The student protests we have been witnessing in India can be explained in large part by the crisis facing the Indian middle class, marked in particular by graduate unemployment and a decline in average purchasing power. This is because the upper middle class has grown wealthier, while the lower-middle class has become poorer.
Until the mid-2010s, the idea that India’s middle class was destined to expand continuously seemed self-evident. India had enjoyed double-digit growth during the decade from 2004 to 2014 under Prime Minister Manmohan Singh, the architect of the economic liberalisation of the 1990s driven by the IT sector and foreign investment. The middle class was expanding at that time thanks to the growth of new skilled jobs. This momentum led to the emergence of a social group comprising corporate executives, engineers, IT professionals and entrepreneurs. This middle class defined itself by its income, its consumption capacity, and a social ethos often associated with the higher castes – particularly evident in its opposition to affirmative action policies.
However, this category has remained difficult to measure, as the criteria used vary widely among organisations: income, consumption, wealth, educational level, type of housing, white-collar employment, or subjective self-identification. In the 2010s, several estimates fuelled the notion of a spectacular rise of the Indian middle class. In 2012, the NCAER estimated that it comprised approximately 142 million people, or nearly 12% of the population. Other researchers, using broader criteria, estimated it at 20% of the population. On this basis, firms such as Ernst & Young, McKinsey, and Goldman Sachs predicted rapid growth in this segment, with some even forecasting several hundred million members by 2025–2040.
Narendra Modi, when he was chief minister of Gujarat and later as prime minister after 2014, even used the term “neo-middle class” to refer to people from rural areas who were entering a form of urban modernity thanks to economic growth. However, this term quickly disappeared from political vocabulary as the momentum for expansion ran out of steam.
Indeed, the Indian middle class plateaued in the mid-2010s. According to the Pew Research Center, in 2017, only 108 million Indians belonged to the middle class – defined as having an income of $10 to $50 per day in purchasing power parity – representing about 8% of the population. When the wealthiest segments – those situated above this group – are included, the proportion remains close to previous estimates, confirming the lack of significant growth of the Indian middle class. This is because real incomes for this social category stagnated between 2013 and 2014 and 2023 and 2024. Real wages even declined in several sectors: manufacturing, mining, energy, and services.
This situation can be explained by persistent inflation, particularly food inflation and by weak income growth. Between 2017 and 2018 and 2022 and 2023, real urban income showed virtually no growth. In certain sectors, such as IT, retail, and logistics, nominal wage increases fell short of inflation.
The social implications of a K-shaped recovery
These averages mask a growing internal differentiation within the middle class. Some households formerly classified in this category have joined the economic elite, while the majority of the middle segments have stagnated or regressed. Data from the World Inequality Lab indeed show a dramatic concentration of income at the top of society: the richest 10% held 57.7% of national income in 2022–2023, compared to 33.5% in 1990. The richest 1% held 22.6% of national income, and the top 0.1% held about 10%. India now has more than 300 billionaires. Conversely, the 40% below the top 10% saw their share of national income drop from 44.1% in 1990 to 27.3% in 2022–2023, while the share of the poorest 50% fell to 15%. This situation has led some researchers, such as Lucas Chancel and Thomas Piketty, to speak of a “missing middle class.”
This polarisation is reflected in consumption patterns. The poorest half of the urban population spends less than 5,000 rupees per month, while the richest 5% spend more than four times as much. Households drew heavily on their savings after the pandemic, but this was not enough: their debt has reached a record high, while demand for consumer goods is slowing. Car sales are telling, as only 12% of Indians are reportedly able to afford a car. Small cars, previously associated with the middle class, are declining, while SUVs and high-end vehicles are growing strongly, as are luxury housing, high-end hotel services, and business-class airline tickets.
