Milestones: A Road Map to the Indian Middle Class
By David Wells
APF Reporter
Volume 20# 1 Index
www.aliciapatterson.org/APF2001/Wells/Wells.html
India, a country stereotyped for its vast number of poor, also is home to what
many consider to be the world�s largest middle class. The very size and
population of India tends to obscure everything else about the country. For
example, India, a nation stereotyped as famine stricken, last was devastated by
a famine in 1943, before independence, when India was still ruled by the
British. When the British finally left India in 1947, they fled a partitioned
country wracked by war and dislocation. They also left behind the rule of law,
democracy, an independent judiciary, a free press, railways, canals, and
harbors. They introduced modern education and helped create a small middle
class.
Historically, India had a quarter of the world�s trade in textiles and more
than a fifth of the world�s wealth in 1700. It was the leading manufacturing
country (handloom textiles and handicrafts) in the world in the early
eighteenth century. Before the industrial revolution, India had a 23% share of
the world�s GDP and a 25% share of the global trade in textiles. By 1990,
despite having one sixth of the world�s population, it saw its share of world
income decline to below 5 % and less than 1/2% of world trade. Economic growth
shrunk from 7.7% a year between 1951 and 1965 to 4% between 1966 and 1980 as
India withdrew further from world trade and raised tariffs and taxes, becoming
one of the worst-performing developing economies.
India�s Prime Minister P.V. Narasimha Rao resolved in 1991 to bring India�s
economy into the 21st century by introducing reforms that attracted foreign
investment. He liberalized the economy by reducing the federal deficit and
cutting inflation. India began embracing a free-market economy after four
decades of state planning. Since the economic reforms of 1991, parts of India
have rapidly moved from poverty to prosperity and much of the nation has
emerged as a vigorous free-market democracy. According to the U.S. Department
of Commerce, India now ranks as one of the ten largest emerging markets in the
world.
To many, the most striking feature of contemporary India is the explosion of
its new middle class. Full of energy and drive, the Indian middle class is said
to be uninhibited and pragmatic.
For the Indian middle class, schooling is the measure of a family�s social
status.
Unlike the older bourgeoisie, which was traditional, secular and ambiguous, the
new middle class is first and foremost street savvy. The new middle class has
worked hard to rise from the bottom, bringing with it a nouveau-rich mentality
that some Indians consider vulgar.
The first dilemma in looking at the Indian middle class is defining it. Simply
converting living costs from Indian Rupees (RS) to dollars is one sure way to
misunderstand the economics of life in India. One aid is the National Council
of Applied Economic Research�s mid-1990�s report on the growing Indian middle
class. It was based on a national population that was estimated to be 900
million rather than today�s 1.1 billion. The survey said the Very Rich
consisted of about 6 million (or 67/100 of 1 %). Below them were three sub
classes: The Consuming class, about 150 million people (17%,) the Climbers,
about 275 million people (30 %); and the Aspirants, about 275 million (30 %).
Beneath these were the Destitute, estimated to be 210 million (23%).
The Consuming class was reported to have an annual income between $1,300 and
$6,000, and typically owned a TV, cassette recorder, pressure cooker, ceiling
fan, bicycle, and wristwatch. Two-thirds of them own a scooter, color TV,
electric iron, blender, and sewing machine, but less than half of them own a
refrigerator. India is now the world�s largest market for blenders and the
second largest for scooters (after China). Sixty percent of all urban homes
have TV sets and 68 million of all Indian homes have TV sets. More than 32
million of those have cable, growing 8% a year. By comparison, only 22 million
homes have telephones.
An Indian once was said to have arrived in the middle class when he wore
something on his feet. This is no longer true as even the lower classes now
wear PVC sandals. Today�s distinctive class marker is housing. Homes of brick
and cement are preferred. The Consuming class is expected to triple in ten
years, reaching 450 million people by 2010.
At the birth of independent India 54 years ago, the Indian middle class was a
small and insignificant minority, less than 10% of the population. Today,
India�s middle class is one of the largest in the world, equal in some
estimates to the population of the United States. Despite India�s size, its
trade with the U.S. is small. By comparison, American trade with China and its
1.2 billion people is vastly larger than that with India and its 1.1 billion.
U.S. businesses sell $3.5 billion worth of goods a year to India but sell more
than $11 billion to China. Similarly, Americans annually buy only $6 billion
worth of goods from India compared to more than $50 billion from China.
