 Hello and let's talk about the middle class. This is in the context of the latest data released by the Centre for Monitoring the Indian Economy. Reports have focused on the fact that there has been an improvement in urban employment which is now at 35.1% for the week ending on July 19th. The overall unemployment rate is around 7.9%. Thus, according to the organisation around 18 million additional people are without jobs over the past few months, at the peak of the lockdown induced unemployment around 122 million people without jobs. An equally important issue however is the question of rise in incomes. Now this is an increment season usually and as all of us know very few companies are taking that move this year. Many instead are resorting to firing employees. So what does this stagnation of income mean for India society and especially the middle classes? We talked to journalist Anandya Chakravarti to find out. Thank you Anandya for joining us. So the CMI numbers have all kinds of indications especially about the employment rate and the unemployment rate basically. But one of the key issues which you talked about in the past in which you've been focusing on a lot is how this affects various sectors of the Indian society and the economy. And specifically in this case is the question of the middle class. So could you talk a bit about how as an introduction maybe to begin with which section gets hit the most and how especially the middle class is getting affected. So you know the point is when we say that the middle class gets impacted the most we are saying this in relative terms because if you look at it Prashant the generally poor people their income doesn't grow up. We know that in the past few years their real income has actually dropped. And even if the real income increases it increases very marginally. What I mean is that if someone is being paid 5000 rupees to work in a house to do the typical Jhaadu Pocha Bhartan it is very unlikely that the next year even if inflation is 10 percent their monthly salary will be increased to 5500. It's not going to happen. So increments take place for poor people. Their income goes up after every 2-3 years and maybe in lump sum amount and sometimes it does not. So often they face higher inflation than their income goes up and therefore generally we see that the number of people who say that their income has gone up compared to last year tends to be low. So if you take April to June last year those who were earning less than 6000 rupees per month as family income only 14 out of 100 said that their income has gone up. And we know that for the past few years income growth has been bad for almost every section. This time only 1% of these people 1% 1 in 100 said their income has gone up. Chances are that most would have seen their income decrease and very few would have seen their income more or less remaining stable. Now this is not always calculated as often a perception. It's not that poor people always calculate how much they made but their sense is that it has not risen. But we have to say that when we look at government relief package the minuscule relief that the Modi government has given it is targeted largely the poorest people. So you'll see some amount of free ration whether it's gone or not is a separate issue but some amount of it has already gone. Whether you see Mandrega the number of days has increased even though demand could not be met. And we've seen money being transferred to some extent to poor women in their Chandan accounts. We know that PM Kisan 2000 rupees was given earlier than the installment was supposed to come. By now it's going to catch up. But the point is that some amount of some sort of first support system was provided to the poor when we saw their income was falling or remaining stagnant. So the data shows that those who earn 5 lakh rupees per year. Now this is not a huge salary in terms of in urban areas 40 odd thousand rupees for a family with two kids and maybe an aged parent is not a lot. But but we still consider that to be a part of the middle class. Now approximately 40 42000 rupees last year about 50 percent of them said that their income had gone up. So we know why that would happen because we've been able to June. Most people get their increments. So even if half of them got increments whether they work in government you know in government sector or outside in private sector. Then you would have seen that income go up. So how now that is not good. We know that is not good because it still means that a large number of people at least half of the people. The real real income has gone up gone down because they still have to catch up with you know the inflation rate. So this year I think less than 15 percent have seen an income growth in this category. Less than 15 percent which is 85 out of 100 middle class families middle middle class families have seen no income growth and most likely they've seen an income decline. Right. And they are facing 6 percent inflation right now. So inflation is up. Food prices are up but they are seeing a decline in their income. When we go a little higher right when one looks at those who were earning about one one and a half one lakh rupees a month. This is a where you would put upper middle class category. These are the people who you know they're the buying classes. They go to the restaurants they order on Zomato and Swiggy and stuff like that. They buy in the malls. They they send send their children to public schools. Private schools as we tend to call public private school public school. What I mean is private school. Now these people those above 1.5 lakh. Now last year again approximately 70 percent of them said that their income had increased. And this year 0 percent. No one 0 percent 0 percent of these people have seen an income increase. But when you go to 2 to 3 lakh rupees. Now maybe there's a June impact because from we know that from May June the stock markets went up. So those with stock market investments property return. You know their income has still more or less lead state stable. People earning more than 2 lakh rupees a month. If you if you thought about it five years ago I can guarantee 100 percent of them would have said that their income has increased between April and June. Last year only 70 odd percent said their income had increased which itself shows that there is a contraction in demand taking place even at the upper end. This year that has dropped to 33 percent. So 70 percent has dropped to 33 percent. Even in the most affluent a lot of people whose income inevitably increases every year. Even there we've seen that. So if you look at it the middle class has essentially got nothing. Even the upper middle class has probably not got nothing. Anything where affluent class has got nothing but you know they could still live off the savings. They're saving