Why Middle Class in India is DYING?

The way that the middle class is squeezed dry by the government, is being slowly realised by the people. People are opening their eyes to it. Last month, after the GST Council meeting, when the Finance Minister announced that popcorn will be taxed in multiple ways, non-branded popcorn at 5% GST, branded popcorn at 12%, and caramel popcorn at 18%. "While treating popcorn, as long as it is salty, salted, masala added, spicy masala, chilli powder, anything, it's taxed at 5%. But when it has added caramelised sugar, it is no longer salty." This led to a lot of uproar on social media with the netizen making fun of Nirmala Sitharaman. People started calling Nirmala Sitharaman 'Vasooli Taai.' The internet was flooded with memes. Someone wrote that Nirmala Sitharaman might also tax the memes made on her. It's good that people are becoming aware, but most people cannot understand how deep and severe this problem is. It's not just about the GST rates of 10-12 items. In reality, the middle class of our country is gradually being wiped out. And this issue is much bigger than Nirmala Sitharaman. Let's understand this better in this video. In the second quarter of 2024, India's largest FMCG company, Hindustan Unilever's profit fell by 3.86% compared to last year. FMCG stands for Fast Moving Consumer Goods. The packaged food items. It also includes cosmetics, skincare, cleaning products, health supplements, diapers etc. Those products that an average person buys for their day to day lives. These are the items to meet basic necessities. If their sale is decreasing, it signals that there's a major problem somewhere. The reason for this is said to be India's shrinking middle class. According to Hindustan Unilever's CEO, Rohit Jawa, urban growth is falling. But it's not just one company, it can be seen with almost every FMCG company. Nestle India's chairman, Suresh Narayanan says that the lack of demand is the most severe in megacities and metros. Tata Consumer Products said that the urban demand has decreased. While ITC says that economic activity in this quarter has decreased. Urban areas represent the people living in cities, the middle class people living in cities, do not have money to spend. The government has taxed them so much that perhaps they aren't even middle class anymore. Before we try to understand this in detail, we need to understand who is "middle class." A popular framework is used here, developed by businessman Kishore Biyani. It divides India into three segments. There are about 120 million people in the first segment. Their per capita income is about ₹1.23 million per year. They are India's upper class, also known as the consuming class. This segment is known as India-1. 50-60% of consumption in India, is due to this class. After them are the middle class, also known as the aspirant class. This has about 300 million people and their per capita income is about ₹250,000 per year. If there are 4 people in the family, then the total annual income needs to be about ₹1 million. This is the average, it may differ a bit. And then, the last is India-3, the biggest segment which encompassed most of the Indian population. Including the poor people who have no savings. Most Indian companies focus on selling to the upper class and middle class people. So what's happening here is that the quarterly results of Indian companies are now showing that, the upper class has a lot of money to spend and they are spending it. This upper class is moving towards premium goods and services. But the middle class is so overwhelmed by the taxes and inflation that they aren't even buying entry-level products. This is why at a glance, you'll notice that the GDP is increasing, The government revenue is high too, but the middle class is left empty-handed. And the lower class in the third section, don't even ask how they are faring. There's so much poverty that they are driven to rely on free ration. So the question arises, why is this happening? Is the middle class and lower class stupid? Can't they work? Do they not want to work? Are they not hardworking? Our Indian CEOs believe so. The CEOs of these giant companies claim that Indian employees are lazy. They don't want to work. "People should work 70 hours a week." Some want 80 hours, some go as far as to say 90 hours. "Our youngsters must say, 'This is my country, I want to work 70 hours a week.'" "This Saturday-Sunday is not an Indian thing. This is a Western thing." "I regret I am not able to make you work on Sundays. To be honest. If I can make you work on Sundays, I will be more happier. I work on Sundays also. What do you do sitting at home? How long can you stare at your wives? How long can the wives stare at the husband?" According to them, it is your fault that you are getting poorer. Only the middle class is to be blamed. But is this the truth? Not at all. The truth is just the opposite. Friends, in reality, the middle class doesn't have money to spend on things because the government and these giant corporations are taking away your income. These people giving you unsolicited advice, are the ones robbing you. In the financial year that ended in March 2024, the profit recorded by Indian corporations was the highest in 15 years since the 2008 financial crisis. According to a report by FICCI and Quess Corp, between the years of 2019-2023, the profits of Indian corporates across 6 major sectors increased 4 times. But at the same time, the salary growth remained negative. Salary growth being negative means that the inflation increased more than the increase in salary. In the last 5 years, on average, inflation increased at the rate of 5.7% each year. But the salaries aren't increasing at this rate and even the government