The number of individuals reporting annual salary income between Rs 10 lakh and Rs 50 lakh - the so-called middle class - increased over sevenfold. Their share of total declared salary income rose from slightly more than 25% to almost 50%. On the face of it, this suggests an increase in formal employment, improved tax compliance, and higher nominal salaries pushing workers into taxable brackets. But the average salary of this cohort increased from Rs 16.86 lakh to only Rs 17.33 lakh - just 2.8% in 10 years and less than 0.3% annually. Average purchasing power thus declined after accounting for inflation by about 40%. The data also compare different groups of taxpayers at two points in time rather than following the same individuals to offer a better idea of economic progress. Greater formalisation of incomes is welcome but it has not been accompanied by adequate salary growth.

Moreover, IT returns data offer a partial picture of the economic situation as most Indian workers in the vast informal sector fall outside the IT bracket. Casual workers without social-security benefits - street vendors, small farmers, drivers, artisans, repair workers - and unpaid family workers are classified as informally employed. A comparison by the Institute for Human Development and the International Labour Organization addresses this gap by aligning data from the National Sample Survey's Employment and Unemployment Survey of 2011-12 with the Periodic Labour Force Survey for 2022: this time period almost corresponds with that of the IT data. It found that informal employment declined only from 92.2% to 90.3% of total employment during this period. The real monthly earnings of casual workers rose from Rs 3,701 in 2012 to Rs 4,712 in 2022, but 78.1% still earned Rs 7,500 or less. Real monthly earnings among the self-employed fell from Rs 7,017 in 2019 to Rs 6,843 in 2022. During the same three years, self-employment increased by 63 million, including an increase of 34.5 million in unpaid family workers. These figures show that greater employment did not always produce secure or adequately-paid work. India needs regular, reliable data on informal earnings and social-security coverage, enforceable minimum wages, portable benefits and greater investment in labour-intensive industries. Along with formalisation of income must come better wages and employment conditions across income groups.