Middle class is reacting like slighted lovers over Budget 2024. Their anger won’t last

What Modi govt got wrong with this budget and in its signalling is in moving away from its generally upbeat, ‘India is on the rise, growth will get steeper, markets are red hot’ messaging.

Illustration: Prajna Ghosh | ThePrint

With her latest Budget, finance minister Nirmala Sitharaman has walked into the nastiest of all hornets’ nests: the Great Indian Middle Class.

Through the week, she and her ministry have been pilloried on social media. Those in the mainstream media are dismayed, but more measured.

There can be reasonable, pragmatic, ideological, and even moral arguments against the new, Thomas Piketty-esque (soak the rich, especially when they earn from their accumulated wealth) changes in the capital gains taxes. It doesn’t justify the kind of outrage it has unleashed, with hundreds of furious, often personalised, memes.

Did the Modi government fail to read the minds of its most valuable constituency, the (mostly Hindu) middle class? Or did it take it too much for granted? In an earlier National Interest published on 6 July, 2019, we had argued that the middle classes were like the Modi BJP’s Muslims.

That somewhat cheeky formulation was drawn from how the government continued to collect more and more by way of taxes on petrol and diesel to fund its humongous programme of direct benefit transfers to the poor. It was a kind of innovative Robin Hood politics. Take from the middle class and give to the poor.

It made the poor, who constitute a vast majority of voters, happy. And if the middle class was fretting, so be it. They were going to vote for the BJP anyway. Our argument was that the BJP could take the middle-class votes for granted like the ‘secular’ parties with the Muslims.

Will this change now? I guess not. This fury will blow over, probably as some ‘corrections’, especially on indexing, are made, and buttons more significant than taxes are pushed: nationalism, religion, the Gandhi family. The usual mix. Many of those ranting now will continue to vote for the BJP. They are not disaffected with Modi, his party, or its ideology. They adore all three. At this point, they are simply like slighted lovers.

What the Modi government got wrong with this Budget and in its economic signalling is in moving away from its generally upbeat, ‘India is on the rise, growth will get steeper, markets are red hot and will get redder’ messaging. A sobering signal from the Budget, if sensible and prudent, is a bummer for the faithful.

The middle class, however, is addicted to good news, hype, even gratitude, and believe each Budget should make them more money.

What they did not want to be told instead was: ‘Listen, guys, you’ve made a lot, especially in the decade’s boom. It’s time you paid back a bit more.’ And maybe that it wasn’t quite virtuous to make even more money on your accumulated wealth.

The rich won’t bother. The middle class, especially those in the lower half of this large socio-economic section who took large EMIs, bought second homes as investments, moved their savings from RBI-guaranteed bank fixed deposits to stocks, mutual funds and debt bonds, are the ones kicking at the government’s shins.

Many of them might’ve lived with increased taxation. They love Narendra Modi and his larger politics enough to be willing to pay some price for it. After all, more than a crore of them gave up their LPG subsidy on his ‘give it up’ call. What’s taken them by surprise is the change in messaging. They probably see this as being told that they’ve done something immoral, made too much money, and the state is reining them back in.

Since reform began in the summer of 1991, successive governments and finance ministers have had one consistent focus: driving those with any financial surpluses towards the markets. That is why capital gains tax breaks were brought in and expanded over these decades. The markets said ‘thank you’, boomed, and rewarded the governments of the day.

Every government in these 33 years, especially the current one, has celebrated the rising number of mutual fund folios, demat accounts and rising indices. Some of the recent nudges, beginning with action on the debt bonds in the 2023 Budget, seem to be directed at bringing the same surplus-generating classes back to bank deposits. They were not ready for it.

Just what is India’s middle class? A lifestyle approach is too amorphous, anecdotal. Do the income tax payers make this middle class? The number of those who actually pay taxes, less than a third of those who file returns (2.2 crore out of 7.4) will not even be a fraction of what has long been on the way to becoming the world’s largest middle class.

It might be safer, instead, to think about what this middle class wants. It wants, and definitely expects, India to be the hottest economy in the world, a leader in fields ranging from economics to science, sports to the military, manufacturing to software, and of course all this with a historically mandated right to sermonise to the world.

They may not use the expression, but they do not dispute the claim or at least the ambition of being vishwaguru. They love to believe the West is in decline and India’s time has come. If I were to record one video saying the dollar is on its last legs, that American power is in terminal decline, that Europe is finished, it would be bound to go viral. Never mind the facts. The scene that most characterises this middle-class mood is enacted every sunset at the Wagah border flag lowering.

Those are the expectations with which they keep voting for Modi/BJP. They see their own growing wealth, the market boom, the world coming to invest in India, as elements in the same package. Ideally, of course, they’d want to achieve all this while paying no taxes. Or Singapore-level taxes. They’d be OK with Singapore-level democracy as well. Now they’re being told to return to bank fixed deposits!

Since it is tempting to get ahead of myself, I will stop here. Let’s just say we still do not know what the middle class is and what it wants. Let’s stick to what we know the Indian middle class isn’t. That is, being grateful.

The heat the Modi government is feeling will cool down soon. But name the one person who’s done more than any other Indian across three generations to create, expand and enrich this new middle class. By deregulating, burning the licence-quota raj, opening imports, cutting taxes and tariffs, and pushing the same middle class towards the markets with generous tax incentives.

Then let us ask who’s the one leader the same middle class has detested most of all since, say, 2011. You’ve guessed right. He is Dr Manmohan Singh. In 1999, he and his party checked out his popularity in India’s most middle-class constituency by fielding him for the Lok Sabha in South Delhi. He lost. What did they expect? A thank-you vote? He’s only got contempt instead. This middle class comes armed with entitlement, not burdened with gratitude.