The Squeeze

India’s economic story has long rested on a simple promise: study hard, secure a stable job, and enter the middle class. That compact is now quietly breaking down, not at the margins, but at the very centre of the economy. For decades, policymakers ~ from the University Grants Commission to reform-era planners ~ expanded higher education on the assumption that skills would translate into upward mobility. And for a time, that assumption held. The rise of the IT and services economy, championed by bodies like NASSCOM, created a pipeline from degree to desk job. But the structure that sustained this pathway is weakening from both ends.

At the entry level, the number of graduates far exceeds the availability of quality jobs. At the top, the nature of those jobs is changing. Automation first hollowed out clerical and mid-skill roles; now artificial intelligence is beginning to compress even higher-end white-collar work. What was once considered secure employment ~ IT services, customer support, back-office processing ~ is becoming leaner, faster, and far less labour-intensive. The result is not just unemployment. It is something subtler and more destabilising: employment that no longer delivers economic security. Even those who find work are discovering that income growth has failed to keep pace with the cost of living. Housing, healthcare, education, and everyday consumption are rising at rates that outstrip wage increments. The middle-class household, once defined by modest surplus and incremental asset-building, is increasingly operating on a knife edge. This gap is being filled, not by productivity gains, but by borrowing.

Advertisement

Personal credit is no longer confined to aspirational spending; it is financing essentials. A growing share of household income is committed to servicing debt, leaving little room for savings or investment. The middle class is not accumulating capital; it is preserving liquidity. This shift has consequences that extend beyond individual distress. India’s post-liberalisation growth model relies heavily on consumption, which accounts for roughly 60 per cent of GDP. When the middle class, its primary engine, begins to pull back, the effects ripple outward. Slower demand translates into weaker business expansion, which in turn feeds back into job creation. What emerges is a feedback loop: fragile jobs produce fragile incomes; fragile incomes suppress demand; weak demand limits the creation of better jobs. Economists from Joan Robinson onward have warned that employment quality matters as much as employment quantity.

India now confronts that reality at scale. The issue is no longer whether jobs exist, but whether they can sustain the economic role assigned to them. The deeper risk is not immediate collapse, but gradual erosion. An economy can withstand inequality; it struggles to function when its core consumers lose purchasing power and confidence simultaneously. India’s challenge, therefore, is no longer confined to job creation. It is about restoring the link between work and stability. Without that, the aspiration that has driven three decades of growth may begin to unravel, quietly, but decisively