Middle Class

Middle Class 1.0

  • India’s Middle class after Independence was largely created by the public sector.
  • Government jobs in Railways, Public Sector Enterprises (PSEs), and Banking were primary employment sources.
  • Public sector employment peaked in 1990-91 and has declined since liberalization (1991).

Middle Class 2.0

  • Emerged post-1991 economic liberalization .
  • Driven by private sector employment in IT, finance, services, logistics, and e-commerce.
  • Major contributors include IT companies, private banks, logistics (like Zomato, Swiggy), and gig economy platforms.

Decline in Public Sector Employment

  • Indian Railways: Employment declined from 16.5 lakh (1990-91) to 11.9 lakh (2022-23) despite increase in services.
    • Even after recent recruitment, it is still around 12.5 lakh (2023-24) .
  • Public Sector Enterprises (PSEs): Employment in Central PSEs reduced from 22.2 lakh (1990-91) to 8.1 lakh (2023-24) .
    • Major PSUs like BHEL, SAIL, Coal India, etc., have seen declining manpower.
  • Banking Sector: Public sector banks' (PSBs) employee strength reduced from 8.5 lakh (1991-92) to 7.7 lakh (2020-21) .
    • Private sector banks overtook PSBs in employment by 2022-23 .
Middle Class

Rise of Private Sector Employment

  • IT Industry: Major employment growth seen in TCS, Infosys, Wipro, HCL, and Tech Mahindra .
    • TCS: From 45,714 (2004-05) to 4,48,464 (2024) .
    • Total employment in Big-Five IT firms: 15.34 lakh (2024) , exceeding Indian Railways' workforce .
  • Private Banks: HDFC Bank's employment (2.13 lakh) almost matched State Bank of India's (2.32 lakh) in 2024.
    • Private banks like ICICI, Axis, Kotak, Bandhan now employ higher than many PSBs.
  • Gig Economy: Rapid employment in gig platforms like Uber, Zomato, Swiggy.
    • Uber employs over 10 lakh drivers , Zomato engages 4.8 lakh monthly food delivery partners.
    • These jobs, however, lack formal benefits and stability.

Structural Employment Shift (Public to Private)

  • Employment Shift: Post-liberalization (1991), organized employment shifted from public sector to private sector .
    • Resulted in Middle Class 2.0 , fueled by private-sector jobs.
  • Challenge in Manufacturing Sector:
    • Manufacturing sector share in the workforce stagnated at 11.4% (2023-24) .
    • Majority of the workforce remains in agriculture (46.2%) or the low-wage informal sector .
    • Lack of high-quality manufacturing jobs remains a major employment challenge.

Employment Challenge

  • Agriculture Backslide: Farm sector workforce share decreased from 64% (1993-94) to 42.5% (2018-19) .
    • However, it increased again to 46.2% (2023-24) due to lack of better employment.
  • Service Sector Dominance: High-quality employment generated only in the services sector (IT, finance, health, logistics, etc.).
    • Low-income jobs still dominate, like gig work, security staffing, sanitation, etc.
  • Lack of Manufacturing Boom: Unlike China , India has not experienced large-scale labor transition from agriculture to manufacturing .
    • Result: Manufacturing sector's contribution remains stagnant.

Different Definitions of Middle Class

  • PRICE Report (2022): Middle class household income: Rs 5 lakh - Rs 30 lakh annually.
  • NCAER: Middle class household income: Rs 2 lakh - Rs 10 lakh annually.
  • Abhijit Banerjee Definition (2008): Per capita daily expenditure: $2 - $10 (Rs 160 - Rs 800) .
  • Government Definition: Families with annual income less than Rs 8 lakh fall under Economically Weaker Section (EWS) .
Middle Class

Middle Class as a Vote Bank

  • Political parties like AAP and BJP are now targeting the middle class.
  • AAP's new "Middle Class Manifesto" aims at increasing education, health allocations, and tax exemptions .
  • BJP has historically gained middle-class support since 2014 .