acknowledges this. In the speeches of India's Chief Economic Advisor V Anantha Nageswaran these big corporates are often targeted. "Corporate profitability has gone up from in FY20, to in FY23." "Compensation to employees usually is a function of two variables. One is the amount of hiring you do and the amount of wage growth you give. And that has not correspondingly grown at the same pace." On the one hand, these companies are making bumper profits. On the other hand, they are not increasing your salaries. And on top of it all, they are taking advantage of the tax breaks given by the Modi government to pay lower taxes. In 2019, the Modi government reduced the corporate tax and gave several benefits to the companies. The government suffered a loss of ₹1.45 lakh crore in 2019-20 because of this. But the government said that it wasn't worrisome, because if these companies do well, the money will be invested back into the economy. Creating more jobs, making the private sector stronger, and rising employment. But in reality, nothing of this sort happened and had there been a well-educated politician, they wouldn't have made this decision. Over the last 5 years, the government's revenue loss was to the tune of ₹9 trillion. Just think about it, had the corporate tax not been reduced, this ₹9 trillion could have been spent on healthcare, education, infrastructure, and the public services could have been improved. Our nation has suffered tremendous losses over the last 5 years and the government is trying to make up for the losses, by taxing the common man. Look at this chart, This shows government revenue from direct taxes. In 2018-19, 58.3% of it was from corporate taxes. And in 2023-2024, this has fallen to only 46.5%. Today, income tax collected from individuals is higher than corporate tax collection. This year, in 2024-25, it is estimated that people will pay about ₹11.560 trillion in taxes. While corporates will pay ₹10.420 trillion. In our country, fewer than 3% of the people pay income tax. But these 3% of the people, individually, are paying more tax to the government as compared to all the companies in India. These 3% of the people are paying ₹1 trillion more to the government as taxes compared to the companies. During Dr Manmohan Singh's government, the share of corporate taxes in the total tax revenue was 35%. But now, under the Modi government, it is only 26%. These companies get numerous benefits, but they don't even want to increase the salaries of their employees. Experts advise them to increase the salaries to match the rising inflation. If the government wants, it can bring a law that each year, the employee's salary should increase at least as much as inflation. This was for the existing employees. But what about new employees? Are new jobs being created? No, they are not. In the 2023-24 Economic Survey, corporates were told that it would be in the self-interest of the Indian corporate sector swimming in a lot of profit to treat job creation as their responsibility. But nothing concrete has been done for this yet. And why would they? If they know that the government runs on political contributions, by paying these politicians they can have laws in their favour, why would they want to do anything else? That is why there is a severe shortage of jobs in our country. In such times, if you want to explore a new field like content creation and to earn money, to make it a source of income, then check out my course, The YouTube Blueprint. This highly detailed course is 7.5 hours long, it teaches you how you can make YouTube your part-time job or your full-time career. I have been making videos on YouTube for more than 10 years in the course, I teach you everything that I learned over all these years of experience. 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The 3% of the population I mentioned earlier was the estimate. In reality, however, this number is at 1.6%. Only 1.6% of our country's population pays income tax. But the tax revenue of the government from income tax was 30.2% in 2023-2024. 1.6% of our country's population is bearing 30% of the tax burden. Many economists and experts have repeatedly said that a middle-income country like India cannot be run on personal income tax. But is the government listening? This was only about the income tax. After this, comes the GST. According to a report by Oxfam, more than 60% of the total GST collected is paid by the bottom 50% of the income earners. One-third is paid by the middle 40% earners, and the top 10% of the population only contributes 3-4% to GST. What does this mean? The richest people in our country contribute only 3-4% towards GST. And most of the GST burden falls on the middle class and the poor once again. According to Oxfam's report, after the Covid pandemic, India's bottom 50% population's wealth is continuously decreasing. In the year 2020, their share in the national income fell to 13%. While in the total national wealth, half of our country's population don't even have a 3% share. India's richest 10% people have 72% of the country's wealth. And the top 1% has 40.6% of the country's wealth. Taxes like GST are called Regressive Taxes. In comparison, Income Tax is called a Progressive Tax. Because with an increase in your income, you pay more taxes. But that's not true in the case of GST. If Mr Narayan Murthy buys shoes worth ₹800, he will need to pay 12% GST. And if a poor labourer buys the same shoes, he too will pay 12% GST. But you know who will have a harder time spending this ₹800. Now the government might say that this is why there are different rates of GST. If the shoe costs less than ₹1,000 the GST is @ 12% and if it costs more than ₹1,000 it will attract 18% GST. But this differences are insignificant. The