THE MIDDLE CLASS TAKES POLE POSITION AHEAD OF 2019 POLL
Within the span of less than a week the rapidly burgeoning middle class was served a bonanza twice. First, the Union budget carved up an income tax exemption for those at the bottom of the middle class food chain. And then, last week the Reserve Bank of India (RBI) sprang a surprise by undertaking an interest rate cut—which to the aspirational middle class, provided the banks read the signals, would translate into lower EMIS, or equated monthly instalments, on outstanding loans for houses, automobiles and, in some instances, even white goods such as refrigerators and televisions.
Preceding this pre-election largesse were the various rounds of cuts in goods and services tax (GST) rates. The biggest was in the form of a New Year gift, which reduced tax rates on 22 items, of which seven were from the highest tax slab of 28%. It included monitors and TVS up to screen size of 32 inches, power banks, digital cameras and video camera recorders, and video game consoles.
Taking all this together, it is clear that the middle class is emerging as a key electoral constituency. Previously, like farmers, they were too disparate and, hence, rarely operated as a collective. But just as an agrarian crisis, especially the problem of surpluses in farm output, united farmers, the cause of aspirations is finding similar resonance among the middle class.
This is particularly true if one expands the idea of this demographic segment to include the neo middle class—those who have been lifted out of poverty by nearly two decades of rapid economic growth and are now residing either in urban areas or in peri-urban pockets (officially classified as census towns) working as delivery personnel, Ola/uber drivers, beauty parlours or security guards. This population segment mimics middle class consumer behaviour that goes beyond meeting their basic material consumption needs to include education and entertainment; they are also deeply aspirational—which also makes them politically potent.
In a piece published in Mint in 2016 (bit.ly/2dsn5jr), two experts from the Boston Consulting Group writing on the neo middle class had said as much: “Who they are, what they believe, why they choose, where they shop and how they buy. Companies and governments alike will need to fundamentally reinvent themselves and create new rules of engagement to truly win in this new reality.”
Politicians seem to be seized of this. Prime Minister Narendra Modi, in a statement issued immediately after the presentation of the budget, specifically alluded to them: “Our neo middle class is rising and so are their dreams,” he said before delivering his government’s re-election pitch, “(the) interim budget (was) a trailer for what will take India towards prosperity after Lok Sabha polls”.
Interestingly, it was Modi who had first coined this term when he introduced it in the manifesto of the Bharatiya Janata Party (BJP) ahead of the election to the Gujarat state assembly in 2012. Then CM Modi was quick to realise that this neo middle class, which possessed deep aspirations, required a different kind of hand-holding as compared to the poor, especially since they were flocking to urban settlements where life can be so much more unforgiving.
Clearly PM Modi, sensing a political opportunity, seems to have extended this strategy to the national level. While we have no idea eventually how this segment will vote, it is obvious that the centre piece of PM Modi’s agenda, anti-corruption, will logically hold an appeal, as it seeks to level the playing field.
Regardless of the outcome of the forthcoming general elections, it is clear that the middle class can no longer be taken for granted. Already a third of India lives in urban areas; the 2021 Census is likely to show us that this proportion would have grown even more, setting the stage for a rewriting of the political rules.
Anil Padmanabhan is managing editor of Mint and writes every week on the intersection of politics and economics. Comments are welcome at [email protected]
It is clear that the middle class can no longer be taken for granted.