The rise of India’s ‘neo middle class’

Narendra Modi’s victory is yet another confirmation of the growing importance of the middle class in Indian politics
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First Published: Mon, Dec 31 2012. 10 46 AM IST
As the middle class continues to swell in size, it will tempt politicians like Narendra Modi to frame broad-based public policies, drawing on their support. Photo: Pradeep Gaur/Mint
As the middle class continues to swell in size, it will tempt politicians like Narendra Modi to frame broad-based public policies, drawing on their support. Photo: Pradeep Gaur/Mint
Updated: Mon, Dec 31 2012. 01 12 PM IST
In the run-up to the state elections in Gujarat, chief minister Narendra Modi hit upon a novel strategy to woo his urban constituents, cutting across caste lines. Modi listed special measures for the lower middle class in his manifesto, calling them the ‘neo middle class’—recent beneficiaries of economic growth who are moving into an urban life and rising up the income ladder—and rode on their support to a thumping victory in the state elections.
Modi’s victory is being considered as yet another confirmation of the growing importance of the middle class in Indian politics, which typically recognizes only the binary distinction between the rich and the poor. But who exactly are these new entrants into the middle class club? Are they sizable in numbers to matter nationally? Or is the growth of the neo middle class merely Modi’s hyped-up projection?
Fixing a definition for the middle class is as contentious as fixing a poverty line and estimates vary depending on whether a global or national criterion is being used. Applying a global definition of the middle class, various studies have found India’s middle class to be growing but still small at 5-10% of the country’s population, rendering this class virtually indistinguishable from the rich or the elites. Homi Kharas of the Brookings Institution, for instance, estimated India’s middle class to be 5% of the population (as compared to 12% for China) using a per capita per day threshold income of $10 in 2010. The consensus among these studies is that the Indian middle class is growing fast, and India along with China will contribute most to the ranks of the global middle class.
Broad-brush benchmarks are helpful for global comparisons, but it is more useful to look at national classifications to gauge the sub-national changes in the income pyramid. In India, the National Council of Applied Economic Research (NCAER) provides the most widely cited estimates of the size and changing composition of the middle class. A 2010 NCAER report based on household survey data estimated a 7.2 percentage point increase in the ranks of the middle class (families having annual household incomes of Rs.2-10 lakh) over the past decade to 12.8% of the population. It also identified a class of aspirers immediately below this middle class, earning between Rs.90,000 and Rs.2 lakh a year, and just above the ranks of the deprived, who earned less than Rs.90,000 and accounted for roughly half of the population. The ranks of the aspirers increased by 12 percentage points in the past decade to 33.9% of the total populace, according to the NCAER estimates.
The latest Census figures appear to lend credence to the NCAER estimates. The Census shows the rise of a new class of consumers with neo middle class characteristics that has expanded rapidly in the previous decade, adding 10-20% of the country’s population to its folds. The net addition in the proportion of Indians who came to own assets such as a motor vehicle (two-wheeler or a car) or gained access to a bank account or used LPG cylinders as fuel for cooking was roughly in the range of 10-20% of the population, the Census reports. For instance, the proportion of Indian households owning a motor vehicle—used by some Indian economists as a proxy for middle class status—went up by 11.5 percentage points to 25.7% over the past decade.
In a democracy, the rise of a middle class lowers the risks of both elite capture and populism, and can lead to more effective provisioning of public goods such as infrastructure or health services. The rise of a large neo middle class that now possesses hard-won private assets but lacks access to quality public goods provides a historic opportunity for India to reorient its politics around the provision of such public goods.
It is unlikely though that politics based on the old cleavages of caste and religion will lose appeal at once. Gujarat itself provides a striking example where the force of Hindutva was as effective as the force of economics during elections. Nonetheless, as the middle class continues to swell in size, it will tempt politicians to frame broad-based public policies to draw their support. The adaptive ability of Indian democracy will determine how long it will take for the new brand of politics to gain dominance and render the old cleavages irrelevant.
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First Published: Mon, Dec 31 2012. 10 46 AM IST
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