Nepali middle class and their expenditure

Middle Class and Expenditure in Nepal
HH Survey 2004/05 (means, 2005 PPP$) – per day	% of population	Total population (million)	Annual expenditure (billion)
$2-$4	16.74	4.45	4.32
$4-$10	5.3	1.41	2.91
$10-$20	0.85	0.23	1.09
Total	22.89	6.09	8.32
$20 plus	0.38	0.1	2.4
Middle class is defined as those earning between $2 and $20 (2005 PPP$)
Source: ADB 2010, p.46

The latest ADB’s report (Key Indicators for Asia and the Pacific 2010) states that total annual expenditure of middle class (defined as having income between $2 and $20 per day at 2005 PPP$-- whose number is 6.09 million) is around US$8.32 billion. This is approximately 27 percent of total value of goods and services produced in the country (i.e. gross domestic product -- GDP). In Nepal, total consumption level is above 90% of GDP. Private consumption is close to 80% of GDP. The data are derived from household survey done in 2004/05. The figures should have increased substantially as remittances has increased drastically since five years back. I wonder how someone earning $2 a day falls under middle class. These people are hardly above the global poverty line. The authors of the report might have taken the lower bound of middle class projections/definitions in literature. But, this does not give the true economic strength and potential of the middle class. Anyway, the above figures give an indication of a rough estimate of the market strength of Nepali middle class.

China in 2011

Gordon Orr, a director in McKinsey’s Shanghai office, predicts what might happen in Chinese economy this year:

• Inflation in food prices will take longer than expected to control.
• Middle-class bankruptcies will expand dramatically.
• Minimum wages will rise, but productivity gains will outstrip labor costs.
• China’s economic growth will be lower than expected.
• China will step up its “invest out” program in the new five-year plan.
• The state will again try to reduce its ownership role in business.