November 4, 2022

Good morning. In today’s either/view, we discuss whether the Indian middle class is shrinking. We also look at the real-time flood monitoring system in Tamil Nadu, among other news.

📰 FEATURE STORY

Is The Middle Class In India Shrinking?

Over the past century, the middle classes in every nation have been the main forces behind the development of the world economy. India is no exception to this. A significant portion of the majority of goods and services are sold to the middle classes. This group contributes a substantial amount of the nation’s tax revenue directly or indirectly.

However, the Covid-19 pandemic has severely impacted the strength of this economic section in India. Is the middle class experiencing a decline?

Context

The middle class is situated between the lower and upper classes socioeconomically and is situated in the middle of the social order. It is defined by the think tank PRICE as households with a yearly income between ₹5 lakh and ₹30 lakh at 2020-21 prices. It accounts for 50% of earned income, 48% of expenses, and 56% of savings.

Post-independence, the population of the country stood at 300 million and jumped to 870 million by 1990. Under the Indian National Congress, private businesses were discouraged, and economic policies mimicked the socialist ones of the previous Soviet Union. During this time, the middle class in India remained relatively small.

A shift to a mixed economy occurred during the 1970s and 1980s, at which time the private sector also added a sizable number of jobs. The country moved progressively toward a market-led capitalist economy, transforming the “colonial” middle class from the era of British control before 1947 into a “new” middle class that increasingly began to be defined in terms of purchasing behaviour.

This class’ rapid rise was principally caused by the encouragement of private capital investment and the opening of the economy to foreign investments. In the 1990s, there were roughly 30 million middle-class people or fewer than 1% of the overall population, and the proportion of people in the middle class started to increase steadily, reaching roughly 5% of the population in 2004.

VIEW: The middle class is shrinking

Following the second wave of Covid-19, the population of India’s middle class decreased by at least 32 million, and 75 million more people have been living below the poverty line since 2020, according to a Pew Research Centre analysis. India made for 60% of the global decline in the middle-class population. India’s already sluggish economy will undoubtedly be impacted by this.

The effects of the pandemic need to be compared to a number of other recent occurrences. While the effects of demonetisation on Indian MSMEs are still being felt, the phenomenon of unemployed growth actually started much earlier. According to the National Sample Survey Office, the informal sector contributes over 40% of India’s GDP and employs three out of every four workers. The long-term objective of expanding the middle class that would purchase goods was affected as MSMEs lost business to corporates, who, in the last decade, did not create new capacities.

Nevertheless, the way the economy operates has undergone a tectonic shift as a result of the Covid crisis. Prioritized consumer spending during the pandemic benefited the pharmaceutical and IT industries, but it had a devastating impact on the most labour-intensive and consumer-discretionary product industries, which together employ 30% of the total workforce and the majority of the lower middle class.

COUNTERVIEW: The middle class is on the rise

Positive demographic trends in India, which have increased the proportion of the working-age population to the overall population, have created the conditions for a significant rise in the middle class. About 600 million people in India are below the age of 25 years, giving the country a demographic advantage until at least 2050. A new dynamic would arise as a sizable population bulge emerged out of abject poverty and are ready to join the middle class. It is anticipated that over 55% of Indians will join the middle class. In reality, India’s middle class may become the largest in the world (in terms of population) by 2025 because its demographics are much younger than those of China and the US.

Private saving and consumption, fueled by the middle class, have been the main drivers of growth. Nearly 60% of India’s GDP is made up of private consumption, and since 2000, private consumption growth has been responsible for 70% of India’s growth. India’s domestic savings and investments are growing and financing investments, in contrast to the US, where domestic savings are dropping, and the country borrows excess savings from other countries to invest and grow.

A study by PRICE found that the middle class in India has more than doubled to account for nearly 30% of families. There is no doubt that the middle class has arrived. All societies have had a long-lasting effect from the middle-class boom as aspirations adjust to the new environment. According to PRICE, India’s middle class would increase to 63% of families by 2047 if necessary political and economic changes are implemented. That magnitude will undoubtedly cause significant social changes.

