Beginning of *India’s new elites, rich, tech class*

Who are this new Elites?

"India's new elites, rich, tech class" refers to?a growing group of affluent individuals in India who have accumulated significant wealth primarily through the tech industry, particularly through successful startups and high-paying jobs in tech companies, creating a new generation of elite consumers with substantial purchasing power and influence on the Indian economy;?often associated with graduates from prestigious institutions like the Indian Institutes of Technology (IITs).?

Key points about this group:

1)????? Origin: This class largely consists of entrepreneurs and tech professionals who have capitalized on India's booming tech sector, leading to a surge in startups and venture capital investments.?

2)????? Education Background: Many members of this new elite hold degrees from top engineering colleges like IITs, which provides them with the technical skills and networks needed to succeed in the tech industry.?

3)????? Lifestyle: This class is often characterized by a high-spending lifestyle, including luxury goods, international travel, and premium education for their children.?

4)????? Impact on the economy: The spending habits of this new elite class are significantly impacting various sectors like real estate, luxury goods, healthcare, and consumer durables

Rise of Tech Companies Going Public

a)????? Companies like Flipkart, Swiggy, Zomato, and PayTM have created a new wave of wealth creation.

b)????? IPOs and acquisitions encourage entrepreneurship and boost employee morale, inspiring more individuals to join startups.

c)?????? Success stories often highlight the creation of ‘crorepatis’ and liquidity events that benefit employees.

Creation of a New Tech Class:

a)????? This “tech elite” is younger, with aspirations fueled by rapid wealth accumulation.

b)????? The emergence of this group mirrors earlier phenomena seen in Silicon Valley post-Google IPO in 2004.

c)?????? In Bengaluru, this wealth is primarily channelled into real estate, significantly affecting the Real Estate market by creating demand.

Impact on Real Estate:

a)????? High-value payouts, such as Flipkart’s $700 million to employees, have driven demand for premium housing.

b)????? Real estate prices are soaring, partly due to employees investing to offset capital gains taxes.

Widening Economic Divide:

a)????? A growing disparity exists within the tech workforce. While top-tier employees accumulate immense wealth, mid-level and junior staff face rising living costs, such as skyrocketing rents.

b)????? The unaffordability of housing echoes similar trends observed in the Bay Area, where the tech boom displaced non-tech workers and even lower-tier tech employees.

Broader Economic Reflections:

a)????? India's economy resembles a feudal model, prioritizing high-margin goods for the wealthy while neglecting mass-market demand.

b)????? Stagnant incomes for the middle class, inflation, and a shrinking manufacturing sector exacerbate inequality.

c)?????? Over 120 million young people are disengaged from education or employment, reflecting a structural demand constraint.

Challenges for the Middle Class:

a)????? The purchasing power of India's middle class is under pressure, a trend mirrored in Bengaluru’s tech community.

b)????? Rising inflation and wealth concentration at the top lead to frustration and potential resentment within and beyond the tech ecosystem.

Structural Reforms Needed:

a)????? The solution lies in fostering demand by producing goods for a broader consumer base, not just the top 15%.

b)????? Investments in manufacturing and employment in underdeveloped regions are essential to prevent the middle-income trap.

Cautionary Lessons:

a)????? India must avoid becoming an economy that thrives on rent-seeking rather than productivity-driven profit maximization.

b)????? The reduction in purchasing power for both middle-class Indians and mid-level tech workers highlights systemic issues requiring urgent attention.

Ecosystem Outlook: While the rise of India’s new tech elite demonstrates the transformative potential of the startup ecosystem, it also underscores the importance of equitable growth and addressing structural inequalities. Balancing wealth creation with broader economic inclusivity remains a crucial challenge.

CA Harshad Shah, Mumbai [email protected]