India is currently facing a very damaging second wave and we are all witnessing its impact on people’s lives, with the daily increase in active cases and deaths. Around that team last year, a nationwide lockdown was imposed as the total number of cases hit the 500 mark. 2 lakh cases every day and well, there is no sign of a nationwide lockdown. This is not surprising because looking at the current state of the economy, we know the country cannot afford another foreclosure. This fact simply explicitly delineates the trade-off between health and the economy and let’s just say the government willingly takes a nap on health. What is disappointing is that this upsurge in cases only highlighted the government’s very inadequate preparation to manage the crisis. While we expected the country to rebound by April, it now looks like the economy may not be able to offset the economic contraction it has suffered over the past fiscal year. However, one thing we have learned from our previous experience of the recession is that India’s disproportionately large size income division continues to shine even during the pandemic, with billionaires like Gautam Adani earning more than anyone on the planet and the middle class losing jobs, savings and resources.

What is the current status of middle class people in the country?

Statistically, before the pandemic, it was predicted that 99 million people in India would belong to the global middle class by 2020. One year after the start of the pandemic, that number is estimated at 66 million, reduced by a third.

Meanwhile, the number of poor people in India is expected to have reached 134 million, more than double the 59 million expected before the recession. Given the severity of the second phase, it cannot be denied that the impact on the middle class is going to be even more severe, given that about a third of middle class people have fallen to less than $ 10.1. per day. . One of the most fundamental theories in microeconomics, known as Arrow’s Impossibility Theorem, asserts that there is no “perfect” way to make social decisions in a democracy in the sense that a decision that brings together the preferences of each group. Well let’s just say it’s time for the government to prioritize the needs and preferences of the middle and lower class.

Why are the middle classes an important resource for the growth of the economy?

Apart from the political reasons why the middle class actually maintains a country’s democracy regarding the fact that the middle class is often seen as the glue that keeps modern liberal democratic economies from collapsing under the pressure of inequality still growing, they are also economically very important and given the current conditions, very vulnerable too. It is a well-established fact that countries with a strong middle-class base have stronger economic growth, as expressed by a sample of 72 countries, in an article by the Asian Development Bank (ADB) in accordance with price theories. Nobel Prize winning economists like Abhijit Banerjee and Esther Duflo, and many more. It is mainly motivated by the presence of entrepreneurs in the middle class who promote growth and innovation in the economy. Moreover, the generalized tendency of the middle class to save and accumulate human capital in the form of education is excessively added to the two main components of aggregate demand and therefore to the country’s gross domestic product. The middle class has also repeatedly shown its ability to demand better public service delivery and has consistently supported growth-oriented policies. There is no denying the role of the middle class in holding the government accountable for its actions and responsible for its promises.

Why do low and middle income people suffer?

This discussion is needed to be undertaken at a time when the government gets away so easily with its actions and middle and low income groups struggle as the rich add milestones to their caps. The middle class is deteriorating and we are witnessing it firsthand. “Among middle-class households, there is now growing dissatisfaction with economic conditions. In this context, the stagnation of the standard of living of the middle classes in OECD countries has been accompanied in recent years by the emergence of new forms of nationalism, isolationism, populism and protectionism. Nationalist and anti-globalization sentiments can arise because a shrinking middle class produces disillusion and undermines political engagement, or pushes voters towards anti-establishment and protectionist policies. Political instability is an important channel through which a squeezed middle class can disrupt economic investment and growth, ”says a 2019 OECD book,“ Under Pressure: The Squeezed Middle Class ”

Unemployment levels hit an all-time high during the pandemic and it doesn’t take a genius to assess where its direct impact would have been. With the economy not recovering as it should and with some states still stranded, the unemployment rate is also not expected to drop much. As recent headlines evidenced, retail price inflation has also accelerated, causing further damage to vulnerable sections of the country. The loss of savings during the pandemic due to collective job losses and current inflation has further caused distress among middle-income groups – ordinary men. Oh, and let’s not forget that recent retail inflation was fueled by heavy taxes on gasoline and LPG. All of this information presented ideally aims to highlight the urgent need for the government to undertake policies for the well-being of the middle class. This could include reorganizing the tax and benefit matrix, reducing the cost of living and addressing the unemployment problem in the country.

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