New entrants in India's middle class: Drivers, carpenters, pani puri vendors

[Nilgiri]

http://economictimes.indiatimes.com...rs-pani-puri-vendors/articleshow/53374327.cms

Paper 'The Rise of New Middle Class and Role of Offshoring of Services' shows that faster pace of growth and higher intensity of work has led to the upward mobility.

MUMBAI: India's middle class has seen new entrants. Pani puri vendors, dosa sellers, carpenters, welders, launderers, drivers and cable TV technicians have all pulled themselves out of the clutches of poverty and leapt into a section of the middle class - the bedrock of the economy.

A paper titled 'The Rise of the New Middle Class and the Role of Offshoring of Services', co-authored by the head of Mumbai University's school of economics, professor Neeraj Hatekar and his colleagues Kishore More and Sandhya Krishna, has found that a faster pace of growth and higher intensity of work has led to the upward mobility.

"Lower middle class households earn better not because they are engaged in different occupations compared to the poor, but because they have been able to get more of their family members to do the same things than the poor do," says Hatekar.

In the study, "lower middle class" refers to households whose daily per capita consumption expenditure is between $2 and $4 (Rs 134-Rs 268) each. Poor households spend less than $2 per capita per day.

Ventakesh Kumar, political scientist and professor at the Mumbai-based Centre for Governance and Public Policy agrees with the findings of the study. "The social base of the middle class is expanding and it is cutting across caste, occupation, age, gender and geography," he says.

A survey of around 800 households conducted by the School of Economics found a significant shift in the type of assets held by those who had just entered the lower middle class.

Almost everyone had a cell phone and a watch or clock. Over 70 per cent had access to electricity and about 60 per cent had a fan, owned a colour television, had a pressure cooker and a chair. More than half of them had gold jewellery and steel utensils.

"The aspirational expenditure is different because there is a clear difference in aspirations among the lower classes (poor) and the lower middle classes," says Hatekar.

The study proposes a new category called the 'new middle' with daily per capita consumption spending range of $2-$10. Though the largest number of the 'new middle' families are likely to have moved into the lower middle class, some have also moved up to middle-middle or upper-middle - hence the large consumption band of the 'new middle'.

The period between 2004-05 and 2011-12 has witnessed a dramatic swelling of the new middle class - from just about 28 per cent to a little over 50 per cent of the total population. In absolute terms, the size of the new middle class is estimated to have increased from 304 million to 604 million, according to the study.

"The middle class is now a diversified group because the country now offers various opportunities for creation of wealth," says S Parasuraman, director of Tata Institute of Social Sciences.

One of the key purposes of the study was to look at the contribution of off-shoring services (ITES-BPO) to uplift of poor households. Hatekar and More conclude that the sector has not made a significant direct contribution, at least in quantitative terms, to the creation of the new middle class.

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What are all of your thoughts, experiences and accounts of this phenomenon?

It shows the importance of two very important things:

1) Access to short, intense and valuable vocational "blue collar" training for youth right out of secondary schooling especially in the rural areas where they have not been exposed to this "without university education you will fail" nonsense that has infected large parts of urban India and also the developed world in general. India MUST improve skilling india program and quantity and quality of ITI and other such infrastructure related to this.

2) Lower govt interference is a GOOD thing....actually a GREAT thing. This current govt has the right idea in promoting ease in business startup culture and expanding credit for such initiatives through MUDRA etc.

I would like to invite some of our esteemed Chinese members to comment as well:

@AndrewJin @Dungeness @Chinese-Dragon @Genesis

 

[AndrewJin]

@Nilgiri Thanks for tagging me.

With the rapid growth of emerging economies, people are becoming richer. Such momentum is unstoppable. It is happening in China, India and all other developing countries.

Source
Mapping China's middle class (2013)
Allianz global wealth report 2015

 

[Archie]

well the definition of Middle class in India is quite different from the west

middle class in India means a family of 4 , having disposables income between Rs 200000- Rs 1200000(3000 USD to 18000 USD)

many drivers , carpenters , pani Puri vendors earn more than Rs 200000 a year
hence they are classified as middle class, same as a white collar junior executive earning Rs 10 Lacs a year

although we should follow the Chinese definition which stipulated 10000 USD as ideal Income for middle class

 

[Local_Legend]

Its quiet visible in the society that the purchasing power of common man has increased very well from past decade. Even though the price of day today items has been increased , there is a parallel price hike in salary and labor. It's a good sign of economic development .