truth is that the government has levied GST on daily-use items as well. Pre-packaged flour, paneer, butter, lassi, curd, lentils, all of these attract 5% GST. And the interesting thing is that the tax is levied on packets weighing up to 25 kg. If the packets weighs more than 25 kg, there's no GST. What's the rationale for this rule? So that these big companies benefit, big corporates buy things in bulk, and with this, they can get away without needing to pay tax. Milk prices have also increased due to GST. After GST, about 80% of medicines have been included in the 12% GST bracket. Whereas earlier, they used to be taxed @ 9%. That's why the prices of medicines have also increased. Now, 18% GST is levied on health and life insurance premiums. Earlier, they used to be taxed @ 15%. That means that buying insurance has also become expensive. Interestingly, countries like America, the UK, and South Africa have imposed lower taxes on it than India. On the one hand, the cost of insurance is increasing and on the other hand, it is becoming difficult for the common man to get treatment in private hospitals. In such a situation, if a government talks about providing free healthcare through neighbourhood clinics, people in power try to break them apart. Corporates get another benefit compared to individuals. Corporates get GST Input but individual taxpayers don't get any GST Input. Similarly, people have to pay tax on their income but these companies have to pay tax on the profit they get after deducting expenses from their income. To help these corporates, the government does not improve government schools and hospitals so that the middle class is forced to send their children to private schools and private hospitals. The government schools all across India are in bad shape. There are only a few exceptions. You can get an idea of how these giant corporations influence governments by the fact that in 1982, 6 out of the top 10 companies in India did not pay a single rupee as tax. These are called Zero Tax Companies. Reliance remained a Zero Tax Company for 30 years after its listing. It was only in 1996-97 that Reliance paid tax for the first time. Apart from this, corporate CEOs go to tax havens to establish their companies. From Mauritius to Panama. They hide their money there to evade paying taxes. You'd remember the Panama Papers or Adani's case, when allegations were made that businessman Gautam Adani's brother Vinod Adani's name was used to hid money in these tax havens. On the quantum of the alleged loss. On the other hand, the middle class is in such a bad state that their dreams are also getting shattered. A person has basic aspirations to own a car and a house. Both these things have become completely unaffordable. In India, on the sale of a car, the amount of money the car manufacturer gets is less than what the government gets in taxes. When you buy a car, it costs 28% GST. Then, based on the size, engine, and other features there's a cess and other taxes. For a 1200c car less than 4 meters in length, the total tax is @ 29%; and a car longer than 4 meters up to 1500cc is taxed @ 45%. SUVs are taxed up to 50%. Let's take an example. Toyota's Fortuner is one of the best-selling SUVs in India. In Delhi, the ex-showroom price ranges from ₹3.1 million to ₹4.8 million. Let's assume that you bought a Toyota Fortuner for an average of ₹3.928 million. The real price of this car is ₹2.627 million. The remaining ₹1.3 million will go to the government as 28% GST and 22% GST compensation cess. After this, the government charges more money through registration and green cess. Similarly, from the sale of one car, the government earned ₹1.8 million. On the other hand, Toyota, the car manufacturer, earns only ₹40,000 rupees from this sale. Apart from this, if you want to save ₹4 million to buy a Fortuner, you would need to earn at least ₹5 million. Because on earning ₹4 million, you'll have to pay about ₹1 million towards income tax. So, overall, a car worth ₹2.6 million will cost you more than ₹5 million. But the series of taxes won't end here. When you drive the car on roads, you will have to pay RTO tax. You will have to pay toll tax at various places. If you buy petrol or diesel for your car, approx 50% of its cost will go to the government as tax. That means if you buy petrol worth ₹100, then ₹50 will go to the government's pocket as tax. Then comes buying a house. According to the consultancy firm Anarock, the average selling price of houses in India's top 7 cities has increased from last year's ₹10 million to ₹12.3 million. A 23% jump in just one year. The highest increase was seen in Gurgaon, where housing prices increased by approximately 160%. In 2019, one could buy a house here for ₹7,500 per square foot, now it has increased to ₹19,500 per square foot. Similarly, in Noida housing prices have increased by 146% and 98% in Bengaluru. Even after this, if you can afford to buy a house, you will have to pay stamp duty and registration charges to the government. The stamp duty ranges between 5-10% of the property's value across different states. Registration fee is generally around 1%. And the one-time maintenance deposit paid to the builder, attracts up to 18% GST. Now even if you can't afford to buy a house, you might want to rent. But the renting market is similar. According to Anarock's report, over the last 5 years, in the top 7 Indian cities, the rent of a 1,000 sq. ft. 2 BHK unit, has increased by 64%. In Noida's Sector 150, where in 2019, the average rent was ₹15,500, by 2024, it has increased to ₹25,000 per month. Similarly, in Mumbai, the average monthly rent of 2BHK has reached ₹45,000 before the pandemic, this was 30% lower. What else does an average person spend on? On children's