That’s because there are 24 million millionaires worldwide, which could be the population of a small country. Also, of the 170,000 in India, 147,400 have assets in the $1–5 million range, which is—ahem—modest by global standards of wealth these days. They have more money, of course, as the old quip has it, but also much more to spend than a simple income comparison would have you think.

While the allure of affluence may seem enticing, it is crucial to recognize the profound downsides that accompany this lifestyle. From the exorbitant financial burdens to the toll on mental health and interpersonal relationships, the pursuit of wealth comes at a significant cost. Finding a balance between enjoying the comforts of luxury and cultivating a fulfilling, purpose-driven life is essential for sustained well-being and happiness.

The following chart looks at income inequality dynamics in India between 1951 and 2022, with the population split into the bottom 50 percent, middle 40 percent and top 10 percent of the country. It shows that inequality declined post-independence until the 1980s, with the share of national income going to the top 10 percent dropping from 37 percent in 1951 to 30 percent in 1982. They explain that from the early 1980s, the Indian government then started to introduce a broad range of economic reforms that led to liberalization in 1991. With this, the top 10 percent’s share started to increase, hitting nearly 60 percent from around income pyramid india 2016 onwards.

Primary Source of Income for Middle Class, Rich

India is poised to become the third largest consumption market of the world by 2026, states a report by UBS. At present, India is one of the fastest-growing economies and the fifth largest consumer market in the world. At current prices, India’s household consumption nearly doubled between 2013 and 2023, to $2.1 trillion, or ₹168 lakh crore (with $1 considered equivalent to ₹80) at an annual compound growth rate of 7.2%. At the same time, the 10-year CAGR for household consumption in China is 7.1%, the US is 5%, and Germany is 1%. Federal and most state governments want to collect a percentage of these transactions and they do so in the form of taxation.

Income Data Tables

This has left less money in peoples’ wallets for discretionary purchases. UBS says the declining savings funding consumption has run its course considering the inadequate social safety net in India. “We estimate that household savings would remain below 20% of GDP in FY24, even after the spurt to 22.7% of GDP during FY21 (pandemic driven precautionary savings),” it says. This means that the top 1 per cent of people have 75 times more income and 313 times more wealth than the bottom 50 per cent of people in India. But the trend of the zips has been the salaried breaking into the ranks of the Rich.

The middle 40 percent of the nation had received a share of national income that was higher than that of the top 10 percent up until the 2000s. That was until 2001, when a switch then took place, as the middle 40 percent received 38.9 percent of total income and the top 10 percent received 41 percent of total income. By 2022, this diverging path had come to 27.3 percent for the middle 40 percent and a high 57.7 percent for the top 10 percent. Reasons for the shares of lower income brackets remaining depressed include a “lack of quality broad-based education, focused on the masses and not just the elites”, as well as India’s inability to “pull more of its workforce away from agriculture”. Okay, now sorry to burst your ‘middle class bubble’ but that’s the sort of definition the investment bank actually used to define the ‘affluent’ group in India. And these rich people earn around $10,000 a year, or roughly ₹8.5 lakhs.

Evolving income distribution and its impact on Consumption

  • By nurturing networks, norms, and trust, affluent communities facilitate innovation, investment, and the provision of desirable goods and services.
  • Adjusted for inflation, real rural wages were down 1.3% during FY23, says UBS.
  • They have more money, of course, as the old quip has it, but also much more to spend than a simple income comparison would have you think.
  • In contrast, southern states have a lower proportion of the poor who fall into the bottom two quintiles of income.
  • Your uncle’s abstract art may not qualify, but that vintage car in the old garage might.
  • You must file a tax return and pay taxes on the income you receive.

The bottom of the income pyramid shrank to 71%, who earned less than $2,500 gross annual income, and 50% of the population, or 53.8 crore, earned less than $1,500. Notably, domestic air passenger traffic was 15.4 crore in FY24 compared with 14.1 crore in FY20. Similarly, in hotel bookings on MakeMyTrip, which caters to the mid/premium segment, suggests that hotel bookings sharply recovered post the pandemic, despite an increase in prices.

Transform rural India

Now we’re not saying that the crowd on the lower threshold is buying Coldplay tickets and the latest SUVs. But it’s definitely those folks in that vicinity that don’t seem to have too much of a problem with money. At the same time, limited fiscal support for vulnerable sections of society during the pandemic amplified the gap, it says. At the very top, acquiring one sort of aura or another is almost a rite of passage.

  • The most reliable picture is to be found in Credit Suisse’s Global Wealth Report 2010, which goes by assets that can be liquidated overnight, such as shares and bonds, as well as other assets like real estate.
  • Delhi, Goa, and Kerala are three states (in that order) that have the lowest population in the same category.
  • While urban mass-market demand should remain modest on softening corporate wage growth, flattening personal loan growth and the lagged impact of monetary tightening, UBS expects the premium segment to continue to do well.
  • At the same time, 61.2 crore people, or 72% of the country’s population was earning less than $1,500 as gross annual income.

Forms & Instructions

They’re the low-income category or the poor and they make up a whopping 50% of India’s working population. The World Inequality Lab suggests the skewed wealth distribution is a good reason to consider restructuring the tax code to account for both income and wealth. Moreover, it suggests that broad-based public investments in health, education and nutrition are needed to enable the average Indian, and not just the elites, to meaningfully benefit from the ongoing wave of globalisation. Gradual income inequality has translated into a more stark wealth inequality in the country. While 57.7 per cent of income is in the hands of the top 10 per cent of people, 65 per cent of wealth lies with them.

Middle-income households account for largest chunk of India’s unemployed population: CMIE

Over the same duration, the wealth of people in the top 10 per cent rose from 44.9 to 64.6 per cent and the wealth of those in the top 0.1 per cent rose from a mere 3.2 per cent to a humongous 29 per cent. Most of the wealth lost was from the people in the middle 40 per cent group — falling from 43.7 to 29 per cent. Alarming as this sounds, it’s a widely shared response in scam-scarred India nowadays. “Earlier, there was money that inspires,” sighs Seth, “Now there is money that mocks.” A pity, really.

Within this trend, MakeMyTrip also notes customers upgrading, such as, from mid-segment to premium. A similar divide is visible in consumption of services if you look at domestic air passenger traffic, which has surpassed pre-pandemic levels despite capacity constraints and other supply issues leading to higher ticket prices. Domestic air traffic was 15.4 crore in FY24 compared with 14.1 crore in FY20. Similarly, data from MakeMyTrip, which caters to the mid/premium segment, suggests hotel bookings recovered sharply after the pandemic despite an increase in prices. MakeMyTrip says there is also a trend of customers upgrading from mid to premium segment. Excluding mortgages, leveraging up by households aided consumption and explains a fifth of the past three years’ private consumption growth, the report says.

Some taxpayers whose modified adjusted gross incomes (MAGIs) exceed certain thresholds after claiming tax deductions and credits must also pay a net investment income tax. The term income refers to any type of compensation or benefit received in exchange for work performed or for capital invested. Income can come in the form of the money you receive from your employer or the payments you receive on your investments. Income can be divided into several categories, including gross versus net income and earned versus unearned income.

The top of India’s income pyramid had income continuity during the pandemic versus the bottom, says UBS. During the pandemic, income levels for the top of India’s income pyramid were largely supported. Corporate wages were up 14% during FY23 versus 9% during the pre-pandemic period. On the contrary, growth in rural wages was largely muted at 5-7% year-on-year during this period.