From Poverty To Prosperity: Who Comprises PM Modi's Neo-middle Class?

On 3 December 2012, in the middle of Gujarat state elections, Narendra Modi, the then Chief Minister, took the stage to unveil the Bhartiya Janata Party's manifesto, Sankalp Patra. As he began to speak, he introduced a term that would soon become a buzzword - the neo-middle class. He said that the manifesto had been crafted with this new class in mind.

Cut to August 2024, while speaking at an industry event, PM Modi said, “25 crore people have moved out of poverty in the last decade and have created a neo-middle Class."  Since then, there has been a discussion regarding who these people are that PM talked about. Are they the middle class? Are they Urban Poor? Or is it a completely new concept? 

Who Are The Neo-middle Class? 
While there is no such clear-cut definition of this term, the BJP’s manifesto attempted to outline the basic idea behind the concept. It highlighted, “Due to the quantum leap of development in the last year, middle-class families have increased in Gujarat. Such neo-middle class category will be defined and welfare schemes will be worked out for this category.”

Going by this, such a category involves people who have been the recent beneficiaries of economic growth and are coming up the income ladder. It concerns a large category of people who are just above the poverty line and have been trying to rise and become part of aspirational India. The people who have been lifted out of poverty in recent times and are being given the facilities to be in the mainstream are at the core of this concept.

Escape From Multidimensional Poverty
While there might not be statistical data to analyse the concept of the ‘Neo-middle Class’, going by the idea behind the term, the people being lifted from multidimensional poverty form the closest resemblance to the concept. As per Niti Aayog’s discussion paper titled ‘Multidimensional Poverty in India since 2005-06’, the country has managed to lift around 24.82 crore people from multidimensional poverty between 2013-14 to 2022-23. This is reflected in the percentage decline of such poverty from 29.17 per cent in 2013-14 to 11.28 per cent in 2022-23.

In 2023, India was ranked 111 out of a total of 125 countries in the Global Hunger Index (GHI) 2023. The Modi government, however, rejected the index while citing flawed methodology. Last year, the government extended the Pradhan Mantri Garib Kalyan Anna Yojana to provide free food grains to about 81.35 crore beneficiaries for five years. Meanwhile, Congress asked the Centre if the poverty level has come down then why is the government providing free ration to 80 crore people?

Case Of Extreme Poverty
While the country has made significant progress in the multidimensional poverty situation, it has also worked towards uplifting its population from extreme poverty. The neo-middle class has one of the largest contributions from these two classes. Citing the findings of the household consumption expenditure survey, the Chief Executive Officer of Niti Aayog BVR Subrahmanyam stated that the country has more or less 5 per cent of its population living below the poverty line and the case of extreme poverty is ‘almost over’.

The data from World Poverty Clock indicates that around 3.44 crore Indians or 2.4 per cent of the country’s population now live in extreme poverty in 2024, as compared to 3.3 per cent in 2022 and 4.6 per cent in 2018. This indicates the mobilisation towards the neo-middle class category.

Middle Income Trap
While India aspires to be a developed nation by 2047 and provide world-class facilities to its ‘neo-middle class’ category, there are several hurdles in that journey. As per the ‘World Development Report 2024: The Middle Income Trap’ by the World Bank, India is among 108 countries that will face ‘serious obstacles’ in the next few decades to transition to high-income countries. The report talked about the middle-income trap.

The concept of the 'Middle Income Trap' is described in a report, which illustrates that countries typically encounter a "trap" at a certain point. The World Bank highlighted, “Economic expansion, on average, begins to decelerate and often reaches a plateau in income per capita growth, typically at about 11 per cent of US GDP per capita. Today, this figure would be about USD 8,000, or around the level at which countries are firmly considered upper-middle-income.”

The Economic Numbers
After witnessing robust gross domestic product (GDP) growth in several consecutive quarters, India’s economy grew at 6.7 per cent in the first quarter of the current financial year,  lower than RBI's 7.1% forecast. As per the official statistics, the agriculture sector reported a growth of 2 per cent in the recently concluded quarter, marking a decline from 3.7 per cent in the same period of 2023-24. However, the manufacturing sector witnessed a growth rate of 7 per cent during the quarter, compared with a 5 per cent growth a year ago.

As far as the per capita income of the country in 2023-24 is concerned, it stands at Rs 2.12 lakh and has been projected to cross Rs 14.9 lakh by 2047. As per the statement from the Chief Economic Advisor V Anantha Nageswaran, the per capita income has doubled over the past decade. These statistics again represent the mobilisation of the population into a newer sub-category- neo-middle class.