Saurabh Mukherjea’s (co-founder and chief investment officer of Marcellus Investment Managers) latest book -- Break Point: The Crisis of the Middle Class and the Future of Work -- has sparked considerable debate for its stark assessment of the challenges confronting India’s middle class.
Co-authored with his colleagues, the book paints a sobering picture of the years ahead, warning of shrinking job opportunities, pressure on real incomes, and rising economic insecurity. In an interaction with Dipak Mondal, Mukherjea explains why India’s middle class may be entering one of its most uncertain phases in recent decades. Excerpts:
You define the middle class as households earning between ₹5 lakh and ₹1 crore annually — a very wide range. How do you justify that definition?
As we explain in the book, traditional definitions typically place the middle class in the ₹5 lakh to ₹30 lakh range.
We believe the definition should meet two criteria. First, it should lie in the middle of the income distribution. Second, it should account for the majority of income earned in the country. Otherwise, why devote so much attention to this segment?
Once we applied that second condition, it became clear the upper bound had to be extended to ₹1 crore. India has roughly three lakh super-rich families, and given this skew, you need to go up to ₹1 crore to capture the segment that earns the bulk of national income.
You say education is no longer a fail-safe route to upward mobility. Does this require a rethink of traditional career paths?
Every major economy eventually reaches a point where its growth model runs its course and needs reinvention. We believe India’s post-1991 model is at that point. There are three specific stresses.
First, white-collar employment has stagnated. Data from the government, Naukri and Azim Premji University all point to this. We are producing roughly 80 lakh graduates a year, but white-collar job creation has stalled.
Second, small business vitality is weakening. Corporate tax data shows profits are increasingly concentrated among a handful of large firms, while smaller companies — which account for around 80% of employment — are under pressure. That affects both jobs and income distribution.
Third, even those with jobs are facing wage compression. Based on Nifty 50 annual reports and income-tax data, we estimate real white-collar wages have effectively declined by about 5% annually over the past decade.
Are we late to rethink the growth model?
Yes and no. Yes, because every prime minister has attempted to build a manufacturing-led economy, and we have underachieved. But also no, because current conditions are creating a fresh opportunity — a more competitive exchange rate, free trade agreements with the West, and the China-plus-one shift. We may have missed the manufacturing export bus once. But the bus is returning — and this time we can’t afford to miss it.
So, you see manufacturing-led growth as India’s next phase?
It will have to be. We have little choice. India needs to pivot from being primarily an IT services exporter to becoming a manufacturing exporter — across sectors such as textiles, footwear, machine tools, precision engineering, auto components, pharmaceuticals and chemicals.
At an exchange rate of around ₹110 to the dollar, India could be highly competitive — even relative to countries like Bangladesh and Vietnam — especially in markets opened up through FTAs.
But would the government or RBI allow the rupee to depreciate that much?
We are a market economy — governments don’t fully control exchange rates.
With IT exports slowing, FPI flows negative and FDI moderating, there may be limited alternatives to a weaker rupee. The Reserve Bank of India may smooth volatility, but market forces will determine the direction.
A depreciation of around 10% annually could persist, potentially taking the rupee close to ₹110 per dollar by the time FTAs with Europe and the UK come into effect.
This transition from services-led to manufacturing-led growth could be painful for the middle class.
Absolutely. The middle class faces three transitions. First, a shift from salaried white-collar jobs towards gig work, accelerated by technology and AI. Second, a shift from exporting services to exporting manufactured goods. Third, a move away from relying on employers or the state for retirement, healthcare and financial security towards greater self-reliance.
Are you writing off India’s IT services model?
At best, IT services may be able to hold dollar revenues flat. The traditional time-and-materials outsourcing model looks increasingly obsolete in the age of AI.
You argue gig work will expand, but there’s still social stigma around such jobs. Can this really work?
We are talking about white-collar gig work, which has existed for decades. Lawyers, consultants and writers have long operated this way. In many respects, we may be returning to a pre-salaried model.
In Break Point, we argue that India could create 100 million white-collar gig jobs over the next decade. The transition will be painful initially, but over time AI will complement skilled professionals.
Many argue Indian equities may not deliver the returns they have in the past. Where do you stand?
Long periods of zero returns are normal in equity markets. The S&P 500 delivered no meaningful returns from 1967 to 1984. In India, the BSE Sensex saw similar phases between 1993–2003 and 2007–2014.
That is the nature of markets — long cycles of strong returns followed by prolonged stagnation. Whenever investors begin to believe equities are a guaranteed path to wealth, it usually signals trouble ahead. There is nothing unusual about a low-return phase.
