Invisible, Volatile Middle India

The Economic Times - August 27, 2012

This deprived section, sandwiched between two pampered classes, needs attention and policy support

In the decade after liberalisation, 'invisible India' referred to the poor, barely earning, mostly rural India, which many said had got lost as policymakers' attention was focused on the so-called middle class, whose steeply-increasing consumption was very important for GDP growth. Also, it was this consumption juggernaut that would attract FDI and vibrant domestic investment, and cause trickle-down of aspiration and incomes, and create jobs down the income ladder.

After that, when it was accepted that the trickle-down didn't trickle all the way down, the spotlight shifted to the plight of the poor and 'inclusive growth' became the new mantra. The hitherto-invisible India became the target for a slew of welfare programmes, most prominent being the MGNREGA. Financial inclusion, being pushed hard by the banking regulator for a while now, is also aimed at this segment, and more such programmes are on the anvil.

Parallelly, the so-called middle class continues to be nurtured. Even as policymakers berate them for their willingness to spend on indulgence items but unwillingness to pay more for food and utilities, a lot of effort is being made to rev up this segment, including easier lending to enable them to spend. But this so-called middle-class India, as this column has often pointed out, is actually upper-class India, comprising the top 20-30% of India's income earners. If one were to strictly translate into numbers the high-value middle-class consumers in consultant reports, then they comprise just the top 15% of households, by income.

This twin focus has ended up creating a new problem: another invisible India, ignored by policymakers, comprising a large enough group of people to be a cause for concern, who are wedged between the mammaries of the welfare state, as the writer Upamanyu Chatterjee put it, and the munificence of a liberalising market-driven economy, with little access to either. Welcome to Middle India, the segment of the population that is most vulnerable to volatility in economic activity, the least included in any institutional protective mechanisms, a group that has no fixed profession but floats around doing whatever is available: contract 'outsourced' workers of all kinds, domestic helpers in non-skilled jobs, casual labour at daily wages, 'self-employeds' selling things or providing petty services of various types and so on.

These are the really small people that no supply-chain benefit as a result of FDI in retail will ever impact, and whose families typically grow their income by adding more family members to do similar work rather than through real upward social mobility, as pointed out by Anirudha Krishna. These are micro entrepreneurs who sell to small consumers like themselves, people who commute large distances to do work that does not allow even a day off, and has no minimum wage, leave alone social security of any kind.

Expert analysts of NSS data on employment corroborate the existence of this group. CP Chandrasekhar says (The Hindu, July 2011) that, "the broad conclusion is that high growth is doing little to deliver employment... the picture of near jobless growth changes the notion of inclusiveness... [from] inclusion through employment and integration into the development process to inclusion through state patronage." He points out, as do other experts, that between 2000 and 2005, most of the increase was in self-employment and while there was an increase in paid employment during 2005-10, it was mostly in the casual work category.

Middle India has the entire unorganised labour force in the country. Taking into account only urban men, of the total workforce of about 100 million, about 41% are self-employed, 42% are in regular employment (mostly unorganised) and 17% in casual labour. A subset of this is middle India, which shows an even worse profile. The data in Rajesh Shukla's book How India Earns, Spends and Saves, a bit dated but still directionally true given how little has changed on employment, shows that in urban Indian households in the 40th to 60th percentile of income, the chief wage earner's occupation was 38% labour, 33% self-employment
(like chanawalas and jhadoo-ponchawalis), and 22% were regular wage earners.

Half of them have studied only up to Class X while 24% are graduates. Looking at the patterns that this data throws up when household profiles are analysed by income quintile, it appears that there is a middle India between the 30th and 60th percentiles of income, which exhibits patterns discontinuously lower than those above it and discontinuously higher than those below it.

This is the group that Dipankar Gupta calls the "nowhere to go, nothing to lose crowd" (The Times of India, August 18, 2012), the "residue left after repeated distillations have evaporated the settled middle class out". He suggests that these are the people that the Anna-Ramdev agitation and the Manesar strike have in common. They are the first to get shortchanged, stay vulnerable and on the firing line and spend a "lifetime chasing their tail", with no benefits that they can bank on from their work. Given the size of this group, we need to turn the spotlight on them and see how we can enable them to be more secure and find greater stability in how they earn, live and fit into the world around them. It will be good for a consumption-driven economy and also essential for a stable society.