Crisis of Middle Class

It was the month of April and May when people were fighting for an ounce of oxygen, medicines, hospital beds, ventilators, and even for a bit of humanity. Those dark days seem to be gone, as the number of cases in India is dipping. 

Between all this, a huge economic impact is awaiting us. The most affected ones are the middle-class population of India. A population of nearly 40 crores (before the pandemic) has been in the middle of this catastrophe when they had been stuck in between the fear of the pandemic and fear of feeding themselves.  

Since the 1990s Liberalization-Privatisation-Globalisation(LPG Reforms), the middle class has been at the center of the economic lifting of the country. A 20-fold rise in the middle group has been a vital wheel of economic growth. India has lifted 27 crore people from poverty between 2006 to 2016, all these numbers have been shifted in the middle section from the lower section of the society.

According to Pew Research Center Report, India's middle class shrunk by 3.2 crores and 7.5 crores and was eventually driven below the poverty line. India contributed 60% of the global decline in the middle class.

But is it only because of COVID-19 or we can make the government accountable for this?

Let us get enlighten. KEEP PATIENCE.

JOB LOSSES

The service-based sector is the major lifeline of the Indian Middle class. Unfortunately, this sector is the most affected by the COVID outbreak. COVID devasted service-based industries that employ 30% of the total population and the majority of the middle class. The small and micro-business that employees 33% of the population is at stress.

81% of them are informal with near to zero job security. These informal sector job losses are huge in number since the first outbreak of Covid. The exodus of migrant workers in the first, as well as the second wave, is a firm example of the above data. Over 1 crore migrant workers belonging to the lower middle class are forced to farming.

Also, white-collar jobs have also been the victim. Multi-National and huge Corporates have cut down thousands of jobs formally and informally, fresh recruitments are minimal in the current scenario. And those sectors who couldn't cut the employees have cut the salaries to half and even more. A person who was getting x amount of salary for work is now getting x/2 or x/3 amount of salary of the same work in the name of Work from home.

The government sector is also not far behind the act of salary cuts. The Central government has suspended the DA hike in the 7th Pay Commission till July 2021, which has affected the salaries and pensioners.

Bank deposits have increased by 11.4% in FY21 despite a 100 bps fall in interest rates. This gives clarity on the point that the more risk-averse section of the society has put their savings in banks to secure future uncertainties. 70% of the total consumer base is not spending as much, which is also a major reason for the downfall of GDP. Spending in IT & electronics and Pharma sector is in majority.

PRICE HIKE

Many over-intelligent people will argue that the above outcomes are natural and COVID has been the only reason, but the inflation or price hike we are facing since COVID, in fact before, can't be justified.

The rise in fuel prices and above 9% food inflation is a sheer torcher for the common man. Till May 2021, the petrol price has reached a record Rs.100/lt in more than 135 districts in India. 58% in Petrol and 52% in Diesel accounts for taxes shared between Central and State governments over the country. Meanwhile, these price hikes had been at a halt during 2 months of the election in 5 states.

It's not only about the COVID era but when we look pragmatically with open eyes, we could see that this phenomenon of inflation had been boosting since the beginning of the Modi era. During FY15 to FY20, excise duties were raised a record 12 times and lowered for a record 2 times. Excluding the revenue-generating goods (Oil and Alcohol)out of the GST is also a questionable deed by the Central government.

The retail price of edible oils has increased by 25% to 50% since March 2020. The reason is India's huge dependency on imports. Gas cylinder prices have increased by Rs. 200-300 in six months since December 2020. In many big cities like Hyderabad, it is reached the Rs.1000 mark. 

Generating revenue is very important in running a country, but what is the purpose if it doesn't serve the section that has the largest chunk in tax-paying, 79% of the total taxpayer base consists of the middle class or working class. Whooping GST collection couldn't be the threshold of economic management. Installing a megaproject of CENTRAL VISTA worth Rs.20,000 amidst the pandemic. 

How can they justify all this?

By referring it is an ACT OF GOD.

SHRINKING MIDDLE CLASS

A year-old announcement of ATMANIRBHAR PACKAGE is still a missing thing at the ground level. It was nothing more than a loan fair that benefited only those businessmen and merchants who had a better credit score. During the injection of liquidity by central banks, the rich and upper classes have grabbed the benefits due to cheap credit, which helped them in increasing their income by 35% by taking advantage of the bull run in the market.

28% of the middle class and lower middle class remain the sufferer. Indians are getting more indebted since 2017, according to the National Accounts Data, more than 81% of debts depend on informal lenders. The top 9 billionaires hold as much as the bottom 50% (65 crores), according to 2014 data.

If the government is in a tough phase for spending, then they could at least relax the price hikes. At one end pandemic had made things ugly for the middle-class, why the government is in a race to make things uglier from another end.

The middle class has been the financial backbone of the country in pulling the nation out of the pit since time immemorial.