1. India gained a lot from BPO works and call centers just because of cheap labor without compromising much on quality . Same like in the technical sector where a huge demand for technicians in various industries all over the world . The problem with ITI , I felt that lack of choices in the subjects to choose or the subjects are not up to date with the current job market . Most of the ITIs offer the same basic courses on Mechanic, Electrician and Draftsman .

If we have to involve a large number of people to become as skillful labors, we have to introduce more job oriented courses , more seats in current institutions as well as to make new related to the modern job market. We have the examples of Docs and Eng degree holders who are desperate to get a job due to the output and job market ratio is huge.


2. Start up programs are good . In fact there are many successful examples are already in our front. As we are giving some exception to the companies , govt should at lest support a bit by purchasing a certain % from start ups just like Khadi. So the start ups have a huge opening market and will be having less stress on financial.


But I wish to highlight one more thing is that as this topic stars with panipuri people , there is a huge group of people who does not comes under the scanner of TDS. As a Govt employee or a pvt sector employee cant receive salary without TDS, these panipuriwala , Construction Workers , Taxi Drivers earns without paying any tax and at the same time many of them holds BPL Ration cards.

In my place a building construction worker gets Rs.1200/- per day . Mostly he might be having work for 24 days a month . working time is 8.45 am to 4.45 pm with tea and lunch breaks . He earns Rs.28,800/- . I know many people who lives in concrete roofed 2 bhk houses , shows monthly income in ration card as low as we can believe that Jesus Christ was not only person who can make 5 roies to 5,000.

As the per capita income has been increased , there should be an effective way to collect tax on wages on unorganized sector too . Otherwise States and Central govt keep adding tax on day today items.

 

[AndrewJin]

well the definition of Middle class in India is quite different from the west

middle class in India means a family of 4 , having disposables income between Rs 200000- Rs 1200000(3000 USD to 18000 USD)

many drivers , carpenters , pani Puri vendors earn more than Rs 200000 a year
hence they are classified as middle class, same as a white collar junior executive earning Rs 10 Lacs a year

although we should follow the Chinese definition which stipulated 10000 USD as ideal Income for middle class

It's very hard to define middle class.
Especially in big countries like China and India.
10000 dollars in Hangzhou is definitely not middle class.
7000 dollars in a 4th tier city can be middle class.
4000 dollars in a village can also be middle class.
A bus ticket in Shanghai costs 2 yuan (20 rupees), but in a 4th tier city costs 1 yuan.
Fried rice in Shanghai costs 8-10 yuan, but in my city 6 yuan is enough.

However, what decides quality of life in a so-called middle class family is how much money they have outside the basic expenditure such as food, electricity and transport. A smart phone won't cost less because you live in a developing country. Same with computer, TV, clothes, etc. It's sometimes quite unfair that a smart phone can be cheaper in a developed country. How many days you need to buy a $500 smart phone or a $1000 4K TV? How about a trip to Europe? That's the essence of real middle-class life, not simply food and water.

 

[Śakra]

It's very hard to define middle class.
Especially in big countries like China and India.
10000 dollars in Hangzhou is definitely not middle class.
7000 dollars in a 4th tier city can be middle class.
4000 dollars in a village can also be middle class.
A bus ticket in Shanghai costs 2 yuan (20 rupees), but in a 4th tier city costs 1 yuan.
Fried rice in Shanghai costs 8-10 yuan, but in my city 6 yuan is enough.

However, what decides quality of life in a so-called middle class family is how much money they have outside the basic expenditure such as food, electricity and transport. A smart phone won't cost less because you live in a developing country. Same with computer, TV, clothes, etc. It's sometimes quite unfair that a smart phone can be cheaper in a developed country. How many days you need to buy a $500 smart phone or a $1000 4K TV? How about a trip to Europe? That's the essence of real middle-class life, not simply food and water.

True. Middle class is an abstract concept. Many people define owning your own house as a prerequisite to middle class, if that is the case then most of those people considered middle class in India (and I assume China) are not really either.

 

[livingdead]

They might be earning in big cities but in most small town and villages these professions earn very little money.

 

[Nilgiri]

They might be earning in big cities but in most small town and villages these professions earn very little money.

Hence why urbanisation is key to India's development.

