India’s middle-class falling into debt trap: Saurabh Mukherjea

India’s middle class, long considered the engine of consumption and economic stability, is in turmoil. In the latest episode of YouTube program Off The Beaten Track, The Federal spoke to Saurabh Mukherjea, founder and CIO of Marcellus Investment Managers, who shared deep insights into the socio-economic pressures weighing on this section of people.

“The great Indian middle class,” Mukherjea noted, “is no longer the focus of politicians.” As AI-driven automation, rising prices, and heavy borrowing pressure converge, many middle-class households are feeling abandoned and financially strained, he said.

AI’s quiet disruption

According to Mukherjea, a key cause of middle-class distress is job erosion due to automation. He explained how robots and AI have replaced both factory and office workers.

“Entry-level IT jobs, once a stable source of employment, are being taken over by machines,” he said. Not only are call centres being replaced by bots, even security jobs at banks are under threat from sensors and AI systems.

This wave of technological substitution, he warned, mirrors what the West experienced during the 1980s and '90s. In Asia, the process is underway now, and India’s middle-class jobs are at its core, he observed.

Stagnant salaries

Despite the booming economy, those earning between ₹5 lakh and ₹1 crore annually — a bracket that covers around 75% of India's income tax filers — have seen stagnant incomes for the past decade.

“People earning below ₹5 lakh and above ₹1 crore are seeing their incomes grow,” Mukherjea pointed out. The former benefit from targeted welfare schemes and the latter are mostly business owners. The middle, however, is being squeezed.

A major factor behind the debt explosion, Mukherjea said, is the illusion of affluence created by social media. Many are borrowing to live a lifestyle they can’t afford — exotic holidays, gadgets, and frequent purchases — driven by a need to ‘keep up.’

“Almost 5-10% of middle-class households are now in a debt trap,” he said. Tools like Aadhaar and mobile banking have made borrowing seamless, but they’ve also made overspending easy. Credit card defaults and microfinance NPAs are rising — a warning sign for the economy.

Shrinking savings

Beyond debt, inflation is eating into savings. Global warming has made food costlier, while expenses like school fees, insurance, and rent continue to rise. The wealthy drive up demand and prices, leaving the middle class behind.

Mukherjea observed, “India’s new political and business elite are increasingly the same — creating a system where prices rise, but incomes don’t.”

With household savings at a 50-year low and limited deposits in the banking system, he urged the RBI to act: “A 2% rate cut could bring some relief.”

Not jobs, but entrepreneurship

What’s the way out? Mukherjea was clear: entrepreneurship is the only viable path.

“India offers abundant economic opportunity, but not jobs,” he said, urging young graduates to shift from an exam-centric mindset to a risk-taking, opportunity-spotting entrepreneurial one. Waiting for a corporate job, he warned, is no longer a feasible plan.

Despite middle-class woes, Mukherjea credited the current political leadership for focusing on India’s real vote bank — those earning below ₹5 lakh.

He added, “Gas cylinders, toilets, roads, and free healthcare resonate with 90% of voters.” For middle-class voters, recent income tax tweaks do help, but they remain marginal.

Mukherjea’s final message to the middle class: don’t expect help — adapt instead.

“Technology is changing everything. We can either be consumed by it, or we can ride the wave by becoming creators and problem-solvers. That’s the only way forward.”

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