While groceries and rent remain the biggest shareholders of the wallet, the shift towards discretionary spending is reshaping the narrative
Every rupee that comes into the wallets of India’s lower middle class carries the weight of careful choices, yet nearly half is absorbed by two essential expenses: food and rent. While groceries (29 per cent) and rent (18 per cent) remain the biggest shareholders of the wallets, a distinct shift towards aspiration-driven consumption is taking shape. This is evident in the rising spends on lifestyle categories such as fashion, dining out, gadgets and local travel.
The Great Indian Wallet 2025 study by Home Credit India revealed that the lower middle class Indians are demonstrating an increasingly aspirational outlook as they adapt to rising costs. A sharp rise in money dedicated to education is also shaping the narrative. Once the essentials of food, shelter, and education are accounted for, the story of discretionary spending unfolds, which tells that the lower middle-class Indian is evolving at a rapid pace.
Wallet Math: The Tale Of Rs 33,000
The report, which maps the financial well-being of the lower middle class, revealed that every month, Rs 33,000 flows into millions of Indian wallets. Every month, Rs 20,000 flows out. In that Rs 13,000 gap lies a universe of dreams, decisions. The gender story adds complexity to this narrative. Men pocket Rs 34,000 monthly while women earn Rs 30,000, a gap that is narrowing but still stings.
Gen X, at their career peaks, commands Rs 37,000, Millennials hold the middle ground at Rs 33,000, and Gen Z enters at Rs 27,000. The report noted that metro dwellers boast Rs 36,000 incomes but watch Rs 23,000 evaporate into urban necessities. Their tier-two counterparts earn less (Rs 30,000) but keep more. The report tracks individuals, aged between 18 to 55 years, who, with an average monthly income of Rs 33,000, navigate their financial worlds
Beyond The Lion’s Share
While the lion’s share of their earnings tackles food, shelter, and the investment in education, the wallet of the Indian lower middle class looks after several other crucial areas. Despite an increase in commute costs, its wallet share has decreased by 4 per cent, indicating a shift in spending priorities. The report noted that with an increase in medical expenses (11 per cent), its wallet share has increased by 1 per cent.
Other notable spending trends include a decline in spending on cooking gas (-9 per cent) and utility bills (-5 per cent), which may provide some relief to household budgets, the report mentioned. Electricity bills are higher in tier-two Cities (Rs 1,907 per month). Metro cities pay the least (Rs 1,582), possibly due to government subsidies, as per the report.
“We are seeing a distinct shift towards aspiration-driven consumption. Beyond just meeting basic needs, the lower middle class consumers are prioritising comfort, self-expression, and an enhanced quality of life. This is evident in the rising spends on lifestyle categories such as fashion, dining out, gadgets and local travel,” highlighted Ashish Tiwari, Chief Marketing Officer (CMO), Home Credit.
Rise In Discretionary Spending
After the essentials of food, shelter, and education are accounted for, discretionary spending takes centre stage. The report noted that these are not frivolous purchases; they are reflections of evolving lifestyles, digital adoption, and a quiet shift towards mindful living. The desire for a quick getaway is strong for 31 per cent of consumers who embrace local travel. It is particularly popular among the youngest, Gen Z (44 per cent).
In bustling metros like Bengaluru (3 per cent) and Chennai (15 per cent), the concrete jungle might be dampening the desire for local travel and sightseeing. Dine-in or takeaways are a cherished social ritual for 30 per cent of consumers. Gen Z (43 per cent) leads the charge again, alongside metro dwellers (39 per cent) and those in tier-one cities (31 per cent). However, only 7 per cent of consumers actively spend on fitness, with Gen Z (13 per cent) showing the most health-conscious approach.
“Our study shows their (Gen Z) spending patterns are highly influenced by a desire for individuality, authenticity, and seamless digital experiences. They are trend-seekers who prioritise convenience, but also value transparency and social consciousness from brands. Their aspirations are fundamentally reshaping demand,” Tiwari told BW Retail World.