 

[Star Wars]

Add housemaids to the list, my housemaid has an independent 3bhk house while i live in an appt.

 

[Roybot]

Add housemaids to the list, my housemaid has an independent 3bhk house while i live in an appt.

 

[footmarks]

Indian middle class is far bigger than the official figures state. Most people are outside financial system and dont disclose income. I remember I was talking to a roadside cigarette seller once. He had a 2ft X 2 ft sized mobile counter. I asked him how much he earns. After initial suspicion, he opened up and told me that he earns enough to send Rs 10000 every month home (in Bihar). This was in Gurgaon. He works all day, standing or sitting on road pavement, probably sleep by the roadside too. And saves more than me every month!

That is how we get so low ratings in HDI. People earn enough, but choose to live a life of poor.

 

[Nilgiri]

Added you to my tag list for future bro. Forgot about you sorry!

Why no DP?

 

[AndrewJin]

True. Middle class is an abstract concept. Many people define owning your own house as a prerequisite to middle class, if that is the case then most of those people considered middle class in India (and I assume China) are not really either.

You are right. Now we can only draw a very vague picture of how big middle class is. But in my opinion, the criteria should be high, on par with the western standards. Many people in China doubt the following data, 225 million households? 430 million households in total, that's nearly 50%. I think $11, 500-43,000 is too low. I don't think any household in our first tier cities and second cities cannot meet that criterion.

Despite some worries as of late, the burgeoning middle class in China is now a force to be reckoned with on the global stage. In just three decades since Deng Xiaoping’s economic reforms in the mid 80s, China now finds itself home to the largest middle class on Earth. This includes over 225 million households which now find themselves in this category.

These 225 million households represent an astronomic shift from the 5M households of just 16 years ago. According to the Economist, the current criterion for those within the middle class involves earning between $11,500 and $43,000 a year in current U.S. dollars. Chinese people are seeing prosperity, the likes of which many have not seen before.


Another more legit report I think is from Credit Suisse Research Institute. It claims the population of middle-class (adults) is 664 million around the world. Among them109 million are Chinese. Every body is talking about earning money from China's middle class. But who are they? It's a mystery.


China's middle class is now the biggest in the world, and growing much faster than America's, according to research by Credit Suisse.

There are 109 million Chinese with wealth of between $50,000 and $500,000. Since 2000, twice as many Chinese as Americans have joined the middle class.

Credit Suisse measured wealth rather than income to avoid temporary changes caused by unemployment, for example.

Chinese are getting richer at an astonishing rate. Wealth per adult has quadrupled to about $22,500 since 2000. The country now accounts for a fifth of the world's population, while holding about 10% of global wealth.

 

[Śakra]

But in my opinion, the criteria should be high, on par with the western standards.

Depends on which Western country's criteria do you us, something like America which is fixed income bracket $40,000 until $120,000 for upper middle class or the British definition? British middle class is working professionals like doctors and lawyers. The British definition is imho it best definition as when we talk about the middle class we always mention two attributes of the group: power and innovation. While there is exceptions, non-professionals by and large are not innovative, they do not create wealth in the scale and scope that professionals do nor do they create tool that increase quality of life. In regards to power, only the classes above the middle class have comparable power due to their concentration of wealth, the non-wealthy non-professionals have no power.

The American definition is much too broad and contains groups with no power (those with salaries in the 40k-80k range) and fractures the more influential middle class workers such as doctors who's salary is quite high by placing them into the upper class. This takes away power from the middle class as a balance to the upper class and is one of the reasons America has such a large GINI inequality.

 

[AndrewJin]

Depends on which Western country's criteria do you us, something like America which is fixed income bracket $40,000 until $120,000 for upper middle class or the British definition? British middle class is working professionals like doctors and lawyers. The British definition is imho it best definition as when we talk about the middle class we always mention two attributes of the group: power and innovation. While there is exceptions, non-professionals by and large are not innovative, they do not create wealth in the scale and scope that professionals do nor do they create tool that increase quality of life. In regards to power, only the classes above the middle class have comparable power due to their concentration of wealth, the non-wealthy non-professionals have no power.

The American definition is much too broad and contains groups with no power (those with salaries in the 40k-80k range) and fractures the more influential middle class workers such as doctors who's salary is quite high by placing them into the upper class. This takes away power from the middle class as a balance to the upper class and is one of the reasons America has such a large GINI inequality.