Urban middle-class households shrink, rich club sees big jump

Mumbai: Affluent households in urban India rose in 2024 while lower middle-class households saw a decline compared to five years ago, according to a report, underscoring a widening gap between the socio-economic class (SEC) in cities and presenting a dilemma for fast-moving consumer goods companies.

The number of affluent households surged 86% while lower and lower middle-class households fell 25% this calendar year compared to 2019, according to Kantar's 'India at Crossroads' report.

Consequently, SEC C, D and E, mostly blue-collar people, comprised 35% of all households in urban India, declining from 52% in 2019. This shows that the urban middle class, once the cornerstone of the consumer goods market, has become the smallest cohort.


The share of SEC A class households, typically white-collared or large businessmen, rose from 24% five years ago to 39% currently, the report showed.

Kantar pointed out that real incomes have been under pressure, leading to stagnating consumer confidence, and a sharper slowdown in consumption in the urban areas than in rural areas.

"The pace of movement from middle to top is significantly higher compared to households added from bottom to middle. So, it's not a pyramid anymore," said Soumya Mohanty, managing director, Insights, South Asia at Kantar. She added that this has led to volume growth stagnating in urban areas for the FMCG market which relies on these consumers to fuel growth.

"In 2022 and 2023, real income growth adjusted for inflation across cohorts increased, but this year, it has been negative for all classes putting further pressure on lower income groups," said Mohanty.

This shift also reflects weak demand for mass-priced groceries and daily household products in cities even as the premiumisation trend continues. In the September quarter, several FMCG companies including Hindustan Unilever, Britannia and Tata Consumer blamed urban stress for weak sales performance in cities though rural demand recovered.

Last month, Britannia managing director Varun Berry said surging housing costs coupled with low income growth for half of urban working population caused a slowdown in urban areas, which accounts for nearly 60% of total FMCG sales.

Rural demand is experiencing growing consumption, bolstered by plentiful rains this year and diverse income sources.

Three quarters ago, FMCG sales growth in villages outpaced that of cities for the first time in nearly three years, an indication of demand recovery, helped by a lower base and price cuts. While rural growth has been stable since, urban demand started seeing a significant downturn.