India’s economic engine is slowing and screeching and the ones hurting the most are the vast middle classes. Why the BJP doesn’t particularly worry about this, or why the party can still take them for granted, we will return to in a bit. The larger crisis first.
It isn’t merely the function of one bad quarter. The central government’s statistical organisation, the Reserve Bank of India and global organisations have all scaled down this year’s growth estimate to around 6.5 percent.
There’s little evidence that a turnaround is around the corner. Economics is complex for me. It is safer for me to bat on the pitch I am more familiar with: politics and public opinion. First of all, the air of optimism, the all-conquering ‘India has arrived’ spirit is now ebbing.
The ‘hawa’ (what we say for vibe) has changed. The millionaires are buying assets and residencies overseas or long-term visas that come with them.
There is plenty of data already in the public domain on Indian millionaires shifting overseas. Over the past two years, the average is 5,000, according to the Henley Private Wealth Migration Report. You’d never hear these wealthy complain. They are too smart to take such ‘pangas’. They are simply voting with their feet.
The fact is, they have surpluses and rather than invest in India, they’d move them overseas. It’s all perfectly legal and so many are leaving that there is safety and anonymity in numbers. What are the even richer ones doing?
Let’s leave the fleeing millionaires aside and leapfrog to billionaires, or even more specifically, dollar billionaires. Most, if not all of these, would be entrepreneurs. It isn’t even that many people.
According to the latest data from Forbes, these are only 200 in number. If the millionaires are quiet and leaving, the billionaires are the opposite. They are speaking, often loudly and volubly praising the government, parroting its “fifth largest economy and third soon” and “fastest growing large economy in the world” mantra, and staying back in the country. It is just that they are not investing and not because they have no love for India. This is despite being repeatedly chided by the finance minister. It is just that if smart entrepreneurs see no demand, what should they invest in and why? It isn’t their burden to pull out their shareholders’ reserves and build assets nobody would use or goods nobody will buy. Which brings us to the nub of the problem. Why the demand collapse?
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Much of the demand, ultimately, comes from that largest consuming demographic in the country: the middle class. Again, it is a tricky definition, but let’s make a wide sweep and describe the middle class as anybody who would normally have some surpluses to spend on something more than basic subsistence, which includes food, children’s education, housing, health and basic mobility.
It is that wide class, ranging from, say, those earning Rs 12 lakh to Rs 5 crore per annum that is simply sitting back and hurting. They aren’t rich enough to emigrate legally along with assets, are taxed at high rates, and have also seen their investments lose value over the past year. Fun fact: the richer among them, say those earning Rs 2 crore and above, pay almost twice as much tax by percentage of their incomes as the top corporates or multi-billionaires.
These are the self-made, usually first generation, aspirational new-rich who were fuelling the India story. Today, they are taking hits as if from a multi-barrel rocket launcher. Fuel prices continue to stay high, income taxes are oppressive, you hear from them a rising clamour that the state gives them too little in return for their taxes. Their tax breaks on mutual funds, equity, property capital gains and bonds are vapourising. They are also hit by rising costs in areas that may not be captured in our headline inflation figures. The rising costs of private education for their children, for example. How crippling this eduflation is, you can read in these two stories by Fareeha Iftikhar of ThePrint.
They are the ones hurting, not buying, postponing consumption and primarily responsible for the disappearance of demand.
The Prime Minister said the other day that Indians buy about 2.5 crore automobiles in a year, which is more than the population of many countries. That’s true. When you check out, however, who’s buying—the lower end cars have inventories piling up while the premium ones have waiting lists—you know how fatigued the middle classes are. As they see how the new politics is unfolding around them, they are infuriated.
They seethe at the growing phenomenon of all political parties, now with the BJP in the lead, taking their tax money and spraying it among the more numerous poorer classes to buy their votes. Over the past 11 years, BJP governments have distributed about Rs 20 trillion already as straight giveaways, including free grain and now this gravy train is running on a double engine.
That’s because all of the electoral politics in the states is now purely transactional. This is how much I will pay for your vote. This politics is Robin Hood with a twist. At least the original robbed the rich and distributed to the poor. The Modi governments have been soaking the middle class and giving away to the poor. While at the same time, the superrich, especially the richest, enjoy the lowest taxes ever.
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The wide middle class is the biggest, most loyal and vocal supporter of the Modi-BJP politics. All elections since 2014 have shown the BJP sweep the major and medium-sized cities except in the South, where the party is fundamentally weak.
In a state like Haryana, the BJP has risen from zero to hero, partly because of rapid urbanisation. And how has the BJP responded? By relegating 75 percent population of India’s third richest large state by per capita income below poverty line. Check out this story by Sushil Manav of ThePrint. This, while the Centre and the BJP proudly claim that India’s overall poverty rate has fallen below 5 percent. How do you square the two?
The answer lies in today’s politics. If you win elections by distributing to the poor, you have to find enough poor. Who can win by spraying tax money over a mere 5 percent? That’s why the states have an incentive in creating two classes of the poor: the genuine, income-linked poor, and the electoral poor. State after state, this is the norm now. The electoral poor are often 10X of what your next Census would count as genuine poor. In this market the political class trades middle class tax revenues for votes.
As we had argued in this National Interest on July 6, 2019, the BJP can afford to take the middle class for granted as much as the Congress and other ‘secular’ parties do with the Muslims. A captive vote bank. That’s why the BJP would see no particular need for course-correction.
