2024. Construction workers, clerical staff, and even managers like Mehta’s team are being let go, adding to the urban unemployment crisis.
The Sting of Inflation
Even for those with jobs, the rising cost of essentials is eroding purchasing power. Food inflation, which hit 10.9% in October 2024, has been particularly brutal. Vegetables like tomatoes and potatoes, staples in Indian households, have doubled in price in some cities, while milk, eggs, and fuel costs have climbed steadily. Rajwanti Dahiya, a 60-year-old retiree in Delhi surviving on her husband’s ₹30,000 monthly pension, told The Hindu last November, “During this festival season, we have not spent at all.” Her family skipped buying new clothes or electronics, a stark contrast to past years when Diwali meant splurging.
Avinash Crasto, a 37-year-old marketing executive in Mumbai, has a similar story. With a family of four and an annual income of ₹15 lakh, Crasto once dreamed of upgrading to a 2BHK apartment. But with food and school fees eating up 60% of his budget, he now shops at “budget-friendly stores” for discounts. “We used to eat out once a week,” he says. “Now it’s once a month, and even that feels like a luxury.” Crasto’s belt-tightening reflects a broader trend: urban consumption, a key driver of India’s economy, hit a two-year low in November 2024, according to Citibank’s index tracking airline bookings, fuel sales, and wages.
The Reserve Bank of India (RBI) has kept interest rates elevated to tame inflation, making loans for homes, cars, or education costlier. Household debt, now at 40% of GDP, is at a record high, with unsecured loans like credit cards—approaching 100 million in use—fueling a risky borrowing spree. Rohan, a 25-year-old from Delhi, racked up ₹2 lakh in credit card debt buying a TV, laptop, and smartphone, lured by “no-interest EMIs.” When he fell behind on payments, he took a cheaper loan to clear the dues, trapping himself in a cycle of debt. “I thought I was living the middle-class dream,” he says. “Now I’m just surviving.”
A Shrinking Middle Class?
The middle class’s struggles are not just financial—they’re structural. A 2021 Pew Research Centre study estimated that India’s middle class shrank by a third during the Covid-19 pandemic, dropping from 99 million to 66 million as incomes collapsed. While some have clawed back, the recovery is fragile. Nestlé India, a bellwether for consumer goods, reported its slowest quarterly growth in eight years in Q2 2024, with a mere 1.4% revenue increase and a 1% volume shrinkage, signaling that even mass-market products are losing traction.
The auto sector tells a similar story. In 2024, car dealers were stuck with an unprecedented inventory of 700,000 vehicles worth ₹86,000 crore ($10.2 billion), a 75% jump from 2023, as middle-class buyers held back. Two-wheeler sales, a staple for lower-middle-class families, remain below their 2018 peak. “The middle class was supposed to drive SUVs,” says an auto dealer in Pune, shaking his head. “Now they’re not even buying hatchbacks.”
This consumption slump has political ramifications. Middle-class frustration was a key factor in Prime Minister Narendra Modi’s weaker election performance in 2024, with voters citing inflation and joblessness as top concerns. A 2024 survey by the Centre for the Study of Developing Societies found that 62% of respondents felt finding a job was harder than five years ago. Yet, the government’s response—focused on boosting production rather than demand—has left many feeling unheard.
A Dream Deferred
Back at the tea stall, Prakash Bhasi reflects on his 30-year career. He joined the middle class in the 1990s, riding India’s liberalization wave. He bought his first TV, then a fridge, and dreamed of a car. Today, those aspirations feel distant for his son, a 24-year-old graduate applying for jobs with no callbacks. “I worked hard so he wouldn’t struggle,” Bhasi says, his eyes misty. “But now, we’re both stuck.”
Economists warn that without structural reforms—job creation in manufacturing, wage growth, and affordable housing—the middle class’s slide could drag India’s growth down with it. The RBI could ease liquidity by cutting the Cash Reserve Ratio, and tax relief for middle-income households might spur consumption, but these are short-term fixes. Long-term, India needs to address wage stagnation and skill mismatches, particularly in tech-heavy sectors where AI is displacing workers.
For now, the middle class is adapting, but at a cost. Families like the Crastos are cutting back on non-essentials, while young professionals like Anjali Sharma are rethinking their futures. “I might move back to my hometown,” Sharma says. “Bengaluru’s too expensive if you’re jobless.” Her words capture a broader truth: the Indian middle class, once a symbol of aspiration, is now fighting to hold on to what it has.
As Bhasi finishes his tea, he glances at the market across the street, where vendors shout prices for tomatoes at ₹80 a kilo. He shakes his head. “The India story was supposed to be ours,” he says. “Now I wonder if we were ever part of it.”