- The economic reforms that were initiated 30 years ago in 1991 strengthened the Indian middle class and gave it a greater economic and political voice.
- The middle class changed the way in which India dealt with environmental, public health and governance issues.
- The high disease burden and the death rate in the second wave of the COVID-19 pandemic have hit the middle class hard and could buck the trend that had been continuing since 1991.
- The views expressed in this commentary are that of the author.
In the middle of the first decade of the 21st century, I was working with the International Crops Research Institute for the Semi-Arid Tropics (ICRISAT), in its global headquarters at Patancheru, off Hyderabad. ICRISAT is located in a 3,500-acre well-conserved campus, and it also used to lend out its facilities for companies to organise team-building events.
The time period coincided with Hyderabad’s growth as an information technology (IT) and information technology-enabled services (ITES) epicentre, following the footsteps of Bengaluru. Every week there were fresh groups of young IT professionals, noisily rowing imaginary boats on the lawns, or attending PowerPoint-filled training sessions indoors.
In the first decade of this century, the young IT and ITES professionals were seen as the prime examples of India’s economic growth story and the aspirations of the country’s youth and middle class. Self-assertive in their confidence, these young men and women were in the front end of India’s growth story that had begun with the economic reforms of 1991 and had taken the direction of service sector-led growth after the national government made policy changes to support the tertiary sector.
In that, the Indian government was following the growth trajectories of developed countries, which decades earlier had transitioned from the primary (agriculture-led) through secondary (manufacturing-led) to tertiary (service sector-led) growth. In the preceding decade of the 1990s, the thrust was on revamping the manufacturing sector, with a new industrial policy being announced with the launch of the economic reforms in 1991.
1991 and beyond
These watershed changes in how India managed its economy were not initiated keeping the aspirational middle class in mind. They were a response to a national economic crisis.
Recalling the events as they happened 30 years ago, senior journalist Sanjaya Baru states in his book that the crisis was due to the rising debt burden and falling foreign exchange reserves. The fiscal deficit (the gap between the government’s revenue and expenditure) was rising due to decreasing government revenues. The Gulf crisis had raised fresh concerns about India’s diminishing capacity for imports. Imports were stopped and India sold 20 tonnes of sovereign gold from its reserve. India was on the verge of defaulting on servicing its external debt.
The national government changed after the elections in 1991, and the Congress-led government with P.V. Narasimha Rao as prime minister and Manmohan Singh as finance minister had the onus of repairing the situation. Using the crisis as an opportunity they launched economic reforms with liberalisation, privatisation and globalisation as the guiding principles.
“The rupee was devalued, trade policy was liberalised, domestic investment controls were dismantled, and a new policy towards foreign direct investments (FDI) was articulated,” writes economist and the then commerce secretary Montek Singh Ahluwalia in his recent book. The new industrial policy abolished licence requirements for industry and liberalised FDI rules to attract foreign investments.
These interventions, supported by more reforms in the following months and years resulted in rapid economic growth and India overcame the trap of the ‘Hindu rate of growth’. According to data compiled by the International Monetary Fund, India’s gross domestic product (GDP) growth rate percentage increased to 10.3 percent in 2010 from 1.1 percent in 1991.
After the average hovering between 7-8 percent, the pandemic caused a GDP growth rate drop into negative territory in 2020. The GDP itself grew from USD 274.84 billion in 1991 to USD 2.71 trillion in 2020. The GDP per capita, in turn, grew from USD 308 in 1991 to USD 1,960 in 2020.
There was marked progress even in human development indicators. According to the data compiled by the United Nations Development Programme through their Human Development Reports (HDR), life expectancy at birth increased from 58.4 years in 1991 to 69.7 years in 2019. Infant mortality decreased from 88.6 per thousand births in 1990 to 29.9 in 2018. The rural population with access to electricity increased from 37.5 percent in 1995 to 92.9 percent in 2018, even though much of the countryside still do not have access to reliable supply, which defeats the purpose of electrification.
Urbanisation, consumerism and losing sight of the ecological footprint
Urban population increased from 25.5 percent of the total population in 1990 to 34 percent in 2018. While one in four Indians lived in an urban setting in 1990, three decades later it became one in three. This combined with an increase in per capita GDP and income resulted in the creation of an economically, socially and politically vocal middle class, with an even more powerful subset of an urban middle class.
This is the consumer base for the increased production of goods and services that the liberalised economy generated. For instance, the HDR compiles the increased internet subscription from 0.5 percent of the population in 2000 to 34.5 percent in 2018. Similarly, mobile phone subscriptions increased from 0.3 percent of the population in 2000 to 86.9 percent in 2018.
It was not just goods and services from Indian producers that were chasing this consuming class, but also from outside the country. Foreign direct investment into the economy increased from 0.1 percent of the GDP in 1990 to 1.8 percent in 2019.
The middle-class consumer was feted. The number of cars and motorcycles, white goods, consumable products, media channels and entertainment options vying for the middle-class attention grew manifold in the post-1991 years. Cheap airlines, business travels, weekend getaways, foreign tour packages linked him globally.
The stock market boom enabled the middle-class to actually participate in the economic growth story by buying the shares of private companies. This in turn meant that they willingly participated in corporate decisions that weighed increased profits over environmental responsibility.
