Thursday, October 31, 2013

Reconciling Indian middle class statistics with the polarization debate



India has a population of about 1250 million people. According to the BBC (May 23, 2013), it is expected that the middle class will grow to 200 million people in 2020. So, perhaps it is only 125 million now? About 10%. Even if it is 199 million now, it's only 16% of the population. So, let's say 10% to 16%. Evidently, in a poor country, people would be happy to be middle class.

The problem created by a small middle class is that it doesn't have any political power. As a result, policies are set either for the poor or the rich. But, the recent debate in India, based on studies by famous economists, shows that economic development has bypassed any social gains for the poor. So, clearly, policies are set for the rich.

But wait a minute. If the poor have not seen any gains, then how is it that the middle classes will grow as the BBC claims? Evidently, population increase could be one answer. But do the middle classes really produce so many babies? Aren't they the educated ones who have one child or two?

Perhaps some rich people may face business failure and slide back into middle class, allowing it to grow. This could be rich farmers who sell their land and don't realize that if they don't invest in anything except BMWs, they will soon spend all of it and now be without land and without income. (Of course, the BMW could become a taxi).

Evidently, most of the swelling of the ranks of the middle classes has to come from the poor. So, there has been economic trickling down to the poor. However, the poor have large family sizes. So, even if a few million move up to middle class, the lower classes are the one that are swelling in number. And for these, perhaps, there have been few social gains as suggested by the different studies.

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