India’s shrinking middle class and increasing income inequality are concerning trends that have been highlighted in recent reports. The statistics you provided are aligned with findings from several studies:

1. Middle Class Decline: The share of national income going to the middle 40% of Indians has indeed fallen dramatically. In the early 1980s, this group held over 45% of the national income, but by 2022, this share had plummeted to around 27%. This reflects a weakening of the middle class over time, as economic gains have become increasingly concentrated in the hands of the wealthy(

   Global Econ Data

   ).

   
   

2. Poorest 50% Struggling: For the poorest half of India's population, the decline has been similarly stark. In the early 1980s, they captured more than 23% of the national income, but by 2022, their share had dropped to about 15%. This growing income inequality indicates that while some have benefited from India's economic growth, a vast majority have seen their relative wealth diminish(

   Global Econ Data

   ).

   
   

Contributing Factors:

• Wealth Concentration: A small percentage of the population, mainly the top 1%, has accumulated an increasing share of the country's wealth. According to Oxfam's inequality report, India's richest 1% now holds over 40% of the wealth, amplifying inequality.

• Economic Policies: Economic reforms post-1991 were aimed at liberalizing the economy and promoting growth, but they have disproportionately benefited the wealthy and urban elites. While these policies contributed to GDP growth, they did not equally distribute the gains across society, contributing to the shrinking middle class.

• Declining Real Incomes: Rising inflation, slow wage growth, and a lack of formal employment opportunities have eroded real incomes for the middle and lower classes, leading to greater inequality.

Implications:

This shift in income distribution has serious social and economic implications. A shrinking middle class can weaken consumer demand, slow economic growth, and create social unrest. Moreover, as inequality grows, it becomes harder for the poor and middle class to access essential services like healthcare, education, and housing, perpetuating the cycle of poverty.

The government's policy choices in the coming years will be crucial in addressing this trend, whether through more inclusive growth strategies, progressive taxation, or targeted social welfare programs.