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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Steve Ovett, the famous British middle-distance athlete, won the 800-metres gold medal at the Moscow Olympics of 1980. Just a few days later, he was about to win a 5,000-metres race at London’s Crystal Palace. Known for his burst of acceleration on the home stretch, he had supreme confidence in his ability to out-sprint rivals. With the final 100 metres remaining,
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]Ovett waved to the crowd and raised a hand in triumph. But he had celebrated a bit too early. At the finishing line, Ireland’s John Treacy edged past Ovett. For those few moments, Ovett had lost his sense of reality and ignored the possibility of a negative event.
This analogy works well for the India story and our policy failures , including during the ongoing covid pandemic. While we have never been as well prepared or had significant successes in terms of growth stability as Ovett did in his illustrious running career, we tend to celebrate too early. Indeed, we have done so many times before.
It is as if we’re convinced that India is destined for greater heights, come what may, and so we never run through the finish line. Do we and our policymakers suffer from a collective optimism bias, which, as the Nobel Prize winner Daniel Kahneman once wrote, “may well be the most significant of the cognitive biases”? The optimism bias arises from mistaken beliefs which form expectations that are better than the reality. It makes us underestimate chances of a negative outcome and ignore warnings repeatedly.
The Indian economy had a dream run for five years from 2003-04 to 2007-08, with an average annual growth rate of around 9%. Many believed that India was on its way to clocking consistent double-digit growth and comparisons with China were rife. It was conveniently overlooked that this output expansion had come mainly came from a few sectors: automobiles, telecom and business services.
Indians were made to believe that we could sprint without high-quality education, healthcare, infrastructure or banking sectors, which form the backbone of any stable economy. The plan was to build them as we went along, but then in the euphoria of short-term success, it got lost.
India’s exports of goods grew from $20 billion in 1990-91 to over $310 billion in 2019-20. Looking at these absolute figures it would seem as if India has arrived on the world stage. However, India’s share of global trade has moved up only marginally. Even now, the country accounts for less than 2% of the world’s goods exports.
More importantly, hidden behind this performance was the role played by one sector that should have never made it to India’s list of exports—refined petroleum. The share of refined petroleum exports in India’s goods exports increased from 1.4% in 1996-97 to over 18% in 2011-12.
An import-intensive sector with low labour intensity, exports of refined petroleum zoomed because of the then policy regime of a retail price ceiling on petroleum products in the domestic market. While we have done well in the export of services, our share is still less than 4% of world exports.
India seemed to emerge from the 2008 global financial crisis relatively unscathed. But, a temporary demand push had played a role in the revival—the incomes of many households, both rural and urban, had shot up. Fiscal stimulus to the rural economy and implementation of the Sixth Pay Commission scales had led to the salaries of around 20% of organized-sector employees jumping up. We celebrated, but once again, neither did we resolve the crisis brewing elsewhere in India’s banking sector, nor did we improve our capacity for healthcare or quality education.
Employment saw little economy-wide growth in our boom years. Manufacturing jobs, if anything, shrank. But we continued to celebrate. Youth flocked to low-productivity service-sector jobs, such as those in hotels and restaurants, security and other services. The dependence on such jobs on one hand and high-skilled services on the other was bound to make Indian society more unequal.
And then, there is agriculture, an elephant in the room. If and when farm-sector reforms get implemented, celebrations would once again be premature. The vast majority of India’s farmers have small plots of land, and though these farms are at least as productive as larger ones, net absolute incomes from small plots can only be meagre.
A further rise in farm productivity and consequent increase in supply, if not matched by a demand rise, especially with access to export markets, would result in downward pressure on market prices for farm produce and a further decline in the net incomes of small farmers.
We should learn from what John Treacy did right. He didn’t give up, and pushed for the finish line like it was his only chance at winning. Treacy had years of long-distance practice. The same goes for our economy. A long grind is required to build up its base before we can win and celebrate. And Ovett did not blame anyone for his loss. We play the blame game. Everyone else, right from China and the US to ‘greedy corporates’, seems to be responsible for our failures.
We have lowered absolute poverty levels and had technology-based successes like Aadhaar and digital access to public services. But there are no short cuts to good quality and adequate healthcare and education services. We must remain optimistic but stay firmly away from the optimism bias.
In the end, it is not about how we start, but how we finish. The disastrous second wave of covid and our inability to manage it is a ghastly reminder of this fact.