Will the "Great Indian Middle Class" show up, please? By Partho Sarathi Ray, Sanhati.
April 9, 2008 (http://sanhati.com/front-page/743/#comment-8468)
Where is the "Great Indian Middle Class"? Where are those conspicuously-consuming, frequently-flying, gizmo-toting, big car-driving, globalized offsprings of our jet-setting "new economy"? Don't we see them all around us: living in highrises with blue-tiled swimming pools, with people living a few miles away getting water once in three days, shopping in glittering malls built on the land of evicted slums, driving around in Toyotas and Chevrolets on roads choked with traffic? From all accounts, and appearances, we have reached the heady days when the Indian middle class has finally arrived. They are the ones who supposedly constitute one of the biggest markets in the world, for whom multinational corporations are falling over one another to invest in India, for whom our governments' policies are directed, for whom roads and airports are built, for they ARE the "people" of India. This great middle class is our hope, the engine of growth for our economy.
But is it true? Can we try to find out who, and how many, belong to the middle class in India? The data sets available from the surveys of the National Sample Survey Organization (NSSO) and from the 2007 report of the National Commission for Enterprises in the Unorganised Sector (NCEUS), better known as the Arjun Sengupta Commission, make for sobering, and often startling reading. The last three surveys of the NSSO, possibly the most comprehensive surveys on employment-unemployment and consumption expenditure, were done in 1993-94, 1999-2000 and 2004-05. We will take a look mostly at the 2004-05 data in our search for the Indian middle class.
The NSSO surveys collect data on consumption from each of the selected sample households in a detailed schedule containing a list of every conceivable item of consumption ranging from edibles to fuels to clothing and consumer durables, and also include educational and medical goods and services. Based on these extensive datasets, the NCEUS computed the monthly per capita consumption expenditure (MPCE) and daily per capita consumption expenditure (DPCE) in an effort to evaluate the performance of the economy in terms of the consumption expenditure of our people. Based on these values, each household was classified as one of the following: "extremely poor" when the MPCE is less than or equal to 0.75 times the poverty line (PL), "poor" when the MPCE is greater than 0.75 PL but less than or equal to 1.0 PL, "marginal" when MPCE is greater than 1.0 PL but less than or equal to 1.25 PL, "vulnerable" when MPCE is greater than 1.25 PL but less than or equal to 2.0 PL, "middle income" when MPCE is greater than 2.0 PL but less than or equal to 4.0 PL and "high income" when MPCE is greater than 4 PL.
Before we go into the details of what percentage of our population belongs to each group, it would be instructive to know what the poverty line is. There is considerable criticism about the determination of the poverty line in India, which systematically underestimates poverty and deprivation. The authors of the report determine the poverty line from the data of the employment-unemployment survey (EUS) and the results are not very different from the official poverty line estimates. For example, the official poverty line for 2004-05 is Rs 356.3 for rural areas and Rs 538.6 for urban areas whereas the poverty line as computed by the commission is Rs 346.2 for rural areas and Rs 514.0 for urban areas. It is also important to know that for international comparison purposes, people below purchasing power parity (PPP) of $1 are considered extremely poor and those below PPP of $2 are considered poor. $2 at PPP therefore signifies a sort of international poverty line.
Now, coming back to the data from the NCEUS, we find that the extremely poor have an average DPCE of just Rs 9 (PPP $1), the poor has DPCE of Rs 12 (PPP $1.3), the marginal, Rs 15 (PPP $1.6), and the vulnerable, Rs 20 (PPP $2.2). The middle income group has an average DPCE of Rs 37 (PPP $4) and the high income group has an average DPCE, the highest in India, of Rs 93 (PPP $10.2). These estimates are nationwide averages including rural and urban areas. These data by themselves are startling. The extremely poor, the poor, the marginal and vulnerable on an average subsist on less than Rs 20 per day and on less than Rs 600 per month (remember that the average to and fro train fare for an overnight journey in the lowest reserved class is around Rs 600; therefore, not withstanding Lalu Prasad's "populist" rail budgets, a train journey in a reserved compartment is out of bounds for all these people). The middle income group in India has an average daily consumption of the princely sum of Rs 37 and an average monthly consumption of Rs 1,098 which is just double the international poverty line (the airfare for a single journey in one of the low-cost air lines is around Rs 3000, which means that the airports and the proliferating airlines are not for these people). This leaves the high income group, and even the presence of the Tatas and the Ambanis, and the 53 dollar billionaires of India who contribute 31% of the GDP, and the thousands of conspicuously-consuming software professionals, does not pull the average DPCE of this group above Rs 93. This means that for an overwhelming number of people in this group, the DPCE would be much below Rs 93, and would be actually closer to the average DPCE of the middle income group.
Now, after we have an idea of "who" might (or might not) belong to the "great middle class" in India, looking at the percentage distribution of the above groups among the population will tell us "how many" of our people really belong to this group. The 2004-05 data on the distribution of population among these various groups classified on the basis of consumption expenditure show that 6.4% of the population is extremely poor, 15.4% is poor, 19.0% is marginal and 36.0% belongs to the vulnerable group. This means that together, a staggering 77% of the population lives on less than Rs 20 per day, which barely reaches up to the poverty line (therefore, a train journey with a reservation is out of question for 77% of our population, unless they go hungry for a month). Among these, 41%, the extremely poor, poor and marginal, live on an average expenditure of Rs 15 a day, which cannot afford more than a miserable existence in today's India. The vulnerable section, which constitutes 36% of the population, is one mishap away from destitution. So, a death or disease or even a crop failure can drive them to desperation; we now know to which group all the "suicidal" farmers belong. This leaves the so-called middle income group which constitutes 19.3% of the population; but these definitely do not constitute our fabled "middle class" with an average monthly expenditure of Rs 1098, which wouldn't even afford them a family dinner at any of the fancy restaurants. We finally come to the high income group, and find to our dismay that they just constitute 4% of the population. And remember, even this group has an average daily consumption of Rs 93, which is less than the price of two litres of petrol or a taxi ride in one of the big cities. Therefore, as we observed before, we estimate that an overwhelming majority, maybe 80%, of people in this bracket would actually be nearer to the middle income group than to the software professionals and business people who constitute our "visible" middle class. So, a back of the envelope calculation would show that the middle class, which we have been searching for, can be estimated to be around 0.8% of our population, which comes to around 8-10 million people. There is our "Great Indian Middle Class".
So, we finally find that our "great" middle class, for whom malls and multiplexes are built, rail fares are reduced, airports are constructed, and "Nanos", stained with the blood and tears of evicted farmers, roll off assembly lines, is more like the legendary Cheshire cat of Lewis Caroll's Alice's Adventures in Wonderland. If you look at it deeply and deconstruct it using statistics, it slowly disappears until what remains of it is its smile, suspended in mid-air as a macabre joke on the Indian people.
This article is based on:
1. Data from the 2004-05 quinquennial consumer expenditure survey undertaken by the NSSO, the "Conditions of Work and Promotion of Livelihoods in the Unorganised Sector" report submitted by the NCEUS in September, 2007
2. The article
India's Common People: Who Are They, How Many Are They and How Do They Live by Arjun Sengupta, K. P. Kannan & G. Raveendran, EPW, March 15, 2008 [PDF] »
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