Modi is squeezing the middle class

By Prasenjit Chowdhury Jan 11 2018, 00:36 IST
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Is the Indian middle-class squeezed between pro-poor policy inclinations and pro-corporate policy indulgences?

A sustainable, growing middle class serves as a beacon to others, a light on the hill, but why is it that the middle classes have begun to feel so threatened? Why have they been marginalised by a new and aggressive international class of the super-rich?

Why are they in such a panic about their childrens education and employment? Why are they worried that their hard-earned monies are either going to ingratiate corporate greed or into projects of economic redistribution?

The Indian middle class has been considered as a major obstacle to poverty reduction in the country, accused as it is of its lack of concern for the poor, combined with its disproportionate influence on policy. One can sniff a class tangle here.

Ashok Lahiri, a former chief economic advisor to the government, has said that the total sum required to be transferred in a country like India to raise the poor over the poverty line "may be too high to allow the government to maintain fiscal sustainability and macroeconomic balance."

This justifies the findings of a study that says that policies presented as promoting development, growth, merit, and individual opportunities, are more likely to be supported by the middle class than policies framed as targeting poverty, redistribution or transfers.

There is indeed some merit in the assumption that such policies are undertaken at the expense of the middle classes. During the UPA regime, the nationalised banks completely forgot the canons of prudent lending to worthy borrowers and found themselves vulnerable to the infamous corporate-political nexus.

"Today, the middle class has to bear the greatest burden
of taxes, of rules and regulation, and observe social norms. The quantum of economic burden for the middle class is the most. This should reduce; the middle classes want hurdles
to be removed so that they can be achievers. Once the poor
begin to carry their own burden, the burdens on the middle class will reduce," Prime Minister Narendra Modi said in March last.

But as one branding himself to champion the cause of neo-liberal middle class, Modi has not been particularly kind to the middle class who have been the primary cheerleaders of his "vikas" in 2014.

The wily pragmatist that Modi is, and riled by the jibe of running a "suit-boot ki sarkar", as one who promised to do away with the various social schemes of the UPA such as the NREGA went on a spree of social spending, the chief brunt of which the middle class continues to bear, saddled with a new form of tax terrorism.

While the 2016-17 Budget had no significant tax sops for middle class, the service tax rate spiked from 12.36% to 15%. Modi refused to pass on the windfall benefits of a crash in oil prices in the global markets, instead imposing a variety of taxes and cesses.

Though the decision to tax interest earned on provident fund (PF) contributions had to be rolled back in the face of nationwide protests, the intent of the Modi government is clear. Ironically, it is the middle class, the sole pillar holding up the economy and which, by dint of its savings, finances the government, that has been levied a plethora of taxes.

Ardent cheerleaders

A generation ago, when the financial journalist Patrick Hutber wrote his book The Decline and Fall of the Middle Class, he said that no class in history had been quite so complicit in its own demise.

It was the middle class that largely invested faith in Modis demonetisation and it increasingly looks like that he prefers to pillory the same class. Earlier, too, he has tried to peg small savings rates with government bond yields, which are susceptible to the vagaries of fiscal and monetary policies.

As electoral calculations go, there is reason to consider that the middle class is so fragmented and scattered that there is really no reason to woo them. The government employees, other than the central government ones, are riven by class divisions and their entitlements vary from state to state.

Apart from the sarkari babus, the new middle class in India includes people in the informal sector, such as in construction, as well as from the disadvantaged castes that have traditionally been denied opportunities for upward mobility. Therefore, the conventional idea that the middle class is comprised of the educated, upper caste groups is not true anymore.

Members of the Indian middle class consume on average $2-$20 a day, and they include today the bottom strata of the middle class - small tradespeople, handicraftsmen, and owner-peasants, the lower levels of the intellectuals (students, primary and secondary school teachers), lower government functionaries, office clerks, small lawyers, etc.

Can Modi continue to bulldoze this substantial intermediate class, often the vanguards for economic liberalisation, to realise his dream of a new India?

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