Sunday, December 30, 2001
Here's an interesting observation I picked from Bibek Debroy's essay on the Indian Middle Class in The Week magazine.
A somewhat simplistic analysis, but one that we can think over nevertheless.
Based on available data he classifies the middle income group as a household earning anywhere between Rs 33,750 and Rs 1,44,000 pa (Rs 2812 and Rs 12,000 pm).
Then he argues how the middle class is the beneficiary of all subsidies.
Explicit subsidies are around Rs 30,000 crore. There are 250 million people below the poverty line. If this Rs 30,000 were distributed directly to the poor, each of these would get around Rs 1200 a year. Obviously that is not happening. So where is the booty going?
It's goint to the middle class: via PDS, via fertiliser subsidies (benefiting rich farmers and fertiliser companies), via higher education subsidies, via LPG, or finally via protected and subsidised jobs in the public sector and the government.
The government, according to the essay, employs 20 million people, mostly in urban areas, where most of the subsidies are. The urban population stands at 65 million households. So, one in three earns its living from the government and obtains the benefit of subsidies.
No wonder then that the middle class is the strongest opponent of a removal of subsidies.
A somewhat simplistic analysis, but one that we can think over nevertheless.
Based on available data he classifies the middle income group as a household earning anywhere between Rs 33,750 and Rs 1,44,000 pa (Rs 2812 and Rs 12,000 pm).
Then he argues how the middle class is the beneficiary of all subsidies.
Explicit subsidies are around Rs 30,000 crore. There are 250 million people below the poverty line. If this Rs 30,000 were distributed directly to the poor, each of these would get around Rs 1200 a year. Obviously that is not happening. So where is the booty going?
It's goint to the middle class: via PDS, via fertiliser subsidies (benefiting rich farmers and fertiliser companies), via higher education subsidies, via LPG, or finally via protected and subsidised jobs in the public sector and the government.
The government, according to the essay, employs 20 million people, mostly in urban areas, where most of the subsidies are. The urban population stands at 65 million households. So, one in three earns its living from the government and obtains the benefit of subsidies.
No wonder then that the middle class is the strongest opponent of a removal of subsidies.
# posted by Ashok @ 10:40 PM 
