Prateeksha Thakur
(pic source: iStock)
New Delhi, April 8, 2025 –
As per the reports of International monetary fund, India stands as the third-largest economy in the world by Purchasing Power Parity (PPP), with a projected GDP of $17.36. Yet, there is troubling reality that lies beneath this, the purchasing power of nearly 1 billion Indians has declined drastically, leaving them unable to afford discretionary goods and services, such as electronics, dining out, or vacations—after covering basic needs like food, shelter, and utilities.
Out of a total population of 1.45 billion, for nearly 1 billion Indians as estimated by Worldometer, the ability to purchase non-essential goods has declined significantly by 2025. The Indus Valley Annual Report 2025, published by Blume Ventures, reveals that only 130-140 million people, roughly the top 10% of the population, constitute the country’s consuming class, driving the bulk of economic activity in a consumption-heavy economy where per capita spending remains weak.
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India’s status as the third-largest PPP economy, trailing only China and the United States, reflects its aggregate economic might, adjusted for lower living costs. However, this metric masks the per capita disparity. With a GDP per capita of approximately $11,976 in PPP terms (derived from $17.36 trillion divided by 1.45 billion), India ranks far below developed nations, and even this figure overstates the reality for most citizens due to income inequality.
Several factors have contributed to this decline. Inflation, which as per reports spiked to 8% by FY23, has outpaced wage growth, particularly for lower-income households. Additionally, the RBI’s decision to raise repo rates to 6.5% by 2025, up from 4% during the recovery, has curtailed the availability of cheap credit, slowing the growth of unsecured loans that once buoyed consumption among lower-income groups.
Tax data further illustrates this divide, with only 2% of Indians paying income tax in FY23—a number potentially shrinking with recent exemptions—limiting the government’s ability to redistribute wealth through fiscal policy.
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For now, India’s economic narrative is one of contrasts that seems a global powerhouse on paper, but a nation where only 130-140 million can truly partake in its prosperity. As the RBI balances inflation control with growth, and startups innovate for the affluent, the question remains: how long can India’s consumption engine run on the fuel of so few? Addressing this disparity will require tackling inflation, boosting wage growth, and investing in human capital—areas where India lags
NI Bureau
