New Delhi, April 27 -- For decades, India's growth story has rested on the spectacular rise of its middle class. But a new book argues that this very group-roughly 40 million income-tax-paying households-is now under acute strain. Facing a convergence of job disruption, wage stagnation, and rising debt, the middle class may no longer be the engine of growth it once was. That is the argument of Break Point: The Crisis of the Middle Class and the Future of Work, by Saurabh Mukherjea, Nandita Rajhansa, and Sapana Bhavsar. Mukherjea and Rajhansa discussed their provocative thesis on a recent episode of Grand Tamasha, a weekly podcast on Indian politics and policy co-produced by HT and the Carnegie Endowment for International Peace. Mukherjea is the founder of Marcellus Investment Managers and the author of six previous books. Prior to setting up Marcellus, he served as CEO of Ambit Capital. Rajhansa is an economist and a small- and mid-cap analyst at Marcellus. Rajhansa told host Milan Vaishnav that India, like many countries, has experienced a hollowing out of middle-skill jobs. She cited the example of a small furniture manufacturing facility outside Pune. "It was 600 or 700 square feet and employed only three people. The owner's annual turnover was Rs.100 crore. When I asked him why he did not have more employees, he said it was simply uneconomical," she said. "One person put the plywood into the machine, another took it out and packed it, and the third loaded it into trucks. That is the level of automation that has become commonplace." Over time, she added, automation has moved up the value chain, displacing clerical and secretarial roles as well. A review of income-tax data over the past decade suggests that nominal wages for those earning between Rs.5 lakh and Rs.1 crore grew at just 0.4% annually. Mukherjea argued that the rise of AI and automation, combined with the poor quality of higher education, has produced a graduate employability crisis. "Out of every hundred graduates in India, only three get a white-collar job the year they graduate-and only seven find any job at all," he said. "We're now in a situation where we're worse off than the 1980s when it comes to graduate employment." In essence, Mukherjea said, India has a "socialist education system and a capitalist economy," resulting in a mismatch between the supply of graduates and labour market demand-putting downward pressure on real wages. Adding to these pressures are rising levels of household debt. Mukherjea pointed to three converging factors: stagnant real wages, the aspirational pull of social media, and the ease of borrowing enabled by widespread access to bank accounts, mobile phones, and digital identification. "This technology.has been so successful that the Indian middle class has become one of the most indebted in the world," he said. The fact that mobile data is so cheap in India, its population is so young, and levels of inequality are so high mean that social media has made all of this much worse. "On social media, people are often seeing the lifestyles of billionaires or Bollywood stars," Mukherjea said. "The vast majority of Indians, who do not have significant financial means, are experiencing what we call an 'industrialisation of aspirations.' They are being relentlessly shown a lifestyle that they simply cannot afford."...