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India's Middle Class What Does the Future Hold?

If you are an Indian reading this, you are very likely among the top 10 percent in the country, since you have Internet access. It is also very likely that you, just like me, consider yourself middle class, though we are not anywhere close to the middle of this country in income or standard of living. We may well have trended the hashtag #IamSoMiddleClass last month, but being in the top decile of a 1.2 billion population, perhaps it’s time to ask #WhyICallMyselfMiddleClass?

“The elite in many parts of the world do not like to be called the elite,” said Dipankar Gupta, a sociologist. “In the U.K., they called themselves the nobility; in current American discourse, the elite are called the job creators. In India, the elite call themselves middle class.”

Like the rich in the United States who use the “job creator” tag to lobby for tax breaks, India’s elite has devised the middle-class narrative to capture more public resources like fuel, food and education subsidies, often at the cost of the country’s poor millions. Using their proximity to the center of power and media amplification, the rich, masquerading as the middle class, have a disproportionate influence in policy formulation and the Indian government’s allocation of funds.

The diesel subsidies — which cost India an estimated $18 billion, according to Montek Singh Ahluwalia, deputy chairman of the Planning Commission — illustrate the elite’s capture of subsidies and its consequences. Much of the subsidies benefit big industries and the so-called middle class, who use the fuel to run their cars and power generators.

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Farmers consume 12 to 18 percent of these subsidies – and those who do are the rich farmers who can afford tractors or pumps – but the majority of the small farmers hardly use any diesel.

Because diesel is much cheaper than gasoline, diesel cars have raced to capture 40 percent of the auto market, from merely 4 percent in 2000. The fast-growing S.U.V. segment runs almost entirely on diesel, as do the massive generators that insulate posh city hotels, offices and residences from power blackouts.

A government panel report last year called diesel subsidies a “major contributor to India’s fiscal deterioration” that jacked up the national deficits and prompted international threats of a ratings downgrade. The report recommended phasing out diesel and cooking gas subsidies, which the government is now attempting at the risk of a middle-class backlash and media outrage.

The subsidies for the well-off don’t stop there. Many rich Indians still pay small amounts like $400 a year for education in the country’s top colleges – a legacy of deep government subsidies for higher education. In a country where millions still do not have access to basic primary education, the higher education subsidies have led to further widening of the gap between the rich and poor, critics say.

The elite capture of India’s subsidies take a toll on the country’s poorest, who genuinely need the discount for subsistence. The current public debate over the Food Security Bill highlights this problem.

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Around 20 percent of India’s population is malnourished, and 43 percent of children under 5 are underweight. These numbers have changed little despite the impressive economic growth of the last two decades, with neighbors Pakistan, Sri Lanka and Nepal doing better than India in the 2012 Global Hunger Index.

The ambitious Food Security Bill, approved by the country’s cabinet but held up in a paralyzed Parliament, aims to provide nearly 70 percent of Indian households with five kilograms (11 pounds) of heavily subsidized wheat, rice and coarse grains every month. But critics say this is a wasteful expenditure, an irresponsible dole from a socialist government with an eye on parliamentary elections next year.

These critics conveniently overlook much larger doles from the government that benefit the rich: for example, this year’s budget waived about $12 billion in customs duties on the import of gold, silver and jewelry. The additional costs in the food bill to feed India’s hungry would amount to much less: $4.5 billion a year.

The economist Amartya Sen, in advocating the Food Security Bill, wrote: “The political support for tolerating — and defending — the present profligacy in catering to the relatively better off contrasts sharply with the fiscal alarm bells that are sounded whenever proposals for helping the poor, the hungry, the chronically unemployed come up.”

India is going through its own version of the American Gilded Age, wrote Jayant Sinha, managing director of Omidyar Network India Advisors, and Ashutosh Varshney, a professor of political science at Brown University, in 2011. The Gilded Age (1865-1900) was marked by fast economic growth, business corruption and cronyism, a shift from agriculture to industry, rapid urbanization and the surge of a new middle class.

This was followed by the Progressive Era, a time of cleansing the system, ousting the corrupt and channeling private wealth into social causes. Presidents like Theodore Roosevelt (a Republican) and Woodrow Wilson (a Democrat), received wide support from middle-class professionals to weed out the corruption of the Gilded Age, to bring about major reforms in education and economic policies that gave more Americans a level playing field to prosper.

“Will India’s political parties fight corruption as a nonpartisan matter?” asked Mr. Sinha and Mr. Varshney. “Will the rising middle class throw out the corrupt? Will the wealthy systematically embrace philanthropy?”

The short answer: it’s too early to know. With only 25 percent of Indians in the middle class and hundreds of millions impatient to break into the zone, both the barons and the masses have incentives to glide on the gilded turf for a few more years.

But in the Delhi street protests, in the philanthropy of software tycoons like Azim Premji and Narayana Murthy who are working to educate disadvantaged Indians, in the example of business school students who are giving up corporate jobs to work in India’s villages, there are faint green shoots of a progressive, compassionate society, a middle class whose values are evolving past the bling of its Gilded Age.

Sambuddha Mitra Mustafi is an independent journalist. Follow him on Twitter @some_buddha.