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Capital Calculus | Everybody loves the middle class

Both government and opposition are claiming to be protecting or assisting the middle class
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First Published: Sun, Sep 23 2012. 08 29 PM IST
The middle class stands to lose or gain directly from the changes initiated by the UPA . Photo: Pradeep Guar/Mint
The middle class stands to lose or gain directly from the changes initiated by the UPA . Photo: Pradeep Guar/Mint
Updated: Mon, Sep 24 2012. 12 37 AM IST
Last week the political class in India had a bitter crossing of swords over a series of administrative measures initiated by the Congress-led United Progressive Alliance (UPA). In question was whether the government was right in increasing the prices of diesel and cooking gas on the one hand and clearing the decks for freer entry of multinational chains into retail business on the other. At the end of a bloody week of long knives, which led to the exit of an irksome ally and the entry of an unpredictable one into the fold to make good the loss, the jury is still out; this is despite both sides claiming victory.
What is interesting though is the demography that both sides claim to be protecting or assisting, as the case may be.
It is obvious that these policy changes mean nothing to the (conservatively estimated) 400 million people living below the poverty line; when struggling for subsistence, they are too far down the food chain either for the system to care for them or for them to arm collectively to resist the change. Similarly, the top five to 10 income percentile of India, are sitting pretty and are virtually shock-proof—especially those, as a colleague pointed out in a recent column for Mint, who drive down to Delhi from out of town for a weekend of splurging on toys for the rich.
This leaves only the loosely defined middle class: a heterogeneous but rapidly growing entity made up of the salaried, part-time and first-time workers in the informal economy, petty entrepreneurs and so on. Linked to the growth in the informal economy, the demography may be more skewed to the lower middle class.
Indian politicians are, contrary to popular perception, extremely sharp.
So it is no accident that they are acknowledging this class, which otherwise has rarely figured in the electoral arithmetic. What then?
The middle class stands to lose or gain directly from the changes initiated by the UPA. The salaried and the fixed income (retirees for one) are particularly vulnerable to the increase in fuel prices, while the opening of retail to more competition promises them unprecedented choice to shop in the future. By the same token, other constituents too stand to suffer with the exception of the petty entrepreneurs, who stand to lose more. Precisely the argument, despite their differing ideologies, posed by the Left parties, self-professed socialists and the Bharatiya Janata Party.
Unlike the Opposition, the ruling UPA can only juggle its options while pushing erstwhile darling of the middle class, Prime Minister Manmohan Singh, to the forefront. It has admitted that the fuel price increases would impact the people, but shrugs its shoulders and says it has to be done (without admitting that this damage was inflicted by itself in the first place) to manage the government’s books—critical to bringing down interest rates and reviving the housing dream. So naturally it leans more on the promise of foreign direct investment in retail—not just more shopping options, clean-up of the entire supply chain in the country—and has also succeeded in temporarily deflecting attention away from the otherwise acrimonious public debate on corruption.
Either way it is apparent that, without saying so explicitly, all of a sudden the middle class is very important to the political parties. As a chattering class they always influenced public opinion and thereby weighed in indirectly on electoral outcomes. They continue to mutter about daily economic atrocities, but what has changed is their construct and spread. Earlier, it was mostly confined to the top metros or towns—which account for limited seats in Parliament—and were dominated by the salaried class.
But all this has been changing for the last three decades as the economy first and aspirations later have taken flight. Like an incoming tide, till it is upon you, one rarely realizes the altered circumstance. The first flush of data released by the 2011 Census reveals that the urban areas now account for 31.16% of the population; it was 23.34% in 1981—the biggest jump coming in the last decade. This has been accompanied by a visible improvement in material circumstances (quality of transport, mobile phones and so on) of the populace.
The growth in the number of towns in the last decade spurted by over 50%. In some states such as Kerala, the rate of growth of urbanization grew from 26% in the decade ended 2001 to 47.7% in 2011. To be sure, this includes census towns, large villages that mimic the demographic characteristics of a town, as opposed to statutory towns that have a municipal administration. The data reveals, as reported earlier in Mint, that between the 2001 and 2011 censuses, the number of statutory towns rose by 242 to 4,041, while census towns almost trebled to 3,894. This distinction based on definition is unimportant.
Instead, what matters is that the middle class has spread its wings in an unprecedented manner. What binds this heterogeneous lot is aspirations. Their presence in census towns could potentially redefine conventional rural voting patterns. Especially since the lower middle class, which has defined the expansion of the middle class, always votes; something that may be crucial in the general election of 2014. It pays, therefore, for parties to position oneself as their vanguard through such symbolic fights over policy change while continuing to sing paens for the aam admi. In politics, it is not what you are doing that is important, but what you are seen to be doing.
Anil Padmanabhan is a deputy managing editor of Mint and writes every week on the intersection of politics and economics. Comments are welcome at capitalcalculus@livemint.com
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First Published: Sun, Sep 23 2012. 08 29 PM IST
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