Saurabh Mukherjea has the line you can't unhear once you hear it: the average Indian middle-class household earned ₹10.23 lakh a decade ago, and earns ₹10.69 lakh today. In the same window, the cost of living roughly doubled. Inflation is running at 8%. Real wages are falling 5–6% a year, every year, and most of the middle class hasn't noticed yet — because nominal numbers are still creeping up. He calls it the boiling frog.
This is the part where the optimistic India-growth-story commentary breaks down. The thesis was simple and worked for a decade: produce engineering graduates by the millions, plug them into IT services, watch them buy homes, watch GDP compound. Mukherjea calls this the pre-2020 "divine equilibrium." The problem is that equilibrium has been quietly broken for three years and the country hasn't caught up.
Here are the numbers that ought to make every parent rethink the engineering coaching cheque. India produces 30 lakh engineering graduates a year. About 15 lakh of them are employable. For most of the last two decades, the IT services industry hired 10 to 15 lakh of those graduates every year, and that was the on-ramp to the middle class. Net new IT jobs created in the last three years: zero. Western companies that used to staff teams of 10,000 engineers in Bangalore now staff teams of 6,000. The 4,000 difference is not coming back, because Claude and ChatGPT happened, and a senior engineer with an LLM does the work of a team. The only meaningful job creation Mukherjea could point to was 1 to 2 lakh manufacturing jobs at the Apple-Tata ecosystem — a rounding error against a 15-lakh-graduates-a-year supply.
The middle class is responding the only way an aspirational one can: with debt. Retail consumer loans outstanding have tripled in five years. Gold loan disbursements are up 3 to 4x in two years. Mukherjea cited a borrower who took 30% of their home loan amount as "spare equity" — a war chest, because they've seen colleagues get laid off and stay unemployed for a year. An office boy he met had taken seven hundred loans in five years and repaid six hundred and seventy of them. This is not a credit cycle. This is people leveraging up to pretend the wage problem doesn't exist.
His next move is the contrarian part most viewers can't accept. He thinks the rupee needs to crash — to ₹110 or beyond, what he calls "triple-digit territory." Not because he hates India, but because India has Dutch disease. The country pulls in roughly $400 billion a year — $250B in IT export earnings and $150B in remittances — which is nearly 3x what Saudi Arabia earns from oil. That windfall artificially props up the rupee, which in turn makes Indian manufacturing exports uncompetitive globally. Indian working capital costs 12% versus 3% in Vietnam, China, and the US. Indian steel is 15 to 20% more expensive than Chinese steel. Land in Maharashtra is 50% more expensive than in Vietnam. You cannot build a competitive manufacturing economy at those input prices, and a strong rupee guarantees you stay locked out. China's playbook in the 1990s was to devalue the RMB by 50% — and that was the on-ramp to its manufacturing decade. Mukherjea thinks economic gravity will eventually do to the rupee what policy ought to be doing already. The painful version comes first; the manufacturing comeback comes after.
He is just as ruthless on the equity side. The "India growth story" sounds like a one-way bet because most retail investors are looking at the last five years. Zoom out and the BSE 500 has averaged 13% over 30 years — fine, except the average hides the fact that the market returned zero from 1993 to 2003, and zero again from January 2007 to January 2014. Two of the last three decades, retirees who held only Indian equities had their real wealth wiped out. India is 3% of the global stock market. Western markets are 75%. Retail investors have lost roughly ₹1.1 lakh crore — $35 to $40 billion — every year for four straight years in F&O trading. He calls keeping 100% of your money in a 3% market "mathematical insanity" and likens it to an IPL team refusing to draft foreign players.
What he tells people to actually do is short and uncomfortable.
Stop relying on a corporate IT job to deliver the middle-class life. The pipeline is broken and will not unbreak in the timeline of your career. Build the skill to do white-collar gig work for the world from your bedroom — train AI for a German company, run analytics for a Singapore fund, do legal review for a US firm. Income inequality is going to widen brutally inside this category, so the goal is to become the "Virat Kohli of training bots," not the club cricketer who hopes a salary still exists.
Send your money where the market actually is. Use LRS to buy an S&P 500 equal-weight ETF through any mutual fund app. Use GIFT City funds to dodge the US estate-tax problem on global holdings. Diversify domestically into bonds, gold ETFs, and silver ETFs. Keep total debt service under 15% of disposable income — anything above that, and especially the 30 to 40% the average urban household is now running, is the danger bell. And do not buy real estate as an investment in India; treat it as a roof, nothing more.
The article worth reading on Indian middle-class economics in 2026 is not a five-star morgue report on whether GDP is 6.4% or 6.8%. It is this: the dream that worked between 1993 and 2020 is broken, the wage data already proves it, and the only people who will come out fine are the ones who notice early and rebuild around remote global work plus globally diversified capital. Everyone else is the frog, and the water is already past warm.
Source: Saurabh Mukherjea on Samvaad — "End Of The Middle Class Dream"
No comments:
Post a Comment