India’s middle class is buckling under a triple blow of high taxes, shrinking job opportunities, and stagnant wages—an economic squeeze that’s throttling consumption and dragging down growth, says Marcellus’ Saurabh Mukherjea.
In a recent podcast, Mukherjea, founder of Marcellus Investment Managers, broke down what he calls the “lethal combination” that’s straining India’s middle class and stalling its consumption engine.
“After Covid, the government launched a massive public capex program—building roads, railways, boosting defense—but someone had to foot the bill,” Mukherjea said. That someone, he argues, was the middle class.
From FY19 to FY25, income taxes as a percentage of GDP jumped from 2.5% to 3.8%. GST collections followed suit, rising from 2.5% to 2.8%. Combined, that’s a 1.6% of GDP increase in tax burden—about $60–70 billion—channeled largely from the middle-income population to fund government infrastructure spending.
“Now, if you’re taxing the middle class heavily, they can manage—only if jobs are growing. But they aren’t,” he warned. After a post-Covid hiring bump, job creation slowed sharply from 2023 onward. “2025 has been disastrous for middle-class jobs,” Mukherjea added.
The result: consumption has collapsed. Volume growth for FMCG, auto, and building material firms has slowed to an anaemic 2–3%, far below Indian norms.
But the pain goes deeper. Even among the 50 largest companies in India, wage growth over the last three years has averaged just 3%, while inflation has hovered around 6%. That means real incomes are falling by 3% annually.
“With 8–10 million new graduates entering the job market each year, and 80–90% not finding work, the pressure is immense,” said Mukherjea. “It’s no surprise we’re in a situation where consumption has completely fizzled out.”
