The Plight of The Indian Middle Class

It is often said that the rich get richer while the poor get poorer! Alas, the middle class does not figure anywhere in this definition. A case of being ignored all around, as usual……

India is defined by a mammoth middle class that is neither too rich nor too poor. It is made up of a heterogeneous section of the populace comprising of public sector employees along with carpenters, cab drivers, healthcare staff, engineers, lawyers, traders and even small shopkeepers and businessmen.

The sheer size of middle India makes it difficult to box them with a precise characterization. The McKinsey Global Institute defines the middle income segment as households with real annual disposable incomes between Rs. 2 lakhs and 10 lakhs. Our Finance Minister, Ms. Nirmala Sitaraman chooses to demarcate the middle class as those with income below Rs. 18 lakhs per year and above the poverty line. However, the representative income is actually considered closer to around Rs. 6 lakhs per year. Economists from Mumbai University classified the middle class as consumers spending anywhere between US $2 to $10 per capita per day.

To put a number to it, approximately 600 million of the population forms the great Indian middle class. Moreover, the figures keep swelling and it is estimated that in the next 10 years, nearly 80% of the households will be in the middle segment.

It should be said that the middle class does fare better than the poor on social parameters of how they live, work, earn and save. However, their modest salaries or earnings are just about enough to cover the food, clothing, shelter and education demands along with footing the water, electricity and other bills. Hardly anything is left for discretionary spending on consumer goods and lifestyle expenses. Walking the thin line between income and expenses, the families keep teetering precariously and then righting themselves up again. It is not a hand to mouth existence for sure, but making ends meet is still a daily struggle.

Falling in the average income spectrum, the middle class common man does not even dare to dream big or harbor huge aspirations. Living a practical life on all counts, all that they want is a safe and secured future for themselves and their families. In fact, the middle socio-economic group carries out a vigilant budgeting at every level. It is with a lot of scrimping and scraping that they manage to save for a rainy day. It is estimated that the middle class barely manages to put aside just about 7% of their annual income.

This money is dutifully deposited in the bank and clearly earmarked for the children’s education or weddings. But will they be able to get it when they are in urgent need of funds? What if one fine day you wake up only to find that your bank has been looted – not by the regular burglars, but a carefully premeditated conspiracy by the corporates or filthy rich people, sometimes in collusion with the bank officials and the regulators themselves?

Hapless victims throng the branch and track the news in the vain hope that they will get their money back – money that they earned with their own grit and toil and not by hoodwinking others!

Meanwhile, the immediate liquidity has gone for a toss. And how do they tide over the health calamity or a child’s college admission or another child’s wedding? There’s no choice but to sell off the meager assets, mortgage the family jewelry or even take a loan from private sources at abnormal interest rates or some other another bank taking full advantage of the situation to exploit the helplessness of the victim. All this while their own savings are locked away in the bank scam!

Honest to a fault, he unfailingly pays the loan installment or other EMI right on the due date. But what happens when he is forced to default for some unforeseen reason like an ill-fated job loss or other misfortune? The bank officials belittle and abuse the unfortunate man; he is mercilessly harassed and threatened by goons posing as recovery agents. He has no choice but to take a debt from a private source to repay the bank loan, that too at a much higher rate of interest. The further liability drives him into indebtedness and ultimately, into poverty.

A similar story unfolds when a guy tries to make an insurance claim. He tightens the family’s belt to pay the premiums year on year with the simple expectation that the risks will be well-covered in case of a health emergency. The insurance provider merrily collects the premium without uttering a word. But when a medical catastrophe strikes, the expected safety net unravels as the company tries its level best to stall or withhold the claim. The already miserable man is made to run pillar to post for medical documents while stories are cooked up about expired claims, deductibles, lack of coverage, insufficient documentation, missing police report and what not. The promised seamless coverage turns out to be a fantasy; the demands are never-ending and it often becomes a case of open harassment. Meanwhile, he has no option but to foot the heavy hospital bills from his already threadbare pocket. Hiring a lawyer is out of the question from the already strained funds!

Ordinary folks are mostly used to the perpetual trap of worries and drudgery. Battered and bruised at every turn, they continue to pick themselves up and carry on with life as usual. Living an honest life, they follow all the rules and regulations without demur. They religiously support the government time and again; recent bouts of demonetization, GST implementation and surrendering the LPG subsidy underline how the middle class staunchly supported the government in hopes of a better tomorrow; in hopes of ache din!

And what has the government done for middle India? It is fashionable to speak about the middle class in the run up to the polls. But has the mid-segment featured in the manifesto of any of the political parties? Hasn’t the aam aadmi been notoriously neglected by the policymakers right since the early days of independence?

Think about it – successive governments offer freebies and relief measures to their faithful vote banks, the poorest sections of the society. All social welfare plans target the economically weaker classes. On the other hand, the state confers huge financial boosters and concessions to large businesses in an attempt to fortify the economy.

The small loans of poor farmers are routinely waived off or restructured to protect their interests. Conversely, loan defaults by huge corporations are simply absorbed as non-performing assets and the Mallyas, Wadhawans and Modis get away in the maze of judicial protection and most of the time are out on bail, to enjoy the gorged money in luxury. In fact, many of the defaulters are ‘rewarded’ with bailout packages!

