Saturday, October 20, 2007

Capitalism and The Rising Middle Class in India

The chart above (click to enlarge) is from a McKinsey Global Institute study "The Rise of India's Consumer Market" from May 2007, showing the expected changing patterns of 5 different income groups in India (shown above in constant 2000 Indian rupees), below in US dollars:

Deprived: Less than $2,250 in annual income

Apsirers: $2,250 to $5,000

Seekers (Middle Class): $5,000 to $12,500

Strivers (Middle Class): $12,500 to $25,000

Globals: > $25,000

Notice that:

1. The "deprived group" is expected to decrease from 77% of the Indian population in 1985 to only 3% by 2025.

2. India's middle class (seekers and strivers) is expected to increase from 8% of the population in 1985 to almost 60 percent of the population in 2025.

Conclusion: As a result of market capitalism and globalization India will experience a dramatic rise in its middle class and a significant reduction in its low-income, deprived group. Far from a story of the "rich getting richer and the poor getting poorer," free market capitalism in India will result in the "rich getting richer" and the "poor getting richer," the same story as the U.S.

(HT: Ray Titus and Sanil Kori)


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