OTTs, Fashion And Electronics
While only 6 per cent of consumers subscribe to over-the-top (OTT) platforms, the world of streaming content is slowly but surely making its way into Indian homes, atleast in this consumer segment. A significant 39 per cent of consumers prioritise spending on clothing and accessories, making it the top discretionary category. This trend is particularly strong in tier-one (47 per cent) and metro (41 per cent) areas, as per the report.
When it comes to electronics, the report emphasised that 28 per cent of consumers invest in electronics, driven significantly by Gen Z (41 per cent) and metro users (33 per cent). Cities like Dehradun (48 per cent), Patna (43 per cent), and Lucknow (38 per cent) show a robust appetite for new devices. Investing in comfort and convenience within the home is a priority for 21 per cent of consumers, as per the report, which also noted that the desire to personalise and beautify living spaces is a more niche pursuit, limited to 7 per cent of consumers.
Offline Dominates, As Online Creeps In
Even as the digital revolution quietly reshapes global consumer habits, the magic of ‘touch-and-feel retail remains dominant, atleast for the lower middle class Indians. The report highlighted that a staggering 83 per cent still prefer to buy their apparel in person. For smartphones and home appliances, the numbers are almost identical at 84 per cent. When it comes to daily groceries, it jumps to 85 per cent.
“Many consumers still highly value the ability to physically touch, feel, and inspect products before purchase. The immediacy of taking an item home, the opportunity for direct negotiation, and the reliance on personal recommendations from familiar shopkeepers all contribute to this preference,” Tiwari explained.
As far as the effective strategies are concerned, Tiwari noted that for retailers, the future is not about choosing between online and offline; it is about crafting seamless omnichannel strategies that blend the convenience and reach of digital platforms with the reassurance and tangible experience of the physical store.
However, while the offline retail is dominant in the stated segments, the report added that a quiet yet powerful revolution is truly taking hold. Online retail payments now account for a striking 51 per cent of transactions, a notable climb from 42 per cent just last year in 2024. The report noted that this is more than a statistic; it is a growing comfort with digital wallets and the Unified Payments Interface (UPI).
The report added that bustling metro areas are naturally leading this charge at 60 per cent, embracing the quick, cashless rhythm of city life. The monthly chore of paying bills has also transitioned online, rising impressively to 54 per cent from 43 per cent.
Rising Basket Size
The surge in digital payment adoption, spearheaded by UPI, has had a profound and transformative impact on purchase behaviour, especially within tier two and three cities. Tiwari noted that the ease, speed, and transparency that digital payments offer have significantly boosted consumer confidence in financial transactions.
With the friction removed from payments, consumers are more inclined to make smaller, more frequent transactions, resulting in a clear trend towards higher purchase frequency. Modern retail financing solutions, such as equated monthly instalment (EMI) options and Buy Now, Pay Later (BNPL) models, are democratising access to previously aspirational items like home appliances, electronics, and even lifestyle upgrades.
“We are seeing a moderate increase in basket size as consumers become more comfortable using digital wallets and UPI for both their everyday needs and discretionary spending,” Tiwari added.
For retailers, particularly those functioning in semi-urban and rural regions, integrating and promoting digital payment options is no longer just an option; it is a necessity for business growth and customer retention
Improved Financial Well-being
Across India’s bustling cities and quiet towns, hope is winning over hardship, the report noted. Led by rising income and stable essential expenses, the financial well-being index revealed a generally positive consumer outlook. The financial well-being index showed a gradual improvement in consumers’ current financial situation, with the current situation index rising from 31 in 2023 to 35 in 2024, before slightly declining to 34 in 2025.
On the other hand, the report mentioned that the future expectations index revealed high optimism, peaking at 64 in 2024, then dipping slightly to 59 in 2025, signalling cautious confidence about the future. Gen Z (39) and Millennials (37) show more financial optimism than Gen X (27), driven by higher income and savings scores among younger cohorts. While tier one cities lead the index, followed by tier two, the report showed that the metros are lagging.
Even amidst financial anxieties, an undeniable spirit shines through this class, displaying optimism regarding future improvement. The report concluded that with household incomes up to Rs five lakh annually, India’s lower middle class demonstrates resilience and aspiration, navigating the challenges of limited resources and rising living costs.