India spends just 1.9% of its gross domestic product on elementary education,
about two-thirds of what it needs to educate all its children. One result is
that over 40% of the population is illiterate. On average, Indians spend just
over two years in school�compared with the average of five years in China and
more than nine in South Korea. In the last decade, private school enrollment
grew 9.5 per cent annually, as compared with 1.4 percent growth at government
schools. One study estimates that 36% of all school children in India attend
private schools.
Upon arriving in the lower end of the middle class, Indians first send their
children to school. Then they spend their disposable income to avoid travelling
on the hot, overcrowded public buses. While the growing middle classes aspire
to automobiles, especially imported ones, the vast majority of Indians rely on
small scooters, bicycles and auto-rickshaws as taxis.
As Indian consumers move up in the middle class, they also move from two to
four wheel vehicles, from small cars to larger vans. The size of India�s middle
class has led business forecasters in the West to place India among the world�s
top 10 emerging economies. Sometimes called the next Asian Tiger, India, as the
world�s most populous democracy, is predicted by some to compete with China as
the next economic superpower.
The economic reforms started in the early 1990�s have spurred an annual growth
rate exceeding 7%, with especially rapid growth in the middle class. Projecting
that growth rate into the future, India�s income will double every ten years.
Within a generation almost 50% of India�s people could become middle class and
poverty could diminish to 15%. In line with this growth, the Indian middle
class is developing an appetite for telephones, cars, televisions, clothes,
refrigerators and other consumer goods. This new Indian class is filled with
entrepreneurs and consumers who follow a very Western pop culture.
The homelands of India�s new middle classes are the more than 200 cities with a
population of over 100,000 filled with people who no longer look to the distant
metropolises of Bombay or New Delhi. Rural prosperity also is growing slowly,
reaching villagers who are 74% of India�s population of one billion.
A recent India Today poll of middle class Indians found striking similarities
with middle class attitudes across the world. These Indians rank travel and
outdoor enjoyment as their top interests. They are concerned about crime,
inflation, unemployment and especially education, which they see as the key to
upward mobility. India sends about six times more people to universities and
other higher educational institutions as compared to China. Ironically, roughly
half of India is illiterate, while China�s adult literacy rate is closer to 80%.
Bangalore, where much of this article is focused, is the capital of the
southern state of Karnataka. It is the most Anglicized and middle class city in
India. In the 1950�s, it became an established center of government sponsored
scientific research. Since the 1970�s, it has experienced rapid growth based on
professional and technical skills, not the traditional sources of wealth in
India, which was the control of land or industry. Bangalore�s software exports
have soared, growing from $50 million to $6.3 billion in less than a decade,
accounting for 11.5% of India�s total exports. India has become the world�s
premier supplier of skilled software engineers.
Citibank is the largest issuer of credit cards in India with over 1.4 million
card members. Competitor, Hong Kong and Shanghai Bank Corporation similarly
covets India's fast-expanding middle-class retail market, stepping up
advertising in local languages such as Hindi. Its employees are taking lessons
in courteousness from hotels and airlines expecting the bank's customer base in
India to grow to at least 2 million by 2005 from 700,000 today.
Despite the boom that many Indians are enjoying, the benefits are trickling
slowly, especially to those in the countryside. In the densely populated farms
and villages of the north Indian "Hindi belt" (along the Ganges River) the
economic boom is much less visible than in urban centers. Some estimate that
300 million Indians live in poverty, more than the population of the United
States. By one estimate, India�s annual per-capita income is a mere $1,910,
trailing even neighboring Bangladesh and well behind China�s $4,050. Similarly,
53% of all Indian children below the age of five are malnourished compared to
Ethiopia�s 48%.
The expansion in India�s industries has led to a growth in stock market
participation. In 1975, only about one million Indians were investors. In 2000,
some 19 million Indians were individual investors, making equity investment a
sure sign of middle class aspirations.
Rising out of a nation of one billion, India�s middle class is considered by
many to be its last potential savior. Though hard to define statistically, its
work ethic and focus on upward mobility may spread the benefits of economic
growth across the country. The fixation on education, a universal route up the
class ladder, may succeed where Nehru�s socialism and central planning have
failed.
But even spreading education will be an uphill battle in such a vast nation.
India has the largest number of illiterates in the world, an amazing 290
million, more than the combined population of the U.S. and Canada. Because
India is at the forefront of information technology and education is needed to
maintain that position, national policy and individual family decisions focused
on education may indeed lead India to a better-educated and wealthier future.
�2001 David H. Wells
David H. Wells, a freelance photographer from Providence, RI, is spending his
Patterson year documenting India.
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