Why the Middle Class Is Spending More and Saving Less

A salary of ₹60,000 today can feel strangely similar to a salary of ₹40,000 a few years ago. The number is larger, but so are the rent, school fees, groceries, insurance premiums, fuel bills, subscriptions and EMIs waiting for it every month. Many middle-class families are earning more in absolute terms while still feeling that there is less money left at the end of the month.

That feeling is not entirely imaginary, but neither is the story as simple as saying the Indian middle class has stopped saving.

Recent Reserve Bank of India data actually show that net household financial savings improved to 7% of gross national disposable income in 2024–25, up from 5.8% a year earlier. At the same time, household borrowing and consumption credit have grown substantially, and RBI’s latest Financial Stability Report has highlighted rising household debt as a risk worth watching.

So the more useful question is not, “Why does nobody save anymore?”

It is this: why does saving feel harder even when incomes, financial awareness and access to investment products have all improved?

Part of the answer is inflation. Part is aspiration. Part is easy credit. And part is that the definition of a “normal middle-class life” has quietly become much more expensive.

The Middle-Class Budget Has More Responsibilities Than It Used To

Consider a couple in Hyderabad earning a combined ₹1.2 lakh per month. On paper, that sounds comfortable.

Their rent is ₹28,000. A car EMI takes another ₹14,000. Groceries and household expenses come to ₹15,000. Insurance, mobile bills, internet and utilities add several thousand more. If they have a child, school fees, transport and activities can easily create another significant monthly commitment. Add fuel, occasional medical expenses and support for parents, and much of the salary is already allocated before anyone orders dinner or plans a holiday.

Nothing in that example is particularly extravagant.

That is what makes the pressure difficult to recognise.

The older middle-class model was built more heavily around predictable essentials and deliberate savings. Today, the household budget contains many expenses that sit somewhere between necessity and lifestyle: broadband, multiple digital devices, app subscriptions, private transport, food delivery, childcare services, health cover and the expectation of occasional travel.

India’s expanding middle class is also consuming differently. Government analysis published in June notes a structural shift toward higher-value consumption and points to forecasts in which middle-class and affluent consumers could account for the overwhelming majority of spending growth over the coming decade.

That reflects prosperity. But prosperity can still feel financially tight when expectations rise alongside income.

Some Costs Have Become Harder to Avoid

There is an important difference between lifestyle inflation and ordinary inflation.

If someone upgrades from a ₹15,000 phone to a ₹70,000 flagship simply because their salary increased, that is largely a lifestyle decision. If their rent rises by ₹4,000, health insurance premium increases and school fees go up again, there may be much less choice involved.

The two often get mixed together in discussions about the middle class.

A family may genuinely be spending more because the cost of maintaining the same standard of living has risen. Urban rent, healthcare, education and transport do not disappear because someone wants to save aggressively. A family with one unexpected hospital bill can also discover that what looked like a healthy monthly budget contained very little real resilience.

Recent commentary around household finances has focused precisely on that vulnerability: rising living costs, uncertain employment and emergencies mean the traditional idea of keeping only a few months of expenses as a safety buffer may feel increasingly inadequate for salaried families.

This is why telling every household to “just stop spending on coffee” often misses the bigger problem.

A ₹200 coffee is visible. A ₹6,000 increase in annual insurance, ₹30,000 increase in school fees or ₹5,000 rent revision can quietly remove far more from the family’s ability to save.

But Lifestyle Inflation Is Real Too

Cost pressure alone does not explain everything.

A person earning ₹35,000 may once have considered a restaurant meal a weekend treat. After reaching ₹70,000, ordering food three times a week can begin to feel ordinary. Cab rides replace public transport, the budget phone becomes a premium phone on EMI, and a domestic holiday starts feeling incomplete without a good hotel.

None of these choices is automatically irresponsible. Income is supposed to improve life.

The problem appears when every improvement in salary immediately becomes a permanent monthly expense.

A ₹10,000 increment feels significant until ₹4,000 goes into a larger apartment, ₹2,500 into a new EMI and another ₹2,000 into subscriptions, dining and conveniences. The person is technically living better but may be saving almost exactly what they saved before.

Over several salary increases, this creates a strange outcome: someone can look wealthier from the outside while remaining financially fragile underneath.

This is one reason premium consumption can rise even while many ordinary households remain price-conscious. Recent consumer research for FY26 found a divergence in which general buyers reduced some discretionary purchases while a more affluent segment continued spending more freely on premium and self-care products.

The middle class is not one uniform group. Some households are moving upward confidently; others are stretching to look as though they have.

EMI Has Changed What “Affordable” Means

One of the biggest behavioural changes is that people increasingly judge affordability by the monthly payment, not the total price.

A ₹72,000 phone sounds expensive.

“Only ₹5,999 per month” sounds manageable.

A ₹15 lakh car sounds like a major financial decision.

“₹22,000 EMI” sounds like something that can fit into the salary.

This shift matters because several individually affordable EMIs can collectively consume the income that used to become savings.

Recent financial commentary in India has warned about exactly this pattern, particularly among younger salaried households using credit cards, personal loans and no-cost EMI offers to bring future consumption into the present. RBI’s June Financial Stability Report also flagged fast-rising household debt, reporting household debt at 45.5% of GDP by September 2025 and noting that consumption-related borrowing had become an important part of that increase.

This does not mean every EMI is bad.

