INDIA. I had published the first part of this write up in the month of April, when the lockdown had just dawned upon the citizens of India. It has been five months from there on and it is the time to re-look at what was said in the previous article and how it is at the moment. Is it any different, has there been any improvement or has it gone for worse? For the beginners, one of the most common terms that has been used in the economic segment and the political segment, alike, to define a huge section of India’s population is Middle Class Segment. This is the segment that comes in between the section categorised as poor as per the standards of Planning Commission and of course, the rich who are estimated at 3% of the population. In 2018, various estimates suggest that India’s middleclass segment comprises 54% of the population while the poor segment is at 43%.
This composition makes the middle class segment the biggest in the social structure and one of the primary growth drivers in the economy. But, despite this big composition, is the middle class segment getting the attention it deserves or the benefits that it is entitled to, even after five gruelling months of lockdown? Let us explore.
As you would know and I hope the government also recognizes, let me refresh a few things. Middle class is the working horse that runs the machinery like a well oiled unit. Their contributions can be counted in terms of the economic support they provide to various segments. They go to offices, use public and private transport, buy automobiles for movements, spend on daily needs, pay rents, buy flats for their settlements, give taxes and GSTs, go to malls and hotels for shopping and dining, etc. They are the biggest consumer group in the country by the sheer size of their number. Their spending capacity acts as the catalyst towards the development and towards the functioning of manufacturing units as well as service industry. Because they spend and the manufacturing as well as service industry functions, there are jobs being created in the country. And because there are jobs being created, there is money being provided in more hands to spend and contribute towards the country’s GDP. Overall, they make the country function, grow, prosper and progress.
But, as I said in my previous article too, this middle class working group has still not figured in the economics of the nation. Loan Waivers to Farmers, Subsidies to Corporates, Support to Underprivileged Segment, Bail Outs, we have seen them all coming up but we haven’t seen anything that directly benefits Middle Class Segment of the society. Yes, there have been guidelines issued by the government “requesting” corporate houses not to cut salaries or lay off employees, but who cares if the corporates still end up doing that! The middle class will bear the impact and will try to find new ways to survive as their lives just keep getting spent on serving the needs of the families, they do not have time to either express or represent. From April till date, there has been no direct support to this segment and by the looks of it, there is no debate going on as well.
It is the time when the Moratorium has ended and large scale job losses have begun. One can only imagine the impact of this on the Loan Books of the banks who would be now gearing up to face large scale defaults. Had there been a strict guideline on preventing job losses, we would not be talking about large scale retail NPAs for the bank. After all, corporates have earned for ages and if they look to cut wages and jobs under the impact of COVID-19 in the current year, it is nothing less than a shame. They could have done better to support the eco system for their own good. Moreover, had there been a strict government mandate, the current consumption decline that we are staring at, would not have been the talk of the country. A strong government will was needed, but we have squandered the option that we could have possibly had.
Having said that, there can still be steps taken to improve the situation. The biggest problem in the current time is that of consumption downfall. While the fiscal policies are definitely the long term and structural way to address this issue, we need some push at the moment to increase the demand. Unfortunately, with the circumstances that have prevailed over past five months, majority population is in savings mode. While the government policies look to give loans to corporates to increase production and jobs eventually, unless there is a demand all these efforts will be in vain. The first step that requires an immediate action is a short term monetary policy. What if we reduce the borrowing interest rates for retail customers to two percent and deposit rate at one percent? A borrowing rate of two percent will give a mega push to the dispensable money available to the consumers. Yes, there is a challenge of inflation, but it would be a lesser devil to deal with than deflation and recession!
Secondly, there needs to be a mandate given to each organisation, which is taking benefits of government subsidies and loans, to increase their employment numbers. Unless more people are employed, there is no way a sustainable economy can be achieved. This mandate will directly benefit the middle class segment. More employment would directly translate into more disposable income and more consumption. We, as a country, are still the second biggest population globally with immense consumption power. All that is required at this stage is dispensable income that can help us buy! And, as the history has shown, we like buying a lot of stuff!
Thirdly, what we also need to understand is that medical expenses are being feared the most at this stage. Government had, in its first term, launched Ayushman Bharat. It was meant for the poor and under privileged segment of India benefiting approximately 10 Crore families. There is an imminent need to expand its scope to everyone except the rich segment of India. The scope should also include hospitalization in private sector over and above the government hospitals. This will relieve people of the financial stress of expensive medical treatments in the current times. The effectiveness of Ayushman Bharat needs to be tested now more than ever and in a much more comprehensive form than what it was planned to be!
Lastly, as I said in my previous article too, we need to acknowledge the foot warriors that our middle class segment people are. They work day in and day out to build the nation. We mention about them once in a while during our Independence Day or Republic Day speeches but beyond that, they are left on their own. Their struggles are no less than that of the soldiers at the border. Imagine travelling in a crushingly packed local train in Mumbai, not knowing which mob will drive you out of the coach and, if you are unlucky, you will fall out of a running train. Such is the condition that our working class operates in on a daily basis; the threat to their life is as real as the threat to the life of a soldier at the border. But, they do not complain, they have no sense of entitlement, they are always willing to compromise and always willing to work hard. It is time that we put up a strong support system for our working class middle segment of the society. They need it the most as I write this!
This article is written by Vishwa Deepak Dikshit, Founder of UnMitigated and MusiCulture. Dikshit is a Media Entrepreneur and a Logistics professional. He is an alumnus of MDI, Gurugram and has been an active political commentator. He tweets at @vishwadikshit
