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India and the Definition of Middle Class

A newly proposed international definition of the middle class for developing countries, produced by the Center for Global Development for the World Bank, has some surprising conclusions for India.

The report, produced by the president of the Center for Global Development, Nancy Birdsall, suggests that “middle class” is defined as everyone with an income above $10 a day, excluding those in the top 5% of earners in the country… meaning India has no middle class.

This is a combination both of the depth of India’s poverty and its inequality. China had no middle class in 1990, but by 2005, had a small urban middle class (3% of the population). South Africa (7%), Russia (30%) and Brazil (19%) all had sizable middle classes in 2005. […]

In socio-political terms, the middle class is traditionally that segment of society with a degree of economic security that allows it to uphold the rule of law, invest and desire stability. They do not, unlike those defined as rich, depend on inheritances or other non-productive sources of income. […]

OECD countries define their poverty lines as 50% of median income which works out […] to about $30 day. In the US the poverty line for a single individual in 2008 was $29 per day and for each individual in a four-person household was about $14 per day.

However, people in developing countries living on even $10 a day still have extremely low social indicators. Economist Lant Pritchett has shown that infant mortality of households in the richest quintile in Bolivia was 32 and Ghana 58 per 1,000. Fewer than 25% of people in the richest quintile in India complete 9 grades of school, Pritchett showed. “An upper limit of the 95th percentile, while on the high side, is just about sufficient to exclude the countrys richest,” Birdsall adds.

via The Browser