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September 20, 2010

Are there more Middle Class Households in India or in China ?

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Euromonitor statistics (top graph) count more middle class households in China than India while the Boston Consulting Group (bottom graph) counts more middle class households in India than in China.

The World Bank estimates that the global middle class is likely to grow from 430 million in 2000 to 1.2 billion in 2030, defining the middle class as earners making US$10-20 a day (a range of average incomes between Brazil and Italy). China and India will account for two-thirds of the expansion.

The National Council for Applied Economic Research in August of 2010 claimed in 2001-'02 India had 13.8 million households with incomes in excess of $4,000 per year and 2009-'10, the number--at constant prices--has risen to 46.7 million, representing a population of about 200 million individuals.

Using the World Bank's definition of middle class (households with $4500 to 22,000) were applied then the number of middle-class households in India would then seem to have risen from some 10.7 million in 2001-'02 to only 28.4 million in 2009-'10.

Euromonitor International predicts China’s middle class will expand to 700 million by 2020. The middle class in China is defined as households with an annual income between RMB 60,000 and RMB 500,000. China’s middle class currently accounts for roughly 23 percent of the whole population. In 2010, households with annual disposable incomes of US$5,000-15,000 as a percentage of total households is expected to be 31.7% in China, 14.6% in India and 35.7% in Indonesia. This will reach 46.2% in China, 41.1% in India and 58.3% in Indonesia in 2020.

Deutsche Bank Research agrees with the Euromonitor that China has more middle class households. Deutsche Bank Research uses World Bank statistics. India has about 25-30% of its people living in poverty, so it is difficult to determine how Boston Consulting group is getting such a high figure for India's middle class household count.

There are about 222 million households in India in 2010.

According to NCAER, in 2009, of the 222 million households in India, the absolutely poor households (annual incomes below Rs 45,000 or US$1000) accounted for only 15.6 % of them or about 35 million (about 200 million Indians). Another 80 million households are in income levels of Rs.45,000-90,000 per year (US$2000 per year) . [45 Rupee to 1 USD]. This means that there would be less than 100 million households in India that could have over Rs 225,000 Rs per year (US$5,000 per year).

The China State Information Center considers those earning 50,000 yuan ($6,227) per year to be middle class – and expects 25% of the populace (330 million) to qualify by 2010. Average urban household size is 3.0 in China. This would mean 110 million middle class households.

China's GDP is about $5.5 trillion. This is over four times higher than India's $1.35 trillion. China definitely has more middle class households.

A McKinsey projection of China's middle class also suggests that there are about 100 million middle class households in China out of about 240 million households.

McKinsey in 2006 assumed China's average growth of 6.5 percent in per capita GDP from 2005 to 2025 (a midrange forecast), with higher annual growth initially but slowing after 2015.
McKinsey Quarterly has a recent look at the Worlds Emerging Middle Class based on purchasing power parity



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