Income down, debt up: Saurabh Mukherjea gives three reasons why India's middle class is facing a major crisis

India’s middle class is under growing financial strain due to a combination of three factors -- stagnant earnings, automation-driven job losses, and an ongoing economic slowdown. Saurabh Mukherjea, Founder and Chief Investment Officer at Marcellus Investment Managers, highlights these concerns, warning that they are reshaping the financial security of the middle class in significant ways.

Stagnant incomes limit financial growth

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.”

Automation reduces job opportunities

The second concern is the increasing impact of automation on jobs. “Whether it's in factories or in offices, the machines are taking over conventional middle class jobs,” Mukherjea says. He cites bank tellers as an example, explaining that the first wave of automation came with ATMs, while the second wave will involve bots gradually replacing tellers. He adds that the next phase of automation, driven by generative AI, will further disrupt jobs across both manufacturing and white-collar sectors.

Cyclical slowdown adds to the strain

Mukherjea identifies a cyclical economic downturn as the third factor affecting the middle class. “India, two years post-COVID, had a terrific economic boom. Revenge spending dies away… it’s leading to a cyclical economic downturn. And it is all but certain that the middle class will be the biggest casualty of this post-COVID cyclical economic downturn.”

Long-term challenges remain

While the economic slowdown may be temporary, Mukherjea warns that the issues of wage stagnation and automation-driven job losses are structural. He states that these challenges “will have a massive… detrimental influence on the middle class over the next decade.”