education. In private schools, on average, the annual fees has reached ₹150,000. If someone has two children, it will cost them ₹300,000. That's ₹25,000 monthly. Apart from this, if you want to survive the summers, you will need an AC. There's 28% GST on it. A normal family will need a fridge to store food stuff. They'll pay 18% GST. If your tap water isn't safe for drinking, you will need to buy a water purifier and pay 18% GST. If you want a respite from the toxic air outside, you will need to buy an air purifier. And pay 18% GST on that too. Now, for these devices to work, you'll need electricity. And who will pay the electricity bill? Unless you live in states like Delhi, where you'll get free or subsidised electricity up to some units, take a look at your electricity bill, on it, you will find the per unit electricity charge. This high electricity price includes several taxes and charges. For example, if you're in Maharashtra, then first, you'll need to pay the fixed charges. Then the energy charges rate, this is the cost of the units of electricity you used. After that, you will have to pay wheeling charges, fuel adjustment charges, and then the 16% electricity duty. And in case your state government's policies were shaped by corporate funding, you might be paying at a higher rate. After all this, if you still have some money left and you want to go to the cinema hall to watch a movie for personal enjoyment, then you'd need to pay 18% GST on the movie ticket. Make sure you don't eat caramel popcorn while watching the movie, or else you'd have to pay 18% GST on that. After paying so much tax, what do you get? Neither are our rivers clean, nor the air. Neither the roads nor the footpaths are in good condition, there are no food safety standards, there are no proper public transport in most of the cities. "Sir, we in India today pay taxes like England to get services like Somalia." The American per capita income is $86,600. Approximately ₹7.4 million. While the per capita income in India is $2,700. Only ₹230,000. Americans earn 32 times more than Indians. But the income tax rate of both the countries do not differ much. Despite having 1/32 fraction of the income, Indians pay a higher price of petrol and diesel than Americans. In March 2022, 1 litre of petrol in America cost ₹86.97. The highest price. Whereas in India, 1 litre of petrol cost around ₹90-₹100. There's only one reason behind this, the tax paid to the government. The government imposes tax at a rate higher than 50% on petrol and diesel. But it's not just about fuel. Many other things are more expensive in India than in America. In India, TV is more expensive than in America. If you want to buy a TV, it will be cheaper in America because it is taxed more in India. Because of a higher tax, many smartphones are more expensive in India than in America. The starting price of iPhone 16 in India is ₹79,900. In America, one can get it for ₹67,000. Once again, the reason is the tax levied by the government. In India, there are taxes like import duty on iPhone, on top of the 18% GST. Overall, an iPhone is taxed up to 40%. Once again, the upper class can easily buy these things at a cheaper price by going on foreign trips and thereby pay lower taxes. While the middle class has to bear this burden once again. Everything is crystal clear for the ones paying attention. The urban middle class was considered to be one of the biggest supporters of PM Narendra Modi and BJP. Because of this, BJP has historically performed well in urban areas. But despite this, the government has squeezed dried the middle class the most. Many people are slowly realising this, many of whom used to blindly support BJP earlier. "The Modi government keeps asking for votes. And to get those votes, they take care of the rich, and not the poor." "Petrol and onion are getting expensive, while PM Modi is going on foreign tours. No one knows if he is bringing in money or not." "They haven't provided employment for the youth." This is what the salaried class is thinking. On one hand, they are being overtaxed under Modi's governance, and on the other hand, rich billionaires and corporates are being helped to get richer. In the 2024 Lok Sabha elections, the ire of the middle class was clearly felt. According to the post-poll survey by CSDS Lok Neeti, in the 2024 elections, middle class's vote share to the BJP fell by 3% along with a 3% decline in that of the upper middle class. As a result, BJP could not get a majority on its own instead, it won 240 seats. But despite this, it has been 6 months and the middle class is still being squeezed dry in the same way. Inflation is increasing rapidly but not the salaries. Corporate profits are at record highs, but it is getting difficult for people to survive. The effects of the middle class's struggles isn't reflected only on the economy but also on the democracy. Harvard University's economist Robert J Barro's research has shown that the countries where the majority of the national income is in the hands of the middle class, the chances of those countries remaining democratic increases. And the countries where the middle class starts shrinking, it leads to a danger to democracy. That is why it is crucial that the politicians who work for the corporates, you need to stop supporting them, stop voting for them, so that the middle class can regain its power. Remember, it is your money which has been snatched from you and given to the corporates. To distract you, these politicians will use religion and caste. But you will need to remember that the issue which really matters is this economic situation. Unity among the poor and the middle class. Unity of all those who work hard and with honesty. Against this corporate-government mafia.