The 'middle class' or the 'troubled class' of India

The middle classes of all countries have been the key drivers of the global economy in the last century. During the past several decades, world economic growth has occurred, mostly because of increased consumption in the middle classes of the United States, Europe, and other advanced countries. This class has been considered a thriving and vibrant catalyst for economic growth. It provides a strong base that drives productive investment and is a critical factor in encouraging other social developments that also stimulate growth and foster expansion of elements that contribute to a healthy society.

“A healthy middle class is necessary to have a healthy political democracy. A society made up of rich and poor has no mediating group either politically or economically.” — Lester Thurow

According to the latest data 28% of India's population is middle class -- of which 14% is lower middle class and about 3% is upper middle class. The class is often referred to as the middle-Income group but it, unfortunately, is the most ignored class in India.

The citizens of the middle class have been the most important and responsible contributors to the economy yet they are ignored while drafting policies.  When demonetization happened they came forward and willingly took the pain on the premise that it would support a cleaner India. When GST came, they supported it silently hoping that it would herald a better future. The middle class has been supporting PM Modi in all his decisions, be it thaali or candle campaign or his 'Atmnirbhar Bharat' campaign.  They pay their taxes religiously, pay the GST on their consumption of goods and services without demur, but what was the reward?? A big zero …. The Corporates got huge tax cuts instead. Massive NPA write-offs for the large and medium-sized corporates and no relief for the small borrowers. Suddenly they are looking at a bleak future. The irony is that many of the policymakers and bureaucrats in India owe their origins to the “Middle Class themselves”, but now stamp on its very existence.

 The middle class seems to be the troubled class burdened by the EMIs, educational expenses, house rentals, and other basic amenities. After all the expenditure they save for children’s education, assisting a parent for a sibling wedding, their own kids’ weddings, and saving some for retirement. Sure, we need to take up farmer issues, unorganized labor issues, but can we forget 20% of the country that slogged to lift itself marginally out of poverty. In times of economic crisis when there is nothing called job security, they are emotionally battered.

The voice of the middle class does not reach the government because they have no organized platform to react. The Middle class seems to be ignored as they do not swing the election as compared to the lower class who is often mobilized and comes out in large numbers to vote. The middle class also cannot be the financial power influencers for the political parties.

COVID made it worse for the middle class

The lockdown devastated the Middle-Income segment outside those who work for the Government or the large organized sector.  The self-employed have been crushed as they have no income. They have EMI commitments on assets that funded their existence. Many fear that their businesses may never revive. Small shopkeepers running in lacs may have lost part/bulk of their inventories to rodents/theft/obsolescence and have loans to repay. The wage earner in the unorganized sector has not been paid by most employers who have gone under themselves. Maybe 20-30% of the migrant workforce that had to vacate dwelling units due to the inability to pay rent is from this cohort.

The Middle-Income Group looked hopefully at the Finance Minister and hoped she would recognize their existence and their role in the economy but throughout the six days of the Finance Minister’s detailed Financial package announcements, they were ignored totally.

The cost of a middle-class lifestyle has increased faster than inflation. Housing, for example, makes up the largest single spending item for middle-income households, at around one-third of disposable income, up from a quarter in the 1990s. Expenditure on education and health has been on the surge. In spite of paying all the taxes, the middle class is mostly deprived of government facilities or subsidies, may it be for education or health or civic services. In fact, people from the middle class and upwards are charged for each facility they avail.

 To help the middle class, a comprehensive action plan is needed. Governments should improve access to high-quality public services and ensure better social protection coverage. To tackle the cost of living issues, policies should encourage the supply of affordable housing. Targeted grants, financial support for loans, and tax relief for home buyers would help lower-middle-income households.

The question will always remain that can the Middle Income Group ever become top of mind for policy planners in India? When will there ever be a white paper on what constitutes a minimum standard of living that every citizen of India deserves, and therefore taxation should be on income above that level?

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