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Budget 2019

The battering of the middle class

RN Bhaskar

2019-01-14_1_HCI-top-10It will probably be a vote on account next month. But the expectations of a decent budget will be kept alive. Hopefully, even for electoral reasons, some of the thoughts expressed below might catch the attention of the finance minister. During such trying times, hope is what keeps the wheels moving.

Disappointments galore

Yes, the government does have lofty plans. But scratch at the veneer and you see how terrible the consequences of the plan could be. At least for the middle class.

2019-01-14_2_HCI-India-neighboursBut what is the middle class. If one goes by the recent reservation formula for 10% of the economically poorly off , almost 95% of India’s population is poor. That leaves only 5% of the population to make up the middle and the upper classes.

Instead a better way would be to look to the Ayushman Bharat scheme which offers free health insurance cover to almost 30% of the population. One could then assume that 30% of India’s population is poor. If one takes away another 10% of the population as comprising the rich and the affluent, you have a middle class which makes up the remaining 60%.

In any county 60% should be considered the majority community. Yet when you look at India’s policies, the benefits invariably go to the backward classes, to minority religious communities and to the poor.

The ‘majority’ middle class has been ignored.

Let us examine how. To understand how the middle class has been marginalised, battered and ignored, just look at the two factors which allow the middle class to grow. One is health. The other is education.

To understand how the middle class has been discriminated against in matters relating to health, let us examine some of the features of Ayushman Bharat (http://www.asiaconverge.com/2018/10/aditya-birla-health-insurance-changing-contours-medical-insurance/).

2019-01-14_3-educated-unemployedFirst, there is no denying that most Indian need health cover and good education to live a life with dignity and find the tools to grow themselves.

But then look at how the World Bank views India’s claims that it does care for human capital. In its recently introduced Human Capital Index (HCI), India does not figure among the top 10 countries in the world (see table 1).

So where does India figure? Right at the bottom of the list. And when it comes to India’s neighbourhood, India fares miserably. Take a look at the countries that have performed better than India. This country’s only consolation is that Pakistan performed even more poorly than India. What a benchmark!

India was quick to retort that the data taken for education was from the PISA scores that date back to the last decade. But that is because India withdrew from PISA rankings on its own, in order to conceal its poor performance on the education front. Surely complaining about old data is absurd, when the country itself refused to participate in new data being generated.

2019-01-14_4-health-expenditureThe fact is that without education, health and recourse to decent justice, there can be no or little development of human capital. It then becomes a story of crass exploitation. India performs terribly on all three fronts.

What is worse is that the middle class which can invest in education finds that the quality of education in schools is so poor that the educated cannot find jobs very easily. This was revealed in one of the answers given to the Lok Sabha. The more educated a person is, the less are the chances of him finding a job. That is one of the unkindest cuts for the middle class.

Health

If education is a nightmare, so is health. Just look at Table 4. The government spends precious little on health. Most people pay for their health from their own pockets. Thus it needs only one major ailment in a middle class family to bankrupt it (table 5).

That is why medical insurance is a must. But once again, the government has failed the middle class.

2019-01-14_5-illness-can-bankruptTo understand this, it is worth examining the Ayushman Bharat scheme carefully. The government has allowed free insurance of upto Rs.5 lakh per household for poor families. Collectively, this is likely to reach out to around 30 crore people. The intent is good. But the concept is bad.

Remember, India does not have enough doctors (http://www.asiaconverge.com/2018/08/ayushman-bharat-great-concept-doctors-overlooked/). . Its doctor to population is one of the worst in the world. Now the government is giving Rs.5 lakh worth of cover to a poor family without there being enough doctors! So who will determine what type of treatment is required, and how much should be spent on it? Sounds absurd, isn’t it?

With so much of money available for poor patients, expect all hospitals, pathology labs and doctors to try grab a bite of this moolah. The result: more doctors will be available for the poor than for the middle class.

The rich will always find a way to get what they want. The middle class will pay for insurance (it does not get insurance free). And it won’t get quality care either. The good doctors will first be with the affluent. Many will go to the rural areas where there is easy money available. The middle class which pays taxes and pays for services will be left out to dry.

One solution: de-licence medical education immediately to get more doctors. That is something the government does not do, because politicians who run medical colleges make money through capitation fees. Instead, the government pushes a plan to introduce short-term courses to convert ayurveds and homeopaths into alopath doctors. So why does the government also not have a six month course to convert clerks into IAS officers? Same rule, right?

Unless hundreds of more medical colleges are created, India will not have enough doctors. Upgrading ayurveds and homeopaths will degrade the professionalism that the medicare sector is supposed to have. And expensive medical education only makes the cost of treatment that much more expensive, because doctors too must recover the cost of education, right?

The result, the middle class will get squeezed.

Taxes

The middle class gets badly bruised even where taxes are concerned. Economy class air-tickets are not given GST set-off. Travel by cabs – even by Uber, Ola and Meru where there is a tax paid receipt – is not given a GST set-off. Nor are payments to restaurants. Result: the middle class pays, but does not get the set-offs that the rich and corporates get.

So if you are a consultant, and travel to other cities, and use cabs, you only pay taxes, without any setoff. Rather cruel, isn’t it?

So the middle class ends up paying the government, which instead pays the poor and protects the rich.

Will the budget do something for the middle class this time?

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