'They won’t say how many they’ll fire…': Marcellus' Saurabh Mukerjea on the threat India's middle class faces

India’s middle class is facing an economic squeeze, with incomes largely stagnant over the past decade, even as consumption surges. According to Saurabh Mukerjea, Founder and Chief Investment Officer of Marcellus, the segment earning between ₹5 lakh and ₹1 crore per year has seen no real income growth in 10 years, even as inflation has eroded purchasing power by nearly 50%.

Both lower-income and ultra-rich groups have witnessed a rise in earnings, further deepening income inequality. With artificial intelligence (AI) and automation threatening jobs and an explosion in consumer credit fueling spending, concerns over sustainability and financial stability are growing.

Despite flat incomes, spending at airports, shopping malls, and online platforms has skyrocketed in the last five years. The reason? A surge in loans and credit expansion.

"Consumption has increased massively, but where did the money come from? Loans," Mukerjea said in a podcast with Raj Shamani, explaining how Indians have borrowed heavily to maintain their lifestyles.

However, with AI and automation reducing job security, the looming question remains: who will repay these loans?

Mukerjea warns that the increasing use of AI across industries will inevitably lead to job losses, even though companies avoid explicitly stating it.

"Every CEO I speak to talks about how much AI they will use. They don’t say how many people they will let go, but it’s obvious that if AI replaces humans, jobs will be lost," he noted.

This shift is raising concerns about the future of employment in India, as businesses invest heavily in automation to cut costs and boost efficiency.

Politicians, Mukerjea points out, are increasingly focusing on the lower-income segment because that’s where the largest vote bank lies. The use of Direct Benefit Transfers (DBT) through Jan Dhan-Aadhaar-Mobile (JAM) infrastructure has enabled targeted financial aid, making it easier for governments to secure electoral support.

"Massive vote bank politics is at play. Direct cash transfers are now highly targeted, making it easy for governments to focus on lower-income groups rather than the middle class," he explained.

While the middle class struggles, the ultra-rich segment—those earning over ₹1 crore annually—has grown sevenfold in the last decade, according to income tax data.

"These are the new kings and queens of India. They run the country, finance political systems, and drive luxury markets," Mukerjea remarked.

Sales of luxury homes, high-end cars, and premium products have surged, while affordable housing and mass-market goods struggle.

India’s consumer economy is deepening, not widening—meaning the wealthy are getting richer, while the middle class faces stagnation. This shift is reshaping market dynamics, with brands focusing on premiumization rather than catering to mass consumers.

With household savings at a 50-year low, rising debt, and job uncertainties looming, the next decade may be increasingly polarized between the booming rich and the squeezed middle class.