The paradigm shift from all this change was that the consuming middle class got dissociated from its own ecological footprint. They needed the plastic bottle of water when they needed it, without worrying about where the water came from or what impact the plastic waste can have on the environment. Urban and rural wetlands, which in the 1980s may have been covered with water hyacinth and salvinia, were now covered with floating plastic bags and bottles.
The middle class embraces environmentalism
Environmentalism since the 1990s also took a middle-class route. Unlike people’s protest that was the mainstream of the Chipko, anti-Narmada dam and anti-Tehri dam movements, environmental action moved to technical arguments, media campaigns, internet-based campaigns, lobbying and legal campaigns.
In the end-1996, before Justice Kuldip Singh retired, he passed environmentally favourable orders on multiple cases, including the leather tannery pollution case from Tamil Nadu and the shrimp aquaculture. M.C. Mehta was the lawyer fighting for the environment in these cases.
This was the beginning of the movement that led to the formation of green benches in the high courts, later culminating in the establishment of the National Green Tribunal and its regional benches. “If the executive doesn’t act then the judiciary has to take action,” was the supportive refrain that echoed in middle-class discussions then.
The middle class also gave a multiplier effect to the disconnect with the ecological footprint, since it was their voice that was prominent in the bureaucracy, the judiciary, the media and even in the private sector. So unless something directly hit the interests of the middle class, they were not bothered. And this was not only for environmental decisions but also issues related to governance and public health – the three areas that have come into prominence with the COVID-19 pandemic.
This disconnectedness outlived changes in national governments. Since 1991 there have been four national governments that were led by the Bharatiya Janata Party (BJP). The first three – of 13 days, 13 months and a full-term – continued with the policies initiated by the earlier Congress-led government.
Like adding an additional topping to the pizza, the fourth BJP-led government, starting in 2014, added strong nationalism into their policies. The impact was two-fold. While the government systematically dismantled the environmental checks and balances in the guise of national interest, those opposing these moves could be branded anti-national along with being anti-development.
COVID-19 and the middle class
India managed to overcome the first wave of the COVID-19 pandemic with reasonable ease since the strict lockdown that was imposed early on and the infection spread could contain morbidity and mortality to limits that could be handled. But the economic impact of the lockdown left an indelible and deep scar, with millions of domestic migrants returning to their villages without jobs, money and food.
It came at the end of a series of shocks caused by the unplanned demonetisation of November 2016 and the confusion related to the Goods and Services Tax (GST) implementation in the next year. In between, many states in the country had also faced many economic crises due to extreme weather events. Kerala, for instance, had passed through floods in 2018 and 2019. All this added to a body blow to India’s middle class.
According to data compiled by the Pew Research Centre, the middle class in India shrunk by 32 million in 2020 due to the impact of the pandemic on the economy. Adding to this, the second wave led to the loss of nearly 7 million jobs, with the unemployment rate increasing from 6.5 percent in March to 7.97 percent in April 2021.
Coming behind this, the second wave of the pandemic was devastating in its impact on morbidity and mortality figures. According to data compiled by the John Hopkins University, both the number of confirmed cases and deaths increased exponentially with the second wave. The cumulative number of COVID-19 deaths recorded from March 11, 2020, to March 1, 2021, was 157,248; whereas by May 10, 2021, the cumulative death total rose to 249,992. This means that 37.09% of the total deaths due to COVID-19 happened during the first 70 days of the second wave. One in three coronavirus deaths in India happened in the second wave, and the graph is still poised steeply up.
Will 2021 change the 30-year trend?
India’s development process is a continuing story and a work in progress. The second wave of COVID-19 could well be that moment that can bring the cause and effect feedback loops on public health, governance and the environment back to the national consciousness.
The voice of the middle class was muted during the first wave of COVID-19. There was the loss of some jobs and reduction in income, but overall the brunt was borne by the poor who had migrated from other parts of the country for employment, and had to trek hundreds and thousands of kilometres back to their villages.
In the second wave, death is being reported from all around and everybody – irrespective of social status – has had fatalities among families or friends. The government continues to be sharply criticised in social and traditional media for its tardiness in learning lessons from the first wave and declaring victory against the pandemic a bit too soon, resulting in shortages of oxygen, vaccines and life-saving medicines.
In recent days the high courts have made sharp observations on holding of election rallies and supply of oxygen. The Supreme Court refused to be a mute spectator and has been questioning the national government on its coronavirus management. The apex court is prodding the national government to prepare for the third wave.
COVID-19 started as an environmental issue. Even though the last word on the zoonotic origin of COVID-19 has not been said, the understanding is that if forests were not fragmented and human-wildlife had not closely interacted, the virus for the disease may not have jumped from its animal host to humans. Once the virus started spreading it became a public health and a governance issue. At the core of all this was the lifestyle of consumption and oblivion to ecological footprints that the economic reforms process had initiated 30 years ago.
If in the years after the economic reforms led to the renaissance of the Indian middle class, in its 30th anniversary it is facing a major shock in the second wave of the COVID-19. If it is the middle class that made all the changes of the past 30 years possible, the same group can lead the process for the course correction to put the system back in place.
Baru, Sanjaya. 2016. 1991: How P.V. Narasimha Rao made history. Aleph Book Company.
Ahluwalia, Montek Singh. 2020. Backstage: The story behind India’s high growth years. Rupa Publications.
Banner image: Residential apartments in Thane, Maharashtra. The urban population of India increased from 25.5 percent of the total population in 1990 to 34 percent in 2018. Photo by Kartik Chandramouli.