more right now. They're reducing expenditure because lockdown is forcing them to reduce expenditure. Frankly there's no need to shed tears for them. But one can argue that in normal circumstances yes there's a bit of redistribution taking place. The middle class shouldn't be earning so much. Why should they earn with you know 70 80 percent of Indians earn so little. That's all very well to say. But you know when the economy is doing badly when things are looking uncertain at a time like this when your income doesn't increase in fact decreases then there's a larger impact on the economy. Just to go a bit into that impact like you said there are some there is a lot of saving that is probably taking place at least for some sections of the middle class. And you can argue that there is some relief that is being provided even miniscule to the poorer classes. So in terms of spending itself what role do they actually play. So does the role they play in terms of spending does it get matched or say does it get can it be met by the fact that they're saving. So does that work out that way. So you know the point is that in the last 30 odd years we've seen that India's economy has been oriented entirely to cater to about 20 percent of Indians. Right. Everything that is produced every service that is produced is aimed at catering to them because they are the people who can pay money. And the more you I mean no private companies here to do charity. So they are there to make profits and they think this is the place where we make profit. And 20 percent in an Indian context is a large number. And maybe 20 percent itself is an inflated number. I would say not more than 10 percent actually amount account for most of the demand for consumer goods and services that we see around us. And and they in terms also from the savings and their capital investments they account for also the capital demand for capital goods indirectly. So if I look at it you can say that over a period of time this needs to be addressed and changed. India needs to be an economy which can cater to the lower income group. It needs to produce things for the lower income group. No private sector companies are to do that. It has to be done by the government through planning by looking at what is needed. But when you see that income you know we have seen how contraction in income at the upper end right disposable income at the upper end has affected the economy car sales sales of even alcohol briefs anything you look at it has gone down. Right. So when you look at that housing. So when these people reduce their I mean their income goes on even further and their expenditure goes on even further because they're uncertain. They're scared. There's going to be a bigger demand impact on the entire way in which our economy is oriented and that is going to affect everyone even more. So when you can't sell to the people you were always selling to save auto manufacturers were hiring people and paying them salaries and lacks right suddenly they're not being able to sell. What are they going to do. They will have to downsize. They will have to. I mean downsize is an ephemism they will essentially have to sack people cut salaries replace people at a particular level with cheaper employees. So this is going to happen and that is going to have a demand effect itself. So income and expenditure are two sides of the same coin. It's not as if they can be done to separate separately. It's not that we have a class of people who only produce in a class of people who consistently consume. So this is a very very bad situation which is a which is a vicious cycle. And there has to be. It's a situation where the standard arguments that we could make saying that there has to be redistribution. It's OK. The middle class has to suffer for a while and must sacrifice. Those things don't hold water because this is not the time to do that. The middle class will have to be given something maybe even tax incentives whatever because when the middle class doesn't spend it stops buying and when it doesn't buy it stops earning. It's as simple as that. So it's a thing which is going to suddenly make the economy collapse. And it's interesting that actually the government hasn't been focusing much on it considering that many of these sections were among its most ardent supporters. Maybe still continue to be its most ardent supporters. I think it doesn't have to simply because this section continues to be an ardent supporter. They will I think the government has got its game pretty well in place. They know that middle class most of which are you know upper forward cast. They are many of them are traditional BJP the catchment area of the BJP in that sense and the traditional vote base. They know that sixty sixty six sixty five percent of these people will vote for them. And if you look at go down the ladder even then forty five odd percent will vote for them. So they then have to catch another the lowest lot. So you need two things. You need these people who will vote for you when they turn up because they also don't turn up. And the poor who turn up in large numbers to vote. You need to hold them. You need to give them something and you need money. So what this government is doing you need money to fight elections. So what it's doing is it's targeting big business and making life very easy for them. This is almost a big business circle as we can see. So big business makes big money. It basically becomes a monopoly. It gradually takes over public assets. And then what you see is essentially they have a reason to keep funding the party. So you get money and you get votes from the bottom. So this is a nice alliance done. But it could reach a tipping point where the middle class actually shifts because we know that the middle class is a very fickle entity. So that's a that's a danger it's playing with. And I don't think the government has any solution to that. But you know it might announce some soaps soon because this is now becoming a big problem. Because if you go online Prashant and there are many of these small companies online which sell the specific kind of goods which are all targeting the upper middle class. They're all out there with massive sales because this time is clear the stocks and many of them will go out of business. Many have gone out of business. We know that Uber has shut its Mumbai office permanently. We know that most companies have cut salaries remove people and these are these are people who buy things every day. They are always doing retail therapy. It's not that easy for us to sustain private manufacturing private sector service private services sector if these people don't know. Thank you so much for talking to us. Thanks a lot. That's all we have time for today. We'll be back on Monday with more news developments from the country until then keep watching news click.