The Struggling Middle Class: How Economic Policies Are Worsening Their Burden

The middle class in India has long been considered the backbone of the nation’s economy. They are the driving force behind consumption, growth, and development, yet in recent years, they have found themselves increasingly burdened by policies that seem to disproportionately benefit the wealthy. One of the most significant factors in this growing disparity has been the economic measures introduced under the tenure of Nirmala Sitharaman as Finance Minister. While some of her reforms were intended to simplify the tax system and boost economic growth, the reality is that the middle class has found itself struggling under the weight of higher taxes, inflation, and stagnant wages. This blog delves into the suffering of the middle class in the wake of these changes, backed by statistics and analysis.

India’s middle class has always been a diverse and growing demographic, with individuals earning between ₹5 lakh and ₹30 lakh annually considered part of this group. As of 2021, the middle class in India was estimated to comprise around 300 million people, making it one of the largest in the world. However, despite their significant contribution to the economy, the middle class has faced numerous challenges in recent years, especially after the implementation of economic policies under Sitharaman’s leadership.

Rising Taxes and GST Impact

One of the key areas where the middle class has been negatively affected is taxation. The Goods and Services Tax (GST), which was introduced to replace a complicated system of state and central taxes, was expected to simplify the tax structure and reduce the cascading effect of taxes on goods and services. However, the GST regime, as it stands today, has placed a significant burden on middle-class consumers. The multiple tax slabs, constant changes in rates, and the introduction of complicated compliance procedures have made it difficult for small businesses and the average consumer to navigate the system.

In the years following the introduction of GST, prices for several essential goods and services have risen sharply. For instance, the tax rate on consumer goods like clothing, electronics, and even food products has fluctuated, sometimes pushing the prices to levels where they are no longer affordable for the average middle-class family. For example, the price of a basic white shirt saw an increase of up to 18% due to the higher GST rates on textiles. This has led to a sense of helplessness among middle-class families who, despite having stable incomes, are unable to make ends meet due to the rising costs of everyday necessities.

Additionally, the 2019 Income Tax Amendments, while offering some relief, have not been enough to offset the rising cost of living. The tax brackets were restructured, but the savings in taxes were not significant enough for many. Middle-class families, especially those with children in school or higher education, saw little to no tax relief to offset the increasing expenditure on education, healthcare, and daily living. In fact, a study conducted by the National Statistical Office (NSO) in 2020 revealed that nearly 40% of India's middle class had seen their disposable income shrink over the past five years.

"Unlock Your Full Potential: Transform Your Life with a Powerful 7-Day Strategy Plan for Just ₹226!"

LINK:- https://amzn.to/4gMc7M2

Inflation and Rising Fuel Prices

Fuel prices have remained a major concern for the middle class under Sitharaman’s watch. Despite various attempts to reduce fuel taxes, petrol and diesel prices in India have continued to rise. As of 2021, petrol prices in many parts of India had crossed ₹100 per liter, making it one of the highest rates in the world. The increase in fuel prices has had a ripple effect on the prices of goods and services, leading to inflation that disproportionately affects middle-class families.

Inflation, especially in essential goods, has exacerbated the financial struggles of the middle class. According to the Ministry of Statistics and Programme Implementation, India's inflation rate in 2020 was recorded at 6.6%, driven primarily by rising food and fuel prices. This means that while wages for the middle class have remained stagnant, the prices of basic goods have been climbing steadily. A family that once spent ₹10,000 on groceries now finds themselves spending ₹12,000 for the same items due to inflation. The middle class, which has no recourse to subsidies or government handouts, feels the pinch as their purchasing power erodes.

The high fuel prices have also contributed to an increase in transportation costs. With a large section of the middle class relying on personal vehicles or public transport, this surge in fuel prices has directly impacted their daily budgets. Public transport fares have gone up, making commuting even more expensive for salaried workers. For those who depend on private vehicles, the rising fuel costs have made it more difficult to maintain their cars, adding an extra burden on their finances.

Stagnant Wages and Job Losses

While the government has introduced policies aimed at encouraging foreign investment and boosting employment, the results have been less than encouraging for the middle class. Job growth has remained sluggish, and the middle class has struggled with stagnant wages. According to data from the Centre for Monitoring Indian Economy (CMIE), India’s unemployment rate stood at 6.5% in 2019, and this number only worsened in the wake of the COVID-19 pandemic. Youth unemployment, in particular, has been a critical issue, with the unemployment rate among individuals aged 15-29 rising to 23.3% in 2020.

As businesses continue to restructure and cut costs, many middle-class employees, especially in the private sector, have faced wage cuts, layoffs, or the loss of job security. The pandemic, in particular, decimated small and medium-sized businesses, which are a major source of employment for the middle class. In a 2020 survey by the All India Manufacturers’ Organization (AIMO), it was found that nearly 90% of small and medium-sized businesses reported a significant decline in revenue, with over 40% of them forced to shut down. This has led to widespread job losses, leaving many middle-class individuals without a steady income.

For those fortunate enough to retain their jobs, the pressure to work harder for the same or even less compensation has taken a toll. Middle-class workers have found themselves working longer hours without corresponding increases in pay, while rising costs continue to erode their standard of living. This job insecurity, coupled with the rising cost of living, has created a sense of uncertainty and anxiety within the middle class, which was once seen as the country’s economic engine.

Wealth Inequality and Corporate Benefits

While the middle class has faced growing financial strain, the wealthiest Indians have seen their fortunes grow exponentially. According to a report by Oxfam, the wealth of India’s 100 richest people grew by 14% in 2020, despite the economic downturn caused by the pandemic. In contrast, the average middle-class family saw little to no relief, and many experienced a significant decline in their financial stability.

This growing wealth inequality is a direct consequence of policies that have prioritized the rich and big businesses over the average citizen. Corporate tax cuts, such as those announced in 2019 by Sitharaman, were seen as a boon for India’s billionaires but have done little to alleviate the struggles of the middle class. By reducing the corporate tax rate from 30% to 22%, the government provided substantial tax breaks to large corporations, while leaving the average middle-class taxpayer with little relief.

The government's push for privatization of state-owned enterprises has also been seen as a way to benefit the wealthiest segments of society, particularly large corporations and wealthy individuals. As public-sector companies are sold off, many middle-class employees face uncertainty about their future, and the public loses out on the long-term benefits these assets could have provided. While privatization may lead to short-term gains for the government, the long-term effects could be damaging for the middle class, which relies on the stability provided by public-sector employment and the social benefits these companies offer.

Conclusion

The middle class in India is suffering under the current economic policies, which have placed an undue burden on them while benefiting the wealthy. Rising taxes, inflation, stagnant wages, and job losses have left many in a precarious financial position. At the same time, the wealthy continue to amass wealth, largely due to policies that favor big business and corporate interests. The promises of economic growth and prosperity made by the government have not materialized for the middle class, and the gap between the rich and the poor continues to widen.

Until the government prioritizes the needs of the middle class, provides real relief through progressive taxation and social welfare programs, and addresses the issues of wealth inequality, the suffering of this vital segment of the population will continue. The middle class needs a government that works for them, not one that works for the already rich.