Rising costs, falling savings: Inside the evolving wallet of India’s lower middle class
India’s lower middle class is navigating rising costs with resilience—cutting back on savings while prioritising education, digital finance, and long-term goals.
- Jun 18, 2025,
- Updated Jun 18, 2025 1:50 PM IST
India’s lower middle class is treading a delicate financial path—balancing rising household expenses, declining savings, and bold aspirations for the future. According to Home Credit India’s “The Great Indian Wallet 2025” report, this segment, despite mounting pressure, remains financially disciplined, digitally aware, and fiercely aspirational.
Incomes may be rising—57% of respondents reported an increase this year—but savings are slipping, with only 50% managing to save, down from 60% in 2024. The average monthly income stands at Rs 33,000, while essential expenses swallow up Rs 20,000. As a result, 12% of respondents are borrowing just to cover basic needs, exposing the financial tightrope many households are walking.
Even as they battle rising costs, the lower middle class is clear about what matters: education, homeownership, job stability, and upward mobility. Education spending alone has surged 34% this year, now consuming 19% of monthly budgets. For Gen X, that number goes up to 22%, signaling a deep commitment to securing their children’s future—even at the cost of personal savings.
Spending is increasingly intentional. While groceries dominate with 29% of the wallet share, discretionary spending is shifting toward experiences and essentials. Local travel has become a lifestyle priority, with 31% exploring nearby destinations monthly, especially Gen Z. Fashion, once a stronghold of aspirational spend, has seen a 20-point decline, replaced by need-based purchases. Fitness (7%) and OTT subscriptions (6%) are emerging but remain niche.
On the investment front, the lower middle class still leans heavily on informal methods. 38% prefer cash savings, while formal avenues like bank deposits (24%), LIC (8%), gold (4%), and property (7%) lag. The low trust in structured investment instruments underlines a need for better financial awareness and accessible, affordable products.
Lower Middle Class: Income, Spending, and Aspirations (2025)
| Category | Key Insights |
|---|---|
| Average Monthly Income | ₹33,000 (₹36,000 in metros, ₹30,000 in Tier-2 cities) |
| Average Monthly Essential Spend | ₹20,000 (₹23,000 in metros, ₹17,000 in Tier-2 cities) |
| Savings Rate | 50% saved this year (↓ from 60% in 2024) |
| Borrowing for Basic Needs | 12% of respondents |
| Top Spending Categories | Groceries: 29% of monthly wallet Education: 19% (↑34% YoY) |
| Education Spend (Gen X) | 22% of monthly budget |
| Discretionary Spending Trends | Local travel: 31% take monthly trips Fashion spending ↓ 20 points |
| Digital Adoption | 63% say digital tools help financial goals 80% use UPI for transactions |
| Online Financial Behavior | 51% of payments now digital 50% prefer online loan applications |
| Investment Preferences | Cash: 38% Bank deposits: 24% LIC: 8% Property: 7% Gold: 4% |
| Confidence in Financial Goals | 73% believe they’ll achieve them in 5 years |
| Belief in Affordable Credit | 65% say it speeds up financial aspirations |
| Desire for Financial Advice | 58% of respondents |
| Financial Fraud Exposure | 20% have faced online fraud; 74% aware of risks |
What’s accelerating their financial journey is digital empowerment. 63% believe digital tools have made it easier to chase financial goals, with UPI dominating 80% of everyday transactions. Online loan applications now match offline preferences at 50%, and digital retail payments have jumped to 51%, up from 42% in 2024. Yet this rapid adoption comes with risk—20% have already fallen victim to online fraud, and poor data hygiene remains a concern.
Amid rising uncertainty, there’s no shortage of ambition. 73% of respondents are confident of achieving their financial goals within five years, and 65% believe affordable credit will help them get there faster. Notably, 58% seek financial advice, indicating a readiness to act smartly if guided well.