Reference Links:

The Middle Class in India: From 1947 to the Present and Beyond – Asian Studies
Long Wait For Prosperity: A Close Look At India’s Shrinking Middle Class – Outlook India
The rising importance of the middle class in India – Financial Express
The shrinking middle-class – The Hindu Business Line
The growing middle: Middle class is set to expand rapidly, a study shows. Impact on society will be huge & mostly for the better – The Times of India
The myth of Indian middle class – Greater Kashmir

What is your opinion on this?
(Only subscribers can participate in polls)

a) The middle class in India is shrinking.

b) The middle class in India is on the rise.

🕵️ BEYOND ECHO CHAMBERS

For the Right:

The language of intermediation matters

For the Left:

OIC should end its obsession with Kashmir, turn attention to Uyghurs in China instead

🇮🇳 STATE OF THE STATES

Monitoring health services (Uttar Pradesh) – The state government will divide Uttar Pradesh into five zones to monitor and improve healthcare services and infrastructure. Under the plan, an officer will monitor each zone and details its progress and grievances. Chief Medical Officers from all districts were asked to seek assistance from private companies with a list of essential supplies that weren’t available.

Why it matters: Recently, there have been cases of negligence in government hospitals. For the government, they hope this will make it easier to address issues and gaps in implementing healthcare schemes and initiatives. For a long time, deputy chief minister Brijesh Pathak had been visiting government hospitals across districts to monitor health services and taking action against irregularities.

Real-time flood monitoring (Tamil Nadu) – The state now has a real-time flood monitoring system which has been under development for the past four years. Now, it’s being used on a pilot basis to forecast local rainfall and moderate the outflows of reservoirs in the Chennai basin. The system, costing ₹71 crores, will become fully operational by the next monsoon. For inundation forecasting, it’s still a work in progress.

Why it matters: This system can also help in floodplain mapping and assessing the effectiveness of stormwater drains. The project was implemented under the Project Development Grand Fund. The system also helps cover the Chennai basin spread across 5,000 sq km that covers Chennai, Kancheepuram, Tiruvallur, Chengalpattu, Ranipet, and Vellore districts.

Mission Shakti and tax collection (Odisha) – Chief Minister Naveen Patnaik announced the state government would partner with Mission Shakti groups for property tax collection in urban areas. Property tax collection will now be handled by the groups. To help with mobility, Mission Shakti partners will be given bicycles. Jal Sathis will play an important role in checking illegal water connections and increasing water tax collection.

Why it matters: The government hopes the move will help increase revenue collections of urban local bodies and empower the groups by giving them more economic opportunities. The state has had success in supplying safe water connections to households. The Jal Sathis have been instrumental in providing pure piped drinking water in 85 cities and towns.

No increased hospitalisations from new variant (Maharashtra) – The new XXB and BQ.1 Omicron variants haven’t led to a significant rise in hospitalisations in the state. Most of the new patients are asymptomatic. Most patients have incidental Covid-19, and symptoms like loss of taste and smell haven’t been noticed in the new patients. However, vaccinations against the coronavirus remain vital and the best way to fend off serious infection.

Why it matters: There’s a concern that as we enter the winter months, cases could increase. From October 10 to 16, the state saw a 17% rise in cases, mostly in Thane, Raigad, and Mumbai. All three are densely populated. The new variant is a hybrid of two Omicron variants – 3.75 and BJ1, making it a novel mutation that could evade antibodies.

Jet landing on bypass (Assam) – For the first time in the state, the National Highways and Infrastructure Development Corporation Limited (NHIDCL) will build a 3.5 km stretch with an emergency fighter jet landing facility at National Highway 37. The exact location is the 11.5 km Moran Bypass, part of the Demow – End of Moran Bypass four-laning package. The stretch will be according to the Indian Air Force’s standards, as the width has to be 60 metres.

Why it matters: Last year, the Centre identified 12 national highways to develop into airstrips for the landing of fighter aircraft and military planes in emergency situations. In the northeast, the other highways identified are the Jorhat-Baraghat road and the Bagdogra-Hashimara road. A mock drill was conducted last year in Rajasthan’s Barmer with multiple aircraft landing on the emergency landing facility (ELF) of NH-925.

🔢 KEY NUMBER

$450 billion – An unverified social media post on China’s supposed reopening plan led to a $450 billion two-day stock market rally. Investors have been looking for reasons to buy Chinese stocks, among the worst performers in the world, as the economy grows at its slowest pace in decades.