A new report Blume Ventures states that around one billion Indians, or two-thirds of the country’s 1.4 billion population, do not have the income to spend on discretionary goods, making them an unviable market for startups.

The venture capital firm’s Indus Valley 2025 report, released on Saturday, estimates that India’s “consuming class” comprises around 140 million people across 30 million households, or just 10% of the population. In effect, India’s middle class is only as large as Mexico’s entire population.

Another 300 million Indians form the “aspirant” consumer class, roughly equivalent to Indonesia’s population. This group is described as “heavy consumers and reluctant payers” with spending gradually increasing due to the rise of the United Payments Interface and AutoPay. Key sectors for this cohort include media streaming, gaming, educational technology and lending.

The report suggests that while India, Asia’s third-largest economy, is not seeing a significant expansion in its consumer base, those already in higher-income brackets are becoming wealthier.

The report’s findings bolster the long-held view that India's post-pandemic recovery has been K-shaped, where the rich have got richer while the poor have lost purchasing power, reported the BBC.

Income inequality in India has widened over the decades. The top 10% of earners now control 57.7% of the country’s income, up from 34% in 1990, according to the World Inequality Report 2018 authored by economists Thomas Piketty and Lucas Chancel, among others. Meanwhile, the share of the bottom 50% has dropped from 22.2% to 15%. The richest 1% of Indians now hold 40.1% of the country’s total wealth, while the bottom 50% share a mere 6%.