Born in socialist times, a generation of Indians lived the ideas and values of middle class for a lifetime. Middle class was an aspirational place to be for this generation, at a time when a large majority of people were still struggling to get a permanent roof over their heads and jobs that could assure them of some level of security. Many Indians took pride in belonging to this group and class. It provided stability, a basic means of life and living, and guaranteed return on hard work. Education, a doctor, lawyer or engineer’s degree or a government job, were passports to this class and respect among the tribe. Wealth and consumption were scorned, looked at with suspicion. It was often assumed that wealth had been gained through corrupt means or at the cost of the masses.
The middle class represented not just a socioeconomic group but also a mindset. A much celebrated mindset, where the present was lived in the memories of the past and with efforts to conserve for the future. Celebrating constraints and restraining aspirations marked the middle class. Consumption, then, was largely centred on festivities and occasions such as childbirth and marriage. Indian society celebrated this mindset; predictability and stability were rewarded. So the middle class was an aspirational place to be both in mindset and as an economic force.
Gradually, however, India changed. Liberalization opened up the country and brought in a degree of ease and comfort in accessing goods and services. Economic policies and the opening up of the private sector provided better prospects. Mobile phones revolutionized the country and their penetration can be understood perhaps as the beginning of un-middle-classing in India. The nation got connected in an uninhibited way; the individual began to develop an identity outside of the family and community. The idea of private space emerged. A democratic force, a mobile phone was aspirational, irrespective of class.
Modern retail created new consumption festivals, unveiled many new categories and created aspirations. The new meccas created by modern retailers helped millennial Indians converge, spend weekends, celebrate their achievements and discover the small joys of life. Malls became the new public spaces and community centres. Here, India discovered modernity, new categories and newer reasons to consume. Smaller towns and cities emerged and demographically India became one of the youngest nations in the world. This young India possessed confidence and a fresh perspective to conquer the world. The romance of constraints did not appeal to this generation.
This un-middle-classing mindset is at the forefront today. Our aspirations have grown. Time is a valuable currency. Convenience and access are essential pillars of these times. Owning white goods, cars and homes on equated monthly instalments, the mushrooming of beauty parlours and gyms in big and large towns, the increasing dependence on household help in urban centres, the emergence of new categories—from diapers for infants to jeans for women, from packaged rice to men’s grooming products—overall attitudes towards saving and spending have much to suggest. The rate of savings in India today is around 31%.
The middle class has a new view of itself. We no longer struggle with life stages and roles, we embrace them and shape them. Everyday lives are not engulfed in the chores of living, we view life as a spectacle. With Indians taking selfies at every chance possible, pouting and posing at the camera, life is lived in the now. Adoption of new festivals and amplification of existing ones makes consumption a part of everyday life.
Shifts are visible. Inter-caste marriages are more acceptable, wearing high heels is an aspiration for women across socioeconomic classes. We no longer scorn the wealthy, the Hindi speakers or business owners. Fluency in English, education or wealth is not seen as the only marker of success. Enough role models have proven that despite all the odds, success is possible. Parenting too is not a one-way stream; often, reverse parenting is at play. Here, the young induct parents into the fold of technology and ensure that they remain relevant.
For modern retail to thrive, a healthy middle-class force is a prerequisite. Today guilt has been replaced by aspirations and society is leaping towards a new future.
With the onset of the un-middle-classing mindset and behaviour, the best years for a consumption-led economy in India are yet to come.
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Petrol in India is cheaper than in countries like Hong Kong, Germany and the UK but costlier than in China, Brazil, Japan, the US, Russia, Pakistan and Sri Lanka, a Bank of Baroda Economics Research report showed.
Rising fuel prices in India have led to considerable debate on which government, state or central, should be lowering their taxes to keep prices under control.
The rise in fuel prices is mainly due to the global price of crude oil (raw material for making petrol and diesel) going up. Further, a stronger dollar has added to the cost of crude oil.
Amongst comparable countries (per capita wise), prices in India are higher than those in Vietnam, Kenya, Ukraine, Bangladesh, Nepal, Pakistan, Sri Lanka, and Venezuela. Countries that are major oil producers have much lower prices.
In the report, the Philippines has a comparable petrol price but has a per capita income higher than India by over 50 per cent.
Countries which have a lower per capita income like Kenya, Bangladesh, Nepal, Pakistan, and Venezuela have much lower prices of petrol and hence are impacted less than India.
“Therefore there is still a strong case for the government to consider lowering the taxes on fuel to protect the interest of the people,” the report argued.
India is the world’s third-biggest oil consuming and importing nation. It imports 85 per cent of its oil needs and so prices retail fuel at import parity rates.
With the global surge in energy prices, the cost of producing petrol, diesel and other petroleum products also went up for oil companies in India.
They raised petrol and diesel prices by Rs 10 a litre in just over a fortnight beginning March 22 but hit a pause button soon after as the move faced criticism and the opposition parties asked the government to cut taxes instead.
India imports most of its oil from a group of countries called the ‘OPEC +’ (i.e, Iran, Iraq, Saudi Arabia, Venezuela, Kuwait, United Arab Emirates, Russia, etc), which produces 40% of the world’s crude oil.
As they have the power to dictate fuel supply and prices, their decision of limiting the global supply reduces supply in India, thus raising prices
The government charges about 167% tax (excise) on petrol and 129% on diesel as compared to US (20%), UK (62%), Italy and Germany (65%).
The abominable excise duty is 2/3rd of the cost, and the base price, dealer commission and freight form the rest.
Here is an approximate break-up (in Rs):
a)Base Price | 39 |
b)Freight | 0.34 |
c) Price Charged to Dealers = (a+b) | 39.34 |
d) Excise Duty | 40.17 |
e) Dealer Commission | 4.68 |
f) VAT | 25.35 |
g) Retail Selling Price | 109.54 |
Looked closely, much of the cost of petrol and diesel is due to higher tax rate by govt, specifically excise duty.
So the question is why government is not reducing the prices ?
India, being a developing country, it does require gigantic amount of funding for its infrastructure projects as well as welfare schemes.
However, we as a society is yet to be tax-compliant. Many people evade the direct tax and that’s the reason why govt’s hands are tied. Govt. needs the money to fund various programs and at the same time it is not generating enough revenue from direct taxes.
That’s the reason why, govt is bumping up its revenue through higher indirect taxes such as GST or excise duty as in the case of petrol and diesel.
Direct taxes are progressive as it taxes according to an individuals’ income however indirect tax such as excise duty or GST are regressive in the sense that the poorest of the poor and richest of the rich have to pay the same amount.
Does not matter, if you are an auto-driver or owner of a Mercedes, end of the day both pay the same price for petrol/diesel-that’s why it is regressive in nature.
But unlike direct tax where tax evasion is rampant, indirect tax can not be evaded due to their very nature and as long as huge no of Indians keep evading direct taxes, indirect tax such as excise duty will be difficult for the govt to reduce, because it may reduce the revenue and hamper may programs of the govt.