The middle class will keep complaining and still stay loyal because they like Modi and his call to Hinduised nationalism too much. They are happy that Muslims are so effectively sidelined and, in any case, if not Modi, who? One-sided, unrequited love isn’t such a rare phenomenon. My colleague and political editor D.K. Singh even has an acronym for it from his years at JNU: FOSLA. That stands for Frustrated One-Sided Lovers’ Association. How do we describe this obsessive middle class love? May be, dil hai ke maanta nahin…
Also Read: Middle class is reacting like slighted lovers over Budget 2024. Their anger won’t last
After 10+ years comparisons don’t matter
Nda was aupposed to be minimal govt max governance. Nothing has changed.
Poor infra in cities, no facilities for tax payers, can not depend on govt deptts to do their job
Tax slabs are not adjusted for inflation and there are multiple taxes on same money as income then expense
At same time corporations are given 2 lakh crore tax break for zero outcomes
As a BJP fan, I can vouch for what the analyst has written here about the ground realities. True, the picture is not rosy and the government is not doing enough to solve the issues. But the reason given for the issue of overlooking the BJP failure by middle class is completely wrong.
He believes that people votes for BJP because it serves their Hindusim interests; best, which is entirely fallacious. People vote for BJP due to the fear of Congress or any other party which are more susceptible to corruption and failures in comparison to BJP.
True, as a BJP voter, I am very much unhappy with the party on many issues but same time I see Congress or any other party ; a threat on whatsoever we are doing good at. They don’t inspire any confidence in people but to a large extend, BJP/Modi does. Yes, Hinduism is an added recipe, BJP serves but that is not enough to convince a voter for the party.
This country needs a party with better leaders than BJP then only BJP will lose. And a Pappy, a Kejriwal, a Yadav or a Mamata doesn’t fit the bill.
Mr gupta just compare how much extra tax you or we are paying from previous government.
There is also the question of legacy. What endures when the passions of the moment are spent. There are so many things for which Prime Minister Jawaharlal Nehru will be evaluated generously by history. For our family, IIM A , part of the vision which created the IITs and IIMs, which allowed bright Indians to succeed all over the world, on a scale that could not have expected for a poor country emerging from two centuries of colonial rule. Now we have women advancing the birth of their children by C section, to beat President Trump’s deadline for citizenship by birth.
Can’t argue with the diagnosis. Middle class is happy to be fleeced as long as the itch of islamophobia is scratched. Atleast the “captive” Muslim votebank is able to extract concessions from the Congress, the middle class gets only scorn and pity from their masters. The budget will undoubtedly be another nail on their coffin.
Oppressive taxes? You must be joking. Which taxes are oppressive in Modi era vis-a-vis earlier years? Please provide comparison. Or, apologise for misinformation.
Your artificial love for Middle class is more of Modi hatred than any affection for middle class. This revdi freebies was infact started by regional parties and manifesto of Cong is even worse when it comes to freebies. So even if one agrees with you, alternative is even worse.
Comment section everywhere is filled with radicalised and frustrated right wing creatures. It’s like har shaakh par ullu baitha hai and the horrible anjaam e gulistan we are witnessing today.
Again and again, journalists cannot fathom the idea that anyone earning Rs. 12 lakhs a year+ in India are not middle class. At the best estimate they are less than 5% of the population. There is no way they can influence the outcome of any election. The best they can do is influence the way other classes vote but here again they have lost their influential power because they have so completely disengaged themselves from politics as to be irrelevant.
Such a well articulated article. Brought out the feelings of a middle class person beatifully
Super touched by author’s extra superficial concern for Indian middle class. It is more of Modiphobia than concern for middle class.
Many have gone paranoid over mere existence of Modi, SG being one of them. Mere thought of Modi can cause constipation to likes of him. I wonder if they can perform their daily morning biological functions without cursing/abusing Modi.
Mr Gupta is more worried about the middle class folks than they themselves are. What a sad state of affairs today. Anyways a nice enough article to read. Kudos.
Middle class is addicted to Modi, India is addicted to ten-a-penny socialism.
Middle class likes him because Rahul baba is an idiot of the first order. Why should I vote for him? Does he care for people like me – general caste, economically secure individuals? He hates our existence and blames us for things we haven’t even done (read oppression of various types). He would rather take my money and give it to others. He wants to give seats in great educational institutes away to completely undeserving folks because of its their birth right apparently. I line in Karnataka. Everytime Siddaramaiah is CM, kannada is hailed as greatest language on earth and activism starts even though non kannadigas are contributing to the economy. Do I ride those free buses? No. Do I use the roads that those buses use? Yes. Do I get any benefit in terms of infra, metro? No. Do I have to see mosques all around springing up and hijabi kids running around? Yes. No reason to like Congress or regional parties who stand for muslims and lazy ass folks. They want me to feel sorry that I exist. They won’t get my vote.
Hello Mr.Gupta, Fantastic article as always.
However I disagree with your reason for widespread middle loyalty towards Modi.
I don’t think it is love. It is a lack of an alternative.
Across India, find me another political alternative that is against freebies and oriented towards building long-term infrastructure and fostering growth, and I believe the middle class will jump ship in a second.
Other political parties are worse than BJP and thus having no other option, we the middle class, are sticking with BJP for now. Atleast I am.