Why Middle Class in India is DYING? | Tax Burden | The End of Middle Class
India’s middle class is facing an unprecedented crisis. The statistics paint a grim picture: only 1.6% of India’s population bears 30% of the total tax burden. With the government imposing taxes relentlessly, the middle class is being squeezed dry, losing their financial stability and identity. Despite being the backbone of BJP’s voter base, the middle class has suffered the most under its policies. Why Middle Class in India is DYING has become a critical question.
The Tax Burden on the Middle Class
India’s tax structure is heavily skewed against the middle class. While corporates enjoy tax breaks and incentives, the burden is shifted to the common people. Over the past five years, the government’s policies have favored large businesses, causing an economic imbalance. To recover the financial loss, the government has resorted to increasing taxes on the common man. Why Middle Class in India is DYING is evident in these financial challenges.
A stark comparison with the United States reveals shocking disparities:
- Americans earn 32 times more than Indians, yet petrol and diesel prices in the U.S. are significantly lower than in India.
- Despite rising taxes, India lacks basic amenities such as clean air, drinking water, quality public schools, healthcare, employment opportunities, and law enforcement.
The harsh reality is that while billionaires are thriving, the common Indian is struggling to make ends meet. This is another reason Why Middle Class in India is DYING.
The Shrinking Middle Class
The impact of excessive taxation and economic policies is becoming evident. The recent GST Council meeting saw the announcement of popcorn being taxed at different rates:
- Non-branded popcorn: 5% GST
- Branded popcorn: 12% GST
- Caramel popcorn: 18% GST
These tax policies are further burdening the middle class, making everyday items more expensive. As a result, the middle class is gradually disappearing, and it’s clear Why Middle Class in India is DYING.
Economic Indicators Pointing to a Decline
In the second quarter of 2024, India’s largest FMCG company, Hindustan Unilever, reported a 3.86% decline in profits compared to the previous year. The Fast-Moving Consumer Goods (FMCG) sector, which includes essential items such as food, cosmetics, skincare, and cleaning products, is witnessing a decline in sales. This trend is another indication of Why Middle Class in India is DYING.
Key industry leaders have voiced their concerns:
- Hindustan Unilever CEO Rohit Jawa noted a decline in urban consumption.
- Nestle India Chairman Suresh Narayan highlighted reduced demand from metro cities.
- Tata Consumer Products reported lower urban demand.
The message is clear: middle-class urban consumers are cutting back on spending due to rising financial constraints. Why Middle Class in India is DYING is becoming a topic of serious concern among economists.
Understanding the Middle Class Segments
To grasp the gravity of the situation, let’s analyze India’s middle-class segments as defined by Kishore Biyani:
- Upper Class (India One):
- Population: 12 crore
- Per capita income: ₹12.3 lakh/year
- Accounts for 50-60% of total consumption
- Middle Class (India Two):
- Population: 30 crore
- Per capita income: ₹2.5 lakh/year (For a family of four: ₹10 lakh/year)
- This segment is shrinking due to rising expenses and tax burdens, which explains Why Middle Class in India is DYING.
- Lower Class:
- Population: Remaining majority
- No savings and low purchasing power
The Future of India’s Middle Class
If the current trend continues, India’s middle class may cease to exist. With rising taxes, increasing inflation, and stagnant wages, the aspirations of millions are at risk. The government’s focus should shift towards policies that empower the middle class, ensuring economic growth and stability. Why Middle Class in India is DYING must be addressed urgently.
Research on the income disparity between the US and India
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FAQs: Why Middle Class in India is DYING? | Tax Burden | The End of Middle Class
1. Why is India’s middle class struggling financially?
India’s middle class is burdened by an escalating tax structure, where only 1.6% of the population pays 30% of the total tax burden. Despite being the backbone of the economy, the middle class is squeezed by rising taxes and decreasing financial stability, while large corporations enjoy tax breaks.
2. What is the tax burden on India’s middle class?
The tax policies in India have been skewed towards taxing the common people, especially the middle class. Over the last few years, the government’s focus on taxing individuals has worsened the financial situation, while corporations continue to benefit from tax exemptions. This has intensified the financial struggles of the middle class.
3. Why is the middle class in India shrinking?
Excessive taxes, rising costs of living, and the government’s economic policies have contributed to the shrinking of the middle class. With everyday items like branded popcorn facing a higher GST rate, financial strain is forcing many to cut back on essential spending, leading to the erosion of the middle class.
4. How does India’s tax system compare to the U.S.?
Despite Americans earning significantly more than Indians (32 times higher), India’s petrol and diesel prices are much higher, and the country still lacks basic amenities like clean air, quality education, and affordable healthcare. This comparison highlights why the middle class in India is facing more challenges despite the government’s rising taxes.
5. What are the economic indicators showing about the middle class?
Economic data from major FMCG companies like Hindustan Unilever and Tata Consumer Products point to a decline in consumption, especially in urban areas. This reduction in demand signifies that the middle class is facing tough times, as urban middle-class consumers are cutting back on their spending.
6. What are the key segments of India’s middle class?
India’s middle class can be divided into three segments:
- Upper Class (India One): 12 crore people with an average annual income of ₹12.3 lakh.
- Middle Class (India Two): 30 crore people with an average income of ₹2.5 lakh per person per year.
- Lower Class: The majority of the population, struggling with no savings and low purchasing power.
The middle class is shrinking due to rising expenses and taxes, further deepening the crisis.
7. What can be done to save the middle class in India?
To address the decline of India’s middle class, the government needs to revise its tax policies, focus on reducing the financial burden on the common man, and work towards creating policies that promote economic stability and growth for the middle-income groups.
8. What are the consequences if the middle class in India disappears?
If the middle class continues to shrink, India could face long-term economic instability. The middle class has historically been the driving force behind the nation’s consumption-driven economy, and its disappearance could severely impact growth and employment opportunities.
9. Why should the government focus on policies that benefit the middle class?
The government needs to implement policies that empower the middle class, reduce tax burdens, promote employment, and ensure access to basic services. A thriving middle class is essential for India’s sustainable growth and the overall economic health of the nation.
10. Is India’s middle class really dying?
While it might not be disappearing completely, the middle class is certainly in decline due to the heavy tax burden, inflation, and stagnant wages. If the current trends continue, the future of India’s middle class looks uncertain. The situation needs urgent attention from policymakers to reverse this trend.
Conclusion
The Indian middle class, once considered the backbone of the economy, is now on the brink of extinction. Unless corrective measures are taken, the country could face long-term economic consequences. The government must address the concerns of the middle class and implement policies that reduce their financial burden, foster employment, and improve the quality of life.