Household is where the heart is: What India's smaller families tell us about big economic changes

Economic Times

5 hours ago

Agencies Macro-level numbers like GDP growth, fiscal health and trade balances offer valuable insights into economic progress. But they often miss more profound changes taking place at the micro level - in households. One of the most significant demographic changes over the past decade has been the steady decline in household size. It has shrunk from an average of 4.8 members in 2015-16 to 4.4 members in 2023-24. This trend reflects falling fertility rates, longer life expectancy, shifting cultural norms and rapid urbanisation.The joint family system yielding to that of the nuclear family is, in turn, yielding to the 2-member, or even single-person, household, particularly in urban India. This evolution has critical implications for how consumption is managed, care responsibilities are shared, and financial resources are distributed within the family.
Smaller households have not led to a decline in income generation. There is an encouraging rise in the proportion of households with more than one earning member. 48% of Indian households now report multiple earners. Among the richest 20%, this rises to 62%, highlighting a key structural shift. This multi-earner trend is driven by several factors: higher workforce participation by women, growing number of adult offspring contributing to household income, and proliferation of gig and informal work arrangements. Households are increasingly treating income as a portfolio, diversifying earnings across members and sectors to buffer against uncertainty. But inequality persists. Quality divide Households with only one earner report average incomes of ₹2.5 lakh a year. Those with three or more earners report incomes upwards of ₹8.3 lakh. This reveals not just a gap in how many people earn, but also in what kinds of jobs and sectors they are earning from.In the lower quintiles, multiple earners are often engaged in insecure, low- paying informal work. In the top quintile, households benefit from stable employment - often formal - with greater access to financial services and social protection. This income bifurcation points to a quality gap in employment, not just quantity.
Gender disparity Despite rising Female Labour Force Participation Rate (FLFPR), only 13% of households identify a woman as the principal earner. This number is even lower in the bottom 40% of income groups, indicating that entrenched gender norms, limited access to quality jobs, systemic inequalities in wages, occupational segregation and unpaid care work still exclude them from economic leadership within families. Moreover, dependency ratios within households remain high, especially in poorer segments. With average family size declining and life expectancy increasing, fewer earners are now supporting more dependents - children and non-working adults. Without robust public support systems, such as affordable healthcare, pensions and childcare, economic pressure on these families is intense.Indian policymaking has historically centred on the individual, be it for taxation, employment schemes or welfare entitlements. But the household - not the individual - is the primary unit of economic life. Recognising this opens new pathways for targeted interventions: Schemes like MGNREGA could evolve to accommodate flexible, family-based work allotments. Financial inclusion initiatives should account for intra-household dynamics - enabling joint savings products, group insurance plans and family- linked credit scores. Welfare programmes should adjust thresholds and benefits not just by individual income, but also by household structure and dependency load. Urban housing policies must cater to the rise of 2-person or single-person households with different spatial and service needs.Businesses, too, can harness this transformation by shifting strategies: With smaller families and more working members, there's a growing demand for time-saving services, dual- income financial products, compact and smart housing, and personalised education and health offerings. eCommerce, fintech and FMCG companies can design solutions that align with multi-earner budgeting, female financial participation and elderly care needs, all within the family unit. Financial institutions could innovate credit underwriting models that consider the aggregate earning capacity of a household rather than an individual. Insurers could create plans that bundle life, health and accident coverage for multiple earners in a single package. Retailers and digital platforms might target consumption clusters - like working couples or intergenerational families - rather than treating consumers in isolation.Structure of the household influences everything from savings rates to borrowing behaviour, from educational investments to retirement planning. If policy and business strategies fail to recognise the diversity and dynamism of households, they risk becoming misaligned with the needs and aspirations of the people they aim to serve.
The writer is MD-CEO, PRICE
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.) Elevate your knowledge and leadership skills at a cost cheaper than your daily tea. Small finance banks struggle with perception. Will numbers turn the tide?
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