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Sunday, May 3, 2009

Middle classes

"Within India's political discourse, the term middle class has come to refer to some 60-80 million urban dwellers who work mainly in the professions and the civil service or are self-employed. The positive support that this motley stratum provided to Rajiv's economic programme in the first two years of his rule can be understood by focusing on two different issues."
"First, Rajiv Gandhi's early economic policies provided concrete benefits to the middle classes. Reduction in taxes and abolition of such programmes as the Compulsory Savings Deposit Scheme were received with great enthusiasm. Moreover, the government seems to have decided to hinge its new economic strategy on the buying power of these groups. Controls on production have been released and exports are not going up all that rapidly. Who, under these circumstances, is going to buy all the new products that are now suddenly appearing on the market? Clearly, the government is hoping that the middle income groups will use their increased incomes to soak up the growing supply and thus avoid a demand constraint on growth. Whether this will become the basis of a successful development strategy is not an issue under discussion here; that is for the economists to debate."
"From the point of view of the political inclinations of the middle-income groups, the new strategy has meant not only improved incomes over the short run, but also for almost the first time in post-colonial India, an economy that is not beset by shortages of consumer goods. Growing incomes and availability of products have, in turn, helped generate benign views of the government. That such tangible rewards are more important than any set of shared values with the leadership was highlighted when these very middle groups threw their weight against the government's plans to raise petroleum prices during February 1987. Also, with the emergence of corruption scandals within the government during 1987 and 1988, many in this fickle political group have changed their evaluation of Rajiv Gandhi."
"A second issue of longer-term significance has not received much attention. Over the last decade, there has been a major change in how Indian industry finances itself. Significant contribution to industrial investment is now made by the sale of public stocks. While exact figures are not known, the phenomenon of middle-income groups, including Indians living outside of India, buying stocks in a big way has been widely noticed over the last decade. This is increasingly creating a structural link between middle-income groups and big business. The political significance of this fact is likely to grow. Middle-income groups now have a growing stake in the economic health of industry and commerce. Policies that facilitate this goal are thus likely to and do receive support."
(Atul Kohli in 'Democracy and Development in India: From socialism to pro-business,' p. 213 OUP)

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