008 Evolution of the Indian Middle Class

This post may align with those that generally count themselves as middle class. Your family values inculcated the focus on education and a drive to find employment in a good stable job till retirement.

We begin two generations ago. Your grandmother took care of the house, while your grandfather worked for the government in some capacity or the other. His pay was adjusted to inflation over the course of his working life, and when he retired, the government paid an inflation-adjusted pension till the end of his life, and took care of your grandmother till the end of hers. Your grandfather worked one job for forty years, bought the house he resided in with years/decades of savings, and lived a frugal retirement from 60 to 80. The government funded pensions with a defined benefit retirement scheme that guaranteed a level of cash payout every month long after your grandfather stopped working. Your grandfather took out a low-interest loan from the government, for the singular purpose of owning the house he will retire in.

Fast forward a generation, and the private sector has outpaced the government in providing jobs to the Indian employee. Your parents worked in five to ten companies through their lifetime. There is no pension that their employer provides them, but your parents had a portion of their paycheck flowing into defined contribution retirement plans. They also invested into real estate during the course of their working years, and your parents are able to manage a good standard of living thanks to regular income coming in from their provident fund investments, and monthly income from houses rented out by your parents. Your parents focused on paying down their home loans, funding your education and were generally successful in saving more than they spent over their working career. This gives them a cushion for a comfortable retirement post 60.

And now cut to the 2000s. You may expect to change not just jobs, but the pace of change is likely to make your current job redundant within a decade and to continue to have a paycheck, you will need to change your career multiple times through your working life. You are bombarded by thousands of advertisements every day to spend money you have not earned yet. There are promises of easy credit, zero interest EMIs and credit cards, and you find there’s not much left in your account at the end of the month. However, you tell yourself you don’t need to worry as your retirement is forty years away and that everything will sort itself out in the end. The sky-high property prices remove any thought of real estate investing from your mind. Meanwhile, the latest iPhone has just released, and its screen is one inch wider than the previous iteration of the iPhone (which you own). It would be humiliating if your phone is a generation older than that of everyone else in your friends circle. Your Facebook feed is full of photos of your friends enjoying vacations in cool foreign locales. This reminds you it’s time to plan your annual vacation.

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