You come across one survey or another, periodically, stating that the number of poor in India is falling or India has a huge middle class. All these surveys make one assumption or the other and therefore it is not an easy task to track what they are actually talking about. So has India’s middle class grown or shrunk?

The latest report from Credit Suisse on this issue, has taken into account wealth rather than annual income to decide how many people actually fall in the middle class. So how much do you need to be worth to be considered middle class in India? ? The answer is about Rs. 7.5 Lakh. What’s interesting is that this level is the lowest among the countries surveyed. We also have about 3% of the world’s middle-class population.

The bad news, however, is that this way of measuring drastically reduces the number of middle-class individuals in India to about 2.4 Crore and not 26. 4 crore ( as arrived at by earlier studies). While the growth of wealth has been the fastest in India, 90% of our population falls at the bottom – they are worth less than Rs. 7.5 Lakh (financially).

What should you do?

This new way of measuring whether you make the middle-class grade is important for you. Long-term savings and investments are essential for people to build and grow their money as your incomes are not guaranteed. A person saving Rs. 5000 each month (and increasing the saving by 10% each year) and investing in fixed income instruments will reach this level in about 7 years.

Someone who invests in equity will be far richer, in the same amount of time. Growing your money is not really a choice if you want to at least maintain your current lifestyles in the years to come.Read More