New Delhi: Diwali is less than two weeks away, but the build-up to the high point of the festive season in Delhi is unusually muted, showing how weak the sentiment is among middle-class consumers in the election-bound National Capital, and sending an ominous poll-eve message to politicians.
The usual bustle is missing in the tony markets of Greater Kailash-I and Khan Market where make-shift stands to accommodate extra crowds of shoppers would, in normal times, have spilled onto the roads by this time of the year. Older residents say they can’t recall a quieter Diwali, suggesting these are not quite normal times.
Madhu Arora, 50, a resident of north Delhi, has for the first time changed the way she celebrates Diwali. “This year I’m only buying gifts for family—I’ve cut out a lot of unnecessary people from my list,” she says.
“This year I travelled to markets out of my neighbourhood market to other cheaper markets. We’ve even postponed our plans to buy things for the house like electronics and kitchenware, which we usually do around Diwali,” she says.
Indeed, the middle class has little to cheer heading into the 28 October festival, which marks the peak of consumer spending for businesses ranging from makers of cars and appliances to clothiers and confectioners, and is an important date on the business calendar as much as it is on the list of Indian festivals.
Urban consumers have been reeling under inflation that entered double digits in June and has stayed there, the consequent rise in borrowing costs, increased instalment payments on mortgages and personal loans and the meltdown in financial markets that has wiped out half the value of Indian stocks this year. A string of bomb attacks in different cities has added to the gloom.
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That’s a vast change from just a few months ago when the economy was on a roll, incomes were rising and Indian consumer confidence was among the highest in Asia.
A discontented middle class isn’t good news for politicians heading into elections, especially for the party in power.
“They are more critical of the government than either the poor or the rich,” says Rajesh Shukla, a senior fellow at National Council of Applied Economic Research (NCAER) and co-author of The Great Indian Middle Class report.
“This is because they are the ones who drive the economy and are the consumers,” says Shukla. “Every bit of government policy affects their (consumption) plans. They are the only ones who plan, the poor cannot plan and the rich do not need to plan.”
Delhi will go to the polls on 29 November. Elections will also be held in Chhattisgarh on 14 and 20 November, Madhya Pradesh on 25 November, Mizoram on 29 November and Rajasthan on 4 December, serving as a barometer of the popular mood ahead of parliamentary polls due by May 2009.
While Delhi, ruled by the Congress party, is largely urban, Madhya Pradesh, Rajasthan and Chhattisgarh that are all governed by the main opposition Bharatiya Janata Party (BJP) and the Mizo National Front-administered Mizoram have developed significantly large urban pockets led by migration from thevillages and economic development.
Middle-class ranks are expanding, increasing its importance as a voting block. About 13% of India’s households are expected to be in the middle class now, with another 34% on the threshold of making it to the ranks, according to a study by NCAER.
Delimitation, whereby the constituencies are redrawn based on new population estimates, has accelerated the process.
Mint had reported on 9 June how delimitation had increased the number of Lok Sabha seats in urban areas to 100, almost one in five.
The same report also flagged the fact that the delimitation process—resulting in 12 additional urban seats in Bangalore—was one of the key reasons that the BJP managed to form its first government in Karnataka.
About 27.4% of all households in urban areas are middle class and 42.3% more are on the way to joining it by 2009-10, according to NCAER data.
The BJP, which has traditionally had an urban appeal, is playing on the economic concerns and insecurities of the middle class in its quest to wrest power from the Congress, serving out its second consecutive term in Delhi. It is picking on the government’s failure to contain inflation, stem the stock market crash and prevent terror attacks. The party is also positioning itself as a champion of small investors, who have lost much of their wealth in the stock market decline. According to rating agency Crisil Ltd, stock investors lost Rs2.3 trillion in September alone.
“BJP very strongly believes in protecting the interests of small investors,” says Ravi Shankar Prasad, a BJP spokesman, who doesn’t accept government claims that the financial market turmoil is due to factors beyond its control.
“It is rubbish,” he says. “A bat of the eyelid of the government is enough to instil confidence in the markets.”
Playing on urban consumer concerns makes sense. “The middle class are the largest consumers of high-end goods such as cars, ACs (air conditioners), computers and credit cards,” says Shukla. “Two-thirds of all these commodities belong to 11% of the people.”
Consumption, he says, underpins middle-class identity. And what undermines economic growth and consumption will antagonize the middle class.
“The middle class is sensitive to issues that affect the process of development,” Shukla adds. “Issues like terror matter to them because it affects development. In this they are indifferent among parties. If one party gets it wrong with such issues like the Congress has in Delhi, it will go out of power (irrespective of ideology). ”
Issues such as inflation, economic instability and terrorism are likely to top the campaign for the state assembly elections as political parties woo the middle class.
The BJP has decided to design its advertising campaign around what it calls the “3is”—inflation, internal security and incompetence.
“Today’s India is an insecure and suffering India. Middle class is a class which earns and lives,” says Prasad.
“We will contrast life during the NDA (National Democratic Alliance) regime to the current one,” he adds. “Life was much easier before, soft loans (were available) for homes, cars, scooters, (and) prices were stable. There were terror attacks, but at least the people knew it was a government serious about fighting terror.”
The Congress party, meanwhile, is looking to build its campaign around the Indo-US nuclear deal, given the perceived importance the middle class places on a strategic alliance with the US.
The BJP’s “India Shining” campaign didn’t help it in the 2004 general election when the Congress-led United Progressive Alliance won power on the promise of putting the interests of the aam aadmi, or common man, on the top of its policy agenda.
But Prasad claims that the campaign did strike a chord among urban middle-class voters.
“Maybe India Shining could have been worded differently as ‘India is beginning to shine, so stay with us to help it shine.’ But it is a false premise that the middle class rejected this campaign,” he says.
“We won in most of the urban areas, especially in Gujarat, Rajasthan, Madhya Pradesh and Orissa. States like Gujarat and Rajasthan have a high proportion of middle class. Failure in 2004 was an aggregate of a variety of local factors, for example, in Tamil Nadu, we were swept aside, but not a gross failure.”
At the same time, analysts caution that it would be a mistake to assume that the middle class is a homogeneous entity and its voting patterns may not entirely be predictable.
Not only has it grown, but its constituents have changed, especially with the addition of a younger demography.
“When we talk about the young working population between 20 and 35, we are talking about people working in the IT (information technology), hospitality, auto, airlines and other such industries,” says S.L. Rao, chairman of the Institute for Social and Economic Change, Bangalore.
“Already there have been some layoffs in the IT and airline industries,” he adds. “BPOs are also being impacted, tourism-related industries have gone down in a big way. These classes were high earners and they spent on houses, cars, etc. If these people lost their jobs, they would feel bitter and would want to blame somebody and that somebody is the government. So there will be anti-incumbency, not against the state government, but against the Central government because the Central government is seen as being responsible for the economy.”
In Indian society traditionally divided according to caste affiliations, the middle class had traditionally been dominated by the higher castes, but that no longer holds true, says Chennai-based political analyst Cho Ramaswamy.
Upward mobility has cut across caste distinctions, Ramaswamy says. “But they (middle class) are not going to vote en-masse for one party,” he adds. “It will take a while at least for the new middle class to imbibe the values of the old middle class. The middle class right now is divided.”
Around 50% of the households classified as middle class constitute the “new” middle class, according to Shukla.
Delhi-based psephologist Bhaskara Rao agrees. “The middle class vote is not homogeneous any more,” he says. “It will converge because issues affecting them (the old and new middle class) are the same, but it is not possible to say when. Convergence is the trend everywhere.”
Priyanka Mehra contributed to this story.