Rebooting Four Indias: For a qualitative shift in India’s place in the world

FOUR DISTINCT INDIAS jostle with one another as we enter the second quartile of the 21st century. At the top is India’s elite: affluent, educated, professional and worldly wise. Right under it is a large and growing aspirational middle class: young, energetic, ambitious and upwardly mobile.

Beneath it lies an even larger cohort of what outdated social scientists called the working class or proletariat: seeking opportunities in cities and small towns that would enable them to break through the corrugated ceiling that separates them from the aspirational middle class.

Below them lies the largest demographic slice of India, perhaps half of India’s population of 1.5 billion. These Indians still lead lives of quiet desperation in villages and in shanties in big, impersonal cities. Extreme poverty in India has decreased to less than 10 per cent, but hand-to-mouth poverty persists.

Over the next 25 years, there will be significant changes in the four-level pyramid that forms India today: a narrow tip, an aspirational middle, a broad third level, and a very large base.

If India’s economy continues to grow at 8 per cent a year, it will double every nine years. In 27 years, by 2052, the economy will therefore undergo three cycles of doubling, rising from $4 trillion today to $32 trillion.

By purchasing power parity (PPP), which adjusts GDP for vastly different living costs between countries and is routinely used by the International Monetary Fund (IMF) and World Bank, India is already the world’s third-largest economy with a GDP of $17 trillion and a per capita income of $11,000.

The problem is inequality. Wealth is disproportionately spread between the four Indias. The top but small affluent tier of around 50 million Indians commands a per capita income and living standards equivalent to a Western European country.

The second tier—the thrusting, aspirational, upwardly mobile middle class—comprising roughly 250 million Indians, forms the core of the country’s dynamic, expanding consumer market. It consumes retail products, travels widely, buys new houses and has made India the world’s third-largest passenger car manufacturer as well as the world’s largest two-wheeler producer. This middle demographic tier has purchasing power roughly equivalent to a Latin American country but wants to quickly move up the value chain.

Rattling the ceiling is the big tier of around 500 million working-class Indians. Many have low-paid jobs in small and medium enterprises or the government. They are gig workers, delivery boys and drivers. Those with technical training work as electricians, plumbers, and masons. Some own tiny one-person businesses, kirana stores, pharmacies, and food stalls. They make a living but yearn for more. Their average per capita income mirrors that of a north African country.

The top three tiers thus comprise around 800 million Indians (50 million at the affluent top, 250 million in the aspirational middle and 500 million in the third struggling rung).

The base of India’s demographic pyramid is made up of the balance 700 million Indians— nearly half of India’s 1.5 billion population. They live lives of deprivation, with few sources of stable income. Many work as labourers at farms owned by large land owners.

To lift this fourth layer is the work of India’s political leadership in the next quarter century. By then, the top tier of 50 million affluent Indians and 250 middle-class professionals would have expanded into one combined layer of 300 million. Also attached to that top layer would be the erstwhile third tier of 500 million Indians, now part of an 800 million-strong top tier.

By 2050, the four Indias would have morphed into two distinct Indias. The second India, impoverished for decades, would have risen too but it will remain a work-in-progress.

In 1947, India had a poverty rate of over 80 per cent. That has reduced, glacially in the first five decades of independence, more quickly in the last three decades. But removing the historical poverty overhang is a work of mammoth proportions.That India will lift hundreds of million people out of extreme poverty and elevate millions of others into the upper middle class would constitute a triumph.

It can fundamentally alter India’s place in the world order. One hundred years after Independence, India would finally meet its tryst with destiny.