The declining middle class leaves politics unruffled

The Congress and the united Opposition need to show economic leadership. They have described the symptoms of the economic crisis but failed to create a narrative that goes beyond it

Anecdotal evidence suggests that many of those who consider themselves middle class are fighting hard to stay there, and those aspiring to get there will find it harder to do so.

A year ago, the Pew Research Centre reported that India's middle-class population had shrunk by at least 32 million because of the impact of the first wave of the Covid pandemic. The second wave's impact on the middle class's numbers has yet to be available. However, some recent indicators are that its shrinking is likely to have continued.

The Chairman of Maruti Suzuki, R C Bhargava, claimed last week that people's ability to buy small cars had fallen and this trend from the last three years would continue. He said that "the ability of people to buy had eroded" and that "inflation will make it worse because it is the people with limited income, who are hardest hit." Maruti-Suzuki had announced earlier this year that it was shifting its focus to high-end cars, with Bhargava declaring, "Small cars used to be our bread and butter. But there is no butter in small cars anymore."

Nevertheless, the automobile industry is still expected to grow by 8 per cent in the next year on the back of sports utility vehicles (SUVs) and cars priced above Rs 10 lakh. This means that the rich will continue to buy, but those aspiring to own a first car, a symbol of graduating to the middle class, may be unable to do so. Two-wheeler sales have also plummeted in fiscal 2022 – crashing to a decadal low of 13.5 million units after three years of regression.

A prohibitive rise in auto and taxi fares is unlikely to provide an alternative for commuters unable to buy private vehicles. Due to the increase in CNG prices, Delhi has already increased the auto-rickshaw and taxi fares. The meter-down fare for autos used to be Rs 25 for the initial 1.5 km and Rs 9.50 per kilometre after that. This has become Rs 30 for the first 1.5 km and Rs 11 per km after that. For taxis, the meter-down fare has been increased from Rs 25 to Rs 40, and the per km charge after that has been raised from Rs 14 per km to Rs 17 for non-AC taxis and from Rs 16 to Rs 20 for AC taxis. This will spur other cities to follow suit, and soon even public transport could become dearer.

A shift from budget categories towards the premium luxury segment is also taking place in the housing industry. The affordable housing segment is most affected by a rise in interest rates, while that is not a crucial consideration for those investing in luxury homes. Home loan rates have risen as the Reserve Bank of India tries to rein in inflation by raising the repo rates, making loans less affordable for small buyers.

It has also become harder for people to apply for home loans from banks as the pandemic has made many people in cities shift from the organised to the informal sector. Their ability to access credit is reduced because of uncertain incomes and decreased job security. They are also less likely to take on long-term commitments to acquire aspirational assets. Those desirous of the accoutrements of the middle class can no longer do so.

Inflation has further squeezed the middle class. Shopkeepers across the country have complained that business was down this Diwali compared to the pre-Covid years. Again, media reports suggest that the spending behaviour of the upper strata has been different. Upper-end malls have added new brands, and their occupancy is up. The head of DLF Retail and Luxury Shopping told a business newspaper that their luxury retail segment had witnessed a growth of 150 to 170 per cent. The CEO of Select City Walk claimed, "Luxury shopping is back, and so are the premium brand categories." Similar sentiments have been expressed in Mumbai.

The government is increasingly using freebies to stave off the electoral anger of the poor due to price rise and rampant unemployment. But it has no money to throw at those trying to hang on to the lower rungs of the middle class.

A decline in the middle class and its purchasing power will no longer make India the choice market of the world. What, however, is the implication of this trend for politics in India? In the recent past, ideology and emotions have repeatedly trumped the immediate economic suffering of Indian voters.

Whatever the incumbent government may lack in economic leadership, it surpasses all its adversaries in the ideological shepherding of the masses. The high dose of majoritarian ideology injected into the veins of Indian society will perhaps continue to keep economic disaffection isolated from political discontent. Even when the economy is in the doldrums, people are happy at seeing their leaders perform temple rituals and believe that Hindus have finally overcome a "long period of slavery". The Ram Temple at Ayodhya, the renovation of the Kashi Vishwanath, Indore's Mahakal and Garhwal's Kedarnath Temples will be crucial sites of political performance in the coming elections and will continue till 2024. Two ruling party states – Uttarakhand and Gujarat -- have announced their intention to introduce a Uniform Civil Code.

The political class seems to have concluded that short of a cataclysm, the middle-class constituency's economic woes will not translate into a rejection of the current political leadership. This constituency will change its political choice only if it sees an alternative gaining momentum and exhibiting the capacity to win electorally. The Congress has the strongest potential for putting together such a political alliance.

However, for that, the Congress and the united Opposition need to show economic leadership. They have described the symptoms of the economic crisis but have yet to create a narrative that goes beyond it. The Bharat Jodo Yatra of Rahul Gandhi has the potential to create a perception shift about the Congress, but so far, the mainstream media's lack of coverage and focus on ritualistic religious spectacles by the government and the ruling party have successfully distracted the public and thwarted the build-up of momentum around it.