Why is the great Indian middle class struggling but choosing to live a luxurious life?

India, the world's most populous country, sees 60% of its GDP coming from private consumption and close to a third of it is discretionary spending (or non-essential, like on entertainment or dining out or vacations). While the richer chunk is always known to be a contributing factor, a new report has revealed that one-third of the discretionary spending is by the aspirational middle class.

India's middle class is consuming more and better, but the pace and distribution of that more-and-better are far too varied. A recent report has shed light on how it’s possible for a household that is value-conscious while buying groceries to splurge on a car or a salaried professional who looks for bargains when hiring an electrician is fine with planning an extravagant vacation.

Why is middle class consuming better?

The reason behind the shift could be because of debt. People are saving less, borrowing more. Asia's third-largest economy is expected to expand 7.2% in the financial year ending March 2025, the fastest among its major peers.


Oxford Economics predicts that emerging-market middle classes will double in the next decade — expanding from 354 million households in 2024 to 687 million by 2034. By 2029, two in every three middle-class consumers are expected to be from Asia. The biggest increases will come from China, India, Indonesia, the
Philippines and Vietnam.

Mukherjea points to stagnant earnings as the first major issue. “As per the income tax data, middle class earnings have stagnated at around 10 and a half lakhs per year for the last 10 years.” He explains that in real terms, middle-class incomes have effectively halved due to inflation. “Massive issue… you can imagine what it does. People want to live a better life, but in inflation-adjusted terms, that means the middle class has had to load up on a lot of debt.”

RBI had also flagged its concerns over household debt levels, saying there is a need for close monitoring of overall household savings that have dipped from average levels seen in the decade before. Despite the savings improvement, household debt continues to rise. It increased to 41% of GDP in FY24 from 37.9% in FY23 and is estimated to have reached 43.5% in the first half of FY25. Housing loans make up about 30% of this debt, but non-housing debt has grown substantially, reaching 32.3% of GDP by the second quarter of FY25.

India sees travel boom

Spending on outbound tourism is expected to grow to $55.39 billion in 2034, the 'Navigating Horizons' report jointly prepared by Nangia NXT and Ficci said.

The rise of “Gen Z” tourists — people born around the turn of the millennium — will spark faster growth in boutique, design-driven hotels in coming years, he said. Younger tourists spend significantly more on food and drinks and like to go on so-called bleisure trips, where the line between leisure and business is blurred.

The report said that availability of Indian or vegetarian food options as well as awareness about niche tourism will help increase the number and frequency of Indians engaging in foreign travel in the coming years. The market has already seen robust growth with rising disposable incomes, an expanding middle class, systemic ease and flexibility in obtaining visas, and a desire for international experiences. "Countries like Egypt, Azerbaijan and Georgia, among others, known for their rich history, cultural heritage, natural beauty and unique topographies, are attracting more and more Indians to venture abroad. Such destinations are often more affordable as well," the report said. With a rising urban and young population, the inclination towards exploring international destinations is expected to continue to grow. Demographic trends thus are likely to support growth in outbound tourism in the near future, it added.

Luxury goods:

Luxury in India is no longer exclusive to the elite. With rising disposable incomes, easier access to credit, and the growing influence of social media, middle-class families are embracing premium lifestyles. Whether it's upgrading to a compact luxury SUV, investing in designer fashion, or choosing high-tech gadgets, Indians are increasingly seeking experiences that exude exclusivity, quality, and status. Younger consumers are driving this trend, prioritizing self-investment in boutique fitness, gated communities, and sustainable products. As premiumisation gains momentum, it calls for strategic attention not just from brands but also from policymakers.

Premium real estate options

In recent years, the Indian real estate market has witnessed a notable shift in consumer preferences. New-age homebuyers, driven by aspirations and changing lifestyles, are increasingly gravitating towards luxury homes, leaving behind the once-dominant affordable housing segment. This paradigm shift underscores the evolving priorities of urban dwellers and the burgeoning demand for a holistic living experience.

India’s burgeoning middle and upper-middle classes are at the forefront of this trend. "Rising disposable incomes, access to easy financing, and global exposure have redefined aspirations. Homebuyers today value comfort, convenience, and status symbols, all of which luxury townships promise to deliver. Millennials, in particular, play a significant role in this shift. Their preferences lean towards quality over quantity, emphasizing premium amenities, contemporary designs, and sustainable living solutions. The notion of affordability for this group has transformed—not in terms of cost, but value," Nagabhushan Reddy, Managing Director of NBR Developers, said.