Middle class: vote and revolt

Many have been surprised by the UPA 2 government's slow response to the events which unfolded subsequent to the rape of the 23-year-old student in Delhi. There were at least three major political mishaps along the way. First, the government just did not anticipate the concerted anger and reaction to the rape (and now murder) of the student. Second, perhaps because of this lack of anticipation, but more likely because of a lack of comprehension, the government reacted in a ham-handed manner. Third, after the fact, the government and the political leadership (read Manmohan Singh and Sonia Gandhi) could have offered an apology for their lack of sensitivity and understanding of the issues involved. This also did not happen.

So what is going on? How can experienced and ostensibly savvy political leaders misread the political dimension of what is happening? I believe there is an explanation, and one consistent with other political anomalies over the last several years. Essential to this view is the belief that the Congress leadership (hereafter Sonia Gandhi, unquestioned political leader of the Congress party) completely misread the 2004 and 2009 election mandates. This misreading has led it to formulate wrong and inappropriate social welfare policies (like NREGA and the food security bill).

Sonia Gandhi has been at the forefront of portraying the image that she, like her mother-in-law, was the champion of the poor. Her belief has been that India is dominantly a poor country, and it is the poor who are maximum in number and therefore need to be "bought". Note that there are two dimensions to the concerns about the poor. First, every society, and all political and economic leaders, must enact policies to efficiently, and with the least corruption, eliminate poverty. Whenever poverty is eliminated, according to a given absolute poverty line, the mandate moves on to improvement and opportunities for the relative poor. These relative poor exist in every society (even in Sweden) and at all times (even in 2100).

The second dimension is one of political calculation. Every political leader has to make calculations of who to cater to. Mitt Romney decided that the bottom 47 per cent would not vote for him, so why bother. Sonia Gandhi believes, and has believed, that India has mostly poor people, and that the situation has not changed much from when her mother-in-law was the boss 30 years ago. So just be populist and a 273-seat majority is within sight.

Misreading of the mandate comes from misreading India. Between 1950 and 2012 (see table), the consumption distribution has not changed much so the gains have accrued in almost equal fashion to all Indians, the poor and non-poor. Note that per capita GDP, in US dollars, increased from 60 in 1951 to 181 in 1977, to 1,500 in 2012. The proportion of poor declined from an estimated 87 per cent in 1951 to 22 per cent during the same period.

Also shown in the table is the proportion of the middle class. Since my 2007 study, Second Among Equals: The Middle Class Kingdoms of China and India, there has been an "offering" from virtually every international organisation. Each offering has a slightly varied definition, presumably in order to preserve "originality". In the main, these definitions of the middle class has the Indian proportion at somewhere between 10 and 25 per cent. By my 2007 definition (see table), the size of the middle class is much larger and in 2012 is estimated to be 53 per cent of the population.

Estimates of middle class matter. If the political leadership accepts the World Bank/ ADB numbers as even quasi-authentic, then it is no surprise that the Congress politicians wantonly disregard any signs of middle-class anger and revolt.

Most of the welfare programmes UPA 1 and 2 have proposed and/ or implemented (such as, MNREGA, the food security bill, diesel subsidies, etc) are both populist and hark back to an era when state control and involvement was considered essential to the removal of poverty. This "vision" did not help much in either generating growth or alleviating poverty. But perhaps the Congress has an old person's dated memory it ruled India for all but three of the first 43 years of independence. Poverty was high, incomes were low, the middle class was non-existent, and the Congress got re-elected every time. Their leaders were hailed as god-sent for example, the Congress refrain "India is Indira, Indira is India."

The Congress won the 2004 election and believed it had won because the ruling NDA was suggesting that India was a different, and differently, considerably less poor country in 2004 compared to the India of 1950 or even 1980. The Congress felt glorious not only by winning but in being vindicated in its belief that India remained just as poor and not shining. So it put in place NREGA, a stone-digging employment programme, something that the state government of Maharashtra had introduced in 1973! A period when India's per capita income was one-third the 2005 level. The 2009 election came along, India had grown at more than 7 per cent an annum for five years, and the Congress believed that the poor had voted them in not realising that it was the middle class that was increasingly important, and dominant, and one that had indeed voted it in. The middle class does not much care for populist platitudes; it worries about how its taxes are spent. It is concerned about corruption, and about both crony socialism and crony capitalism. Which is why it is increasingly disappointed and disillusioned with the Congress party, and Sonia Gandhi.

The table also documents what has happened to female and male education, 8-24 years, and female to male wages, 15-24 years, urban areas. If you want to understand a changing, and changed, India, just look at these figures. Female education was one year less than male education in 1983; in 2009-10, it was the same. Women earned only 71 per cent of male wages in 1983; in 2009-10, they earned, on average, 3 per cent more!

There are some, and perhaps many within the ruling party, who believe that the anti-rape, pro-equality demonstrations are just another manifestation of angst on the part of the "painted and dented". That these protests will go the way of Anna Hazare and India Against Corruption. Nothing is further from the truth. Those demonstrations were the equivalent of affirming the goodness of motherhood. Nobody disagrees. The recent anti-rape and anti-inequality protests were much more about the affirmation of individual, particularly female, identity an identity that is demanding equality in all aspects of their existence, and especially vis--vis males and especially vis--vis the system.

The writer is chairman of Oxus Investments, an emerging market advisory firm

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