This polarisation seems paradoxical in light of India’s officially reported growth rates, which have often hovered around 7 to 8 percent since 2014, excluding the Covid years. How can this paradox be explained? First, these figures have been disputed, particularly due to issues with national accounting and the overestimation of the informal sector. The IMF itself has criticised the quality of India’s data. In reality, growth is believed to have been overestimated by 1.5 to 2 percentage points. This is because several shocks have hit the economy hard: the 2016 demonetisation, which abruptly removed 85% of the currency in circulation and had a lasting impact on the informal economy; the poorly managed introduction of the Goods and Services Tax in 2017, which disrupted small and medium-sized enterprises; and then the Covid-19 pandemic, which caused a collapse in economic activity, a massive exodus of precarious workers, and a major social crisis.
Second, since the pandemic, India’s recovery has been described as “K-shaped” growth: the wealthiest are benefiting from growth, while the working and middle classes are stagnating or declining. In 2024, three quarters of Indians earned less than 15,000 rupees per month – about 140 euros. This unequal recovery explains why macroeconomic growth is not translating into an expansion of the middle class. It primarily benefits an elite capable of investing, consuming high-end goods, and capitalising on the opportunities of globalisation, while college graduates face a deteriorating job market.
Graduate unemployment and turbulence in the IT Sector
Young Indians with higher education face very high unemployment rates. In 2024, according to the International Labor Organization, the unemployment rate among graduates reached 29.1 percent – nine times higher than that of illiterate people. This new paradox stems in part from a mismatch between graduates’ expectations and employers’ needs – both in terms of quality and quantity. Families invest heavily in private education, often at the cost of significant debt, which leads young people to turn down low-paying jobs. At the same time, employers believe that many graduates lack the necessary skills. Top-tier institutions, such as the Indian Institutes of Technology, remain highly selective and train only a small minority of engineers. And even these institutions are facing placement difficulties, with a significant drop in job offers in 2023–2024.
The IT sector, long a driving force behind the rise of the middle class, illustrates this crisis. The growth of India’s IT sector was fuelled by outsourcing from the West – particularly in the wake of the Y2K bug – by the training of qualified engineers, and by supportive public policies, such as the creation of special economic zones. Companies such as Tata Consultancy Services, Infosys, Wipro, and Satyam-Mahindra have made India a global powerhouse in IT services. The sector accounted for 7.4% of GDP in 2022, up from 1.2% in 1998, and its exports exceeded $200 billion in the mid-2020s, with the United States absorbing a dominant share of these exports.
But India’s IT sector is slowing down. Revenue growth has levelled off, investments have declined, and the workforce is no longer expanding. Automation and artificial intelligence threaten a significant portion of jobs. Major companies in the sector have begun to reduce their workforces: Infosys, Wipro, and TCS have laid off employees or scaled back hiring. The Indian IT sector could benefit from the rise of Global Capability Centers, or GCCs. These centers are established directly in India by foreign multinationals to bring certain IT, financial, HR, or innovation functions in-house. By 2025, India had approximately 1,700 GCCs employing 1.9 million people, with an annual growth rate of 19%. They could expand
further due to the cost of skilled labour and visa restrictions in the United States. However, these centers do not recruit large numbers of recent generalist graduates; they primarily seek specialised, experienced professionals with advanced skills in AI, cybersecurity, or cutting-edge technologies. This trend is therefore likely to exacerbate polarisation in the labour market rather than help expand India’s middle class.
Overall, the middle class is not experiencing linear growth, as was imagined in the 2000s, but rather significant polarisation: while the elite is prospering, the lower middle class is becoming increasingly vulnerable. Social mobility – which was based on the three pillars of education, jobs in the service sector (particularly in IT), and urbanisation – is functioning less effectively than before. This situation is particularly problematic in a country where, every year, more than ten million young people enter the job market: it is from among them, and from Gen Z at large, that today’s street protesters are drawn.
Christophe Jaffrelot is the author of Modi’s India (Princeton University Press, 2021. His next book L’ambition indienne : les paradoxes d’une nouvelle puissance (éditions Taillandier) is due to be released in October 2026.
Christophe Jaffrelot has received funding from France’s National Research Agency. He is a member of the French Political Science Association.