Meanwhile, the middle class continues to be ignored at every juncture. These people know they are neither poor enough nor rich enough to warrant attention from the powers-that-be. Preoccupied with their responsibilities and troubles, they never voice any of their worries or expectations. They suffer in silent ignominy as they don’t want to rock their already precarious boat. But does this license the government to exploit them over and over again?

Consider this – the common man pays tax on his income at punitive rates, and then again on every item of consumption. There are a host of additional taxes, cess and surcharges to cover the shortfalls faced by the state exchequer. After all this, he is asked to pay a toll on the highway as well! In fact, he is easily paying at least a month’s salary in taxes every year.

Alas, it is the middle class that contributes the most to the government by way of taxes. And where does his tax rupee go? Isn’t it his hard-earned money that is financing the housing schemes, the Mudra loans and even the bailout packages so easily doled out to the very rich and very poor?

To add to this, the cost of living is rising by the day. Everything from vegetables to petrol is becoming dearer. Interest rates on loans and insurance premiums are going through the ceiling. But does the income increase to match the price rise? The joke is on the middle class in the form of consecutive rate cuts in interest on bank deposits! Even if they can manage to save anything after all the expenses, it is just not worth the while!

The current Covid-19 pandemic further highlights the baldly apathetic attitude towards the middle demographic of the society. The government is going all out with trains for migrants, relief for the farmers and rations for the poor. There are tax sops and cuts in PF contributions to protect the industry and boost the economy.

But why does the middle class not figure in the scheme of things? Why is nobody talking about the burden of massive pay cuts and job losses? These households are constantly dipping into their savings which are almost depleted now. There is Sonu Sood for the migrant laborers….. but who do they have? How will they pay their rents, school fees and EMIs? The children’s online classes call for laptops, smartphones and internet connections which can be beyond their means now. The loan moratorium is only pulling the wool over their eyes as the interest continues to accrue over the deferred 3 month period.

In fact, the middle class is fed up of being squeezed in the middle and being continually alienated from government programs. The restlessness against rampant cheating and injustices is coming to the fore. They have put up a valiant fight against the PMC Bank scam and the recent Sushant Singh Rajput case when the authorities seemed to be harboring powerful folks.

They should continue to rally together and campaign for equal rights for every citizen as drafted by the Indian constitution. Assert your rights in a collective voice and demand action from the government.

In this context, a round of applause for Media who always rallied behind us like Rahul Shivshankar and Navika Kumar of TimesNow or Arnab Goswami of Republic TV for taking up the cause of the middle class on a public forum and highlighting the power they can wield. The Middle Class Hub is also poised to emerge as an effectual platform to organize the fragmented middle class and make them realize their significance.

A meaningful line of reasoning is that the middle class is mostly disengaged from politics and fails to actively participate in the elections. This could be a primary reason why the governments take them for granted. Don’t just sit back and enjoy the election day as a holiday! You need to understand the power of your vote – vote for change, vote for the party that will take care of your issues. You have the power to become the game changer by your sheer strength of numbers!

This brings us back to the question - why is the government not bothered about the middle class families? Is the harsh and indifferent attitude justified? Why don’t they try showing some love to the middle class instead?

It is high time the government wakes up to the fact that it is the middle class population that is actually driving the economy with their consumption. They form the backbone of the country and cannot be treated as milching cows anymore. Moreover, the lower rungs of the social pyramid are progressively rising and millions of people are knocking on the doors of the middle class every year. However, the shackles of the middle rungs keep most in this category from moving further up. According to a 2019 report by Bain and Company for the World Economic Forum (Future of Consumption in Fast-Growth Consumer Market – INDIA), ‘140 million households move into the middle class’, but only ‘20 million move into the high-income bracket’!

There is a pressing need for the government to recognize, prioritize, strengthen and support the middle class by including them in the social security schemes. Public health coverage should be extended to this section of the society; government and employer contributions to a central health fund should be made mandatory. This will allow them to avail medical facilities without being pushed below the poverty line. In fact, outpatient services should be brought under the net so that chronic health conditions do not become the undoing of the common man.

Moreover, the middle class should also be accorded some financial latitude when they are legitimately unable to repay their loans or lose their jobs. The insurance regulator should be rendered powerful enough to protect the interests of the common man when he is making a genuine claim. There should be mechanisms in place when someone is being duped or harassed unnecessarily – like appointing a lawyer by the government or instituting measures of accountability with a time-bound resolution for prompt relief and redressal.

On the other hand, the fraudulent Government or Public/Private sector officials should be investigated thoroughly and charged by the judiciary instead of being allowed to get away scot-free at the cost of public loot. Liquidate their assets if need be. After all, safeguarding the interests of the common investors should be considered paramount and should prevail over commercial interest.

The middle class warrants financial inclusion with due attention in the monetary policy. The policymakers should make taxes fairer with proper tax breaks for the mid-segment. Making savings secure and profitable again will be the wind between their wings. This will pave the way for a healthy political democracy defined by cohesive and sustainable growth.

Finally, it is high time we designed robust social security measures for the middle class like assured pension, affordable shelter, food, education for children and Universal Health Coverage. We have pots of money collected from the middle class as taxes but utilized for the privileged few, who otherwise could have managed on their own. Let us all now talk about the plight of the missing middle-class.?