Veering at the onset of the millennium, India’s stagnant economy was ready to bloom with the increasing globalization. With this major element in play, several aspects of the economy also evolved. India’s enemy- income inequality continued getting worse as the middle class continued to suffer. Political parties’ primary focus on the extreme parts of the society left the middle class hanging with substandard benefits. The Indian ‘middle-class’ may refer to a profusion of India’s population and not describe a myopic distinction of incomes. Every year the middle class anticipates some relief in paying taxes but is left hanging in disdain. It is often squeezed between the wealthy, who indulge in a disproportionately large share of the nation’s assets, and the penurious, who can fall upon government aid. Ostensibly, it pays the largest share of taxes but is often not the recipient of the proportionate benefits.
INDIA'S FOCAL POINT BEFORE A DOWNTURN SPIRAL
A rapid trudge into globalization and a burgeoning middle class coincided to form India’s focal point. Growing from 304.2 million in 2004-05 to 604.3 million in 2011-12, it exhibited all the qualities of becoming India’s beacon, even beseeming the title for a period. Over the years, the per capita incomes in India have increased, lifting millions out of the abject degree of poverty. An upward trend of high mobility has been highlighted in India’s trajectory. The middle-income cohort was successful in tripling the saving rates between 2005 and 2015, with many more households having a significant disposable income. Several magazine editors were interested in reporting the growing middle class synonymous with poverty. The middle-class also comprised an exploding consumer market that McKinsey Global Institute in 2007 described as India's "bird of gold". Over five decades of a bumbling socialist bureaucracy, several factors hobbled the expansion of the middle class to this day- Losing the focus resulting in a slump.
DOES THE MIDDLE CLASS ALSO HAVE CATEGORIES?
Even the middle class has a typology and receives different benefits as per its classification. The aspirational or economically weak part of the middle class, facing certain precarious situations in everyday life, aspires for a better standard of living and is heavily affected by the consumption trends of different classes. The lower-level middle class has no job security and even the security of a regular flow of money. Nevertheless, several government schemes like the PM Kisan scheme have benefitted areas like micro-health insurance, micro-pension schemes, and affordable housing.
The affluent middle-class, who owns financial assets and securities across several platforms, comprises salaried employees with a high degree of job security. Gaining directly from real estate and stock prices, the affluent cohort gained certain benefits despite the GDP decline. The ‘middle middle-class’ of the stratification receives the least benefits, often despondent and ignored. This cohort will soon become the largest single bloc, bringing new forces.
WHAT ARE THE REASONS BEHIND THE DECLINE?
With several structural changes happening around us, it is difficult and amiss to isolate one particular one. One trend to note is the declining middle class with each successive generation. This shrinking could have a medium-term impact on India’s growth trajectory. A medium-term impact refers to the wavering repercussions from 2 to 10 years. The pandemic accelerated this decline and recorded a much sharper rise in poverty. Plunging into its deepest recession in more than 40 years, India is losing its major driver of consumption.
Several people point out the natural problem of the government not being able to satisfy a spectrum of interest groups. But, public policies are particularly designed for benefitting the disadvantaged during crises. Bearing the brunt of GST, the middle class has been forcibly maintained as the largest yet worn-out contributor. Another facet of the problem is the rising price of their lifestyle. The cost of education, healthcare, and especially housing has increased, at times above inflation, over the past 25 years. While their aggregate income has inevitably increased over the years, so has the price of goods and services. Especially after the implementation of GST, exposure to vulnerability and indebtedness have been unveiled, facing roadblocks at every step of the way. Often compared with fellow countries, India’s middle-class may not be as wealthy as that of the USA’S and China’s, but makes up a potent stratum. However, this rich stratum is not provided with benefits.
One thing to note is the consequences of the budget policies every year. Owing to several factors expedited by the pandemic, the government decided to halve the corporate taxes but left personal income taxes unchanged. Moreover, lower interest rates are catalyzing obstacles for the middle cohort, whose major source of financing is bank deposits. The more recent arrested progress has been the result of chaotically-implemented demonetization and goods and services tax(GST)- expelling and bludgeoning several small businesses and middle-cohort individuals. The highest rate of GST is 28%, benefitting the central and state governments to funnel revenue for carrying out projects. As a result, the middle-class becomes responsible for subsidizing the government- not the other way round. The upper class too has to pay its share, but its resources are enough to overleap the excesses. Most importantly, the notion of a middle class is deduced to more of a vague national asperity than an actuality in India.
DID THE PANDEMIC EXACERBATE THE DECLINE?
It is no doubt that a range of factors has contributed to the burden of the forsaken middle class.
Before the pandemic, a staggering 1.38 billion people were expected to join the middle cohort, accelerating the momentum. However, a report by Pew Research suggests an enormous shrink from 99 million to 66 million, a staggering one-third, in the period of the dire pandemic. The once regarded ‘beacon’ of India’s growth has inhabited the dusty corners of the room. India’s first recession in over forty years has decelerated the momentum of the middle class, who experienced expediency since the last thirty years. While several structural problems, inadequate policies, and a grotesque triumph over covid have contributed to the nation’s growth undoing, the accelerated downturn of the middle class brings in tough calls. In April-June 2019, a greater part of the households earning more than 5 lakh recorded a significant increase in their annual incomes. Reversing the headwinds, 2020 witnessed a drop of 15% in the figures. Why is the problem grave? The middle class imbues a multiplier effect in the economy, contributing a colossal part to total consumer spending and bolstering the economic front by soldering a taxpayer base.
While the middle class seems to be responsible for being a stanchion of the economy, it has been disproportionately affected for a long time. Countless changes like rising in the price of daily household items and services are prodigiously impacting the common man in daily life. Increasingly, the government is recognizing the unheard voices, however, no concrete steps have yet been taken. It is necessary to emplace the paramount of India’s structure, the middle class, and the first step towards it is its inclusiveness in policies. The differential treatment and ignorance have to stop to ensure economic prosperity.