A home loan can help build an asset. An education loan can improve future earning capacity. Even a phone EMI may be reasonable for someone who needs the device for work.

The problem is the accumulation of obligations.

Once ₹35,000 of a ₹70,000 salary is committed before the month begins, the person loses flexibility. A medical bill, job loss or family emergency does not reduce the EMIs just because income temporarily disappears.

Convenience Spending Has Become Almost Invisible

Our recent H View discussion on UPI matters here because modern spending rarely feels dramatic.

₹180 for coffee. ₹320 for dinner delivery. ₹149 for a subscription. ₹240 for a cab. ₹499 for something discovered on Instagram.

Each transaction is small enough to ignore.

Together, they can become one of the largest flexible categories in the monthly budget.

Digital payments did not create this behaviour, but they reduced the friction around it. The experience of spending ₹300 no longer necessarily involves opening a wallet and watching three ₹100 notes disappear. You tap, scan or approve and continue with your day.

The same is true of one-click shopping and stored cards.

The middle-class budget has become easier to spend without becoming easier to monitor.

That creates an unusual contradiction: households today have better transaction records than ever before, yet many still reach the end of the month unsure where the money went.

Social Media Has Changed the Reference Point

Earlier generations compared lifestyles mainly with relatives, neighbours and colleagues.

Today, a 26-year-old earning ₹50,000 can spend the morning looking at someone’s Bali trip, afternoon watching a new SUV delivery video and evening scrolling through an apartment makeover that costs several months of their salary.

The comparison set has expanded from people around us to people performing their best moments online.

That can quietly redefine what feels normal.

A birthday dinner becomes a resort stay. A functional phone starts feeling outdated after two years. A simple wedding seems inadequate beside elaborate destination celebrations. Even home interiors now have trend cycles.

The danger is not social media itself. Inspiration can genuinely improve taste and expose people to better ideas.

But aspiration becomes financially dangerous when someone else’s highlight reel turns into your monthly fixed cost.

The Indian middle class has always been aspirational. What has changed is the frequency with which those aspirations are marketed back to us.

Saving Has Also Changed Shape

There is another reason people sometimes believe Indians are saving less: savings no longer sit only in bank deposits.

Household money has gradually moved toward mutual funds, equities, insurance, provident funds and other financial assets. Deposits, while still important, have declined as a share of total household financial savings over the past decade. Analysis of official data places the deposit share at about 40.6% in 2023–24, with provisional estimates pointing still lower in 2024–25.

This matters because a person contributing ₹10,000 every month to mutual funds may still describe themselves as having “nothing in savings” because their bank balance remains low.

So we should avoid confusing lower cash sitting in an account with zero wealth creation.

The more worrying situation is different: households that have neither meaningful liquid savings nor long-term investments because almost all income is already committed to living costs and debt.

The Real Test Is Not How Much You Earn but How Much Flexibility You Have

Consider two people earning ₹1 lakh per month.

The first spends ₹65,000, invests ₹20,000 and keeps some room for unexpected expenses.

The second spends ₹55,000 on ordinary living costs but also has ₹30,000 of EMIs and subscriptions. On paper, both are middle class and both earn the same salary.

Their financial positions are completely different.

The first can absorb a temporary problem.

The second needs next month’s salary to arrive on time.

That difference—financial flexibility—is more important than appearances.

A useful budget therefore should not ask only, “How much did I save this month?” It should also ask, “How much of next month’s salary have I already promised?”

That one question can expose lifestyle inflation faster than many complicated spreadsheets.

Her View

There is something unfair about reducing every middle-class financial struggle to bad discipline.

Families today are paying for things their parents may not have had to think about in the same way: expensive urban housing, private healthcare protection, digital connectivity, competitive education and the costs that come with two working adults trying to manage a household.

At the same time, we also have to admit that convenience can become expectation very quickly. Once food delivery, cabs, annual vacations and frequent upgrades become part of normal life, cutting them back can feel like losing progress rather than simply reducing spending.

A healthy budget should not require a family to remove every enjoyable thing from life. It should create enough space that one emergency does not turn ordinary life into panic.

His Insight

The most dangerous financial position is not always low income.

It is high fixed expenditure.

A person earning ₹1.5 lakh with ₹1.3 lakh already committed can be more vulnerable than someone earning ₹70,000 with manageable obligations and consistent savings. Income can change quickly; EMIs and lifestyle commitments often do not.

That is why salary increases should not automatically become upgrades.

When income rises, allowing at least part of the increase to improve savings before improving lifestyle can gradually create something more valuable than a premium purchase: freedom to make decisions without immediately asking whether the EMI will fit.

The H View Take

The Indian middle class is not simply “spending irresponsibly,” and it is not uniformly abandoning savings either. Recent data actually show an improvement in net household financial savings, even while debt and consumption pressures remain important concerns.

What has changed is the financial environment around the household.

Life contains more recurring costs. Credit makes expensive purchases feel monthly rather than large. Digital payments make small spending almost invisible. Social media raises expectations continuously. And genuine expenses such as housing, education and healthcare compete with the desire to enjoy the income people worked hard to earn.

The solution is not returning to a life where nobody travels, orders food or buys something nice.

It is recognising the point at which a better lifestyle begins consuming the financial security that was supposed to make that lifestyle possible.

When your salary increases, improve your life.

Just do not let every rupee of progress become another permanent bill.

Frequently Asked Questions