Accelerating inflation squeezes India’s middle class

December 18, 2013 9:39 am

Accelerating inflation squeezes India’s middle class

By Amy Kazmin in Ghaziabad, India

Standing on the balcony of his two-bedroom apartment on the outskirts of New Delhi,Indian real estate broker Rakesh Kumar Chawla, 40, is reminded every day of his trajectory from impoverished roots at the bottom of India’s caste hierarchy.

After struggling in poorly paid odd jobs that included being a construction labourer, rubbish recycler, courier and taxi driver, Mr Chawla finally got a break in 2008 when he joined his uncle’s business, acting as broker for working-class families that had won the right to buy low-cost, government-built flats, and wanted to sell them on at a profit.

Today, Mr Chawla, who now operates independently, enjoys many of the trappings of a middle-class existence, financed by commissions for brokering the sales of an apartment – or sometimes two – each month. He has a colour television, a refrigerator, and a small car. His two school-age children attend a private, English-language school.

Around 100m of India’s estimated 246m families are part of the aspiring class, with at least a mobile phone, a television or a two-wheeler in their possession – and dream of clawing their way still higher, like Mr Chawla, squarely into the middle-class.

But as economic growth slows and inflation spirals – prices in November were 11.2 per cent higher than a year earlier – many families that have been on an upward trajectory are increasingly anxious.

They say price rises are outpacing increases in income and eroding their hard-won savings. Their concerns about tightening household budgets are likely to be an important factor in forthcoming parliamentary elections, when the ruling Congress party will face a stiff challenge from the Hindu nationalist opposition Bharatiya Janata party.

Mr Chawla, who earns about Rs40,000 per month, is feeling the pinch. His income once allowed him to save about Rs10,000 a month, even after sending money back to his parents, three married brothers and their families in his home village. But he says he now struggles to make ends meet after paying his Rs10,000 monthly rent, kids’ tuition, and soaring food and fuel bills.

To cut costs, Mr Chawla has stopped eating out, and is driving his scooter, instead of his car, for work. “We have managed to fight our way out of the village, and we will do anything to make sure that we don’t have to go back,” he says.

His business partner, Rahul Singh, who also comes from a humble rural background and now lives in the same apartment building, says, “We don’t have a stable, regular source of income, so we always worry about how much to save for the future to keep our families secure.”

“I am doing whatever I can to make a better future for my children, as all parents do, but inflation is setting us back. That is the main worry,” says Narendra Tomar, a 35-year-old car mechanic, who employs six people at two small garages that have combined monthly revenues of Rs100,000.

Inflation is setting us back. That is the main worry

– Narendra Tomar, car mechanic

Such angst is shared by many other Indians striving to overcome their humble origins, lack of education and limited opportunities, and claw their way up India’s economic ladder.

“In this class, they will always talk about some archetypical guy who got such a huge job, and got so much money,” says Dheeraj Sinha, chief strategy officer in South Asia for Grey World Wide, the advertising agency. “They live with the whole sense that there is this better opportunity somewhere else – some huge jackpot waiting for them to unveil.”

But as economic conditions worsen, this optimism is slowly eroding.

“People don’t want to get major work done on their car repairs,” says Mr Tomar, the auto-mechanic, whose entire joint family – at least 15 people – depends on the earnings from his garages. “They just want to do the minimum that keeps the car running.”

As India’s government raises fuel prices in an effort to curb costly energy subsidies, Mr Tomar is considering whether he can still afford to ride his scooter on his daily 150km round-trip commute from his home to his garages in New Delhi’s suburbs. “The scooter costs Rs200 per day,” he says. “Very soon, I’ll have to start taking the bus.”