In essence, India’s lower middle class is no longer just surviving—it’s evolving. Faced with inflation and limited resources, they are recalibrating spending, stretching income, and staying focused on the future. With the right policy support and financial inclusion tools, this segment could become the backbone of India’s consumption and investment story.
India’s lower middle class is treading a delicate financial path—balancing rising household expenses, declining savings, and bold aspirations for the future. According to Home Credit India’s “The Great Indian Wallet 2025” report, this segment, despite mounting pressure, remains financially disciplined, digitally aware, and fiercely aspirational.
Incomes may be rising—57% of respondents reported an increase this year—but savings are slipping, with only 50% managing to save, down from 60% in 2024. The average monthly income stands at Rs 33,000, while essential expenses swallow up Rs 20,000. As a result, 12% of respondents are borrowing just to cover basic needs, exposing the financial tightrope many households are walking.
Even as they battle rising costs, the lower middle class is clear about what matters: education, homeownership, job stability, and upward mobility. Education spending alone has surged 34% this year, now consuming 19% of monthly budgets. For Gen X, that number goes up to 22%, signaling a deep commitment to securing their children’s future—even at the cost of personal savings.
Spending is increasingly intentional. While groceries dominate with 29% of the wallet share, discretionary spending is shifting toward experiences and essentials. Local travel has become a lifestyle priority, with 31% exploring nearby destinations monthly, especially Gen Z. Fashion, once a stronghold of aspirational spend, has seen a 20-point decline, replaced by need-based purchases. Fitness (7%) and OTT subscriptions (6%) are emerging but remain niche.
On the investment front, the lower middle class still leans heavily on informal methods. 38% prefer cash savings, while formal avenues like bank deposits (24%), LIC (8%), gold (4%), and property (7%) lag. The low trust in structured investment instruments underlines a need for better financial awareness and accessible, affordable products.
Lower Middle Class: Income, Spending, and Aspirations (2025)
| Category | Key Insights |
|---|---|
| Average Monthly Income | ₹33,000 (₹36,000 in metros, ₹30,000 in Tier-2 cities) |
| Average Monthly Essential Spend | ₹20,000 (₹23,000 in metros, ₹17,000 in Tier-2 cities) |
| Savings Rate | 50% saved this year (↓ from 60% in 2024) |
| Borrowing for Basic Needs | 12% of respondents |
| Top Spending Categories | Groceries: 29% of monthly wallet Education: 19% (↑34% YoY) |
| Education Spend (Gen X) | 22% of monthly budget |
| Discretionary Spending Trends | Local travel: 31% take monthly trips Fashion spending ↓ 20 points |
| Digital Adoption | 63% say digital tools help financial goals 80% use UPI for transactions |
| Online Financial Behavior | 51% of payments now digital 50% prefer online loan applications |
| Investment Preferences | Cash: 38% Bank deposits: 24% LIC: 8% Property: 7% Gold: 4% |
| Confidence in Financial Goals | 73% believe they’ll achieve them in 5 years |
| Belief in Affordable Credit | 65% say it speeds up financial aspirations |
| Desire for Financial Advice | 58% of respondents |
| Financial Fraud Exposure | 20% have faced online fraud; 74% aware of risks |
What’s accelerating their financial journey is digital empowerment. 63% believe digital tools have made it easier to chase financial goals, with UPI dominating 80% of everyday transactions. Online loan applications now match offline preferences at 50%, and digital retail payments have jumped to 51%, up from 42% in 2024. Yet this rapid adoption comes with risk—20% have already fallen victim to online fraud, and poor data hygiene remains a concern.
Amid rising uncertainty, there’s no shortage of ambition. 73% of respondents are confident of achieving their financial goals within five years, and 65% believe affordable credit will help them get there faster. Notably, 58% seek financial advice, indicating a readiness to act smartly if guided well.
In essence, India’s lower middle class is no longer just surviving—it’s evolving. Faced with inflation and limited resources, they are recalibrating spending, stretching income, and staying focused on the future. With the right policy support and financial inclusion tools, this segment could become the backbone of India’s consumption and investment story.