Middle class to remain India’s growth engine: FM Sitharaman

Finance minister Nirmala Sitharaman on Friday said the middle class is the growth engine of India and has helped the country remain the world’s fastest-expanding major economy in the aftermath of the pandemic by driving consumption.

By 2036, about 93% of all spending in India will be driven by the middle class or the slightly affluent consumers, on the back of measures initiated by the government, she said.

The middle class in India is not concentrated in a few metropolitan cities, improving the distribution of wealth, she said. This also augurs well for the country’s growth outlook.


Sitharaman was speaking at a panel discussion on “How to Promote the Rise of a New Middle Class?” at the Rencontres Économiques d’Aix-en-Provence, a major economic forum at Aix-Marseille University in France.

The middle class in India accounts for close to a third of the population. It grew at an average of 6.3% between 1995, a few years after the country adopted globalisation, and 2021, she said.

Now, the World Economic Forum has also pointed to a fundamental shift in India's middle class consumption patterns, she said. Nearly 500 cities are poised to emerge as the new centres of economic activity. This, she indicated, points at the durability of India’s growth prospects.

“India's model has resulted in the development in such a way that the middle class is present not just in Mumbai, Delhi, Kolkata, or Chennai or Bangalore but also in tier two, tier three cities,” she said.

“So, we see the middle class not just as a beneficiary of growth, but actually the engine of growth. It is their consumption which is making the economy grow. “

The government under Prime Minister Narendra Modi has taken a series of steps to lift the poor to the middle class, she said, thus widening the base and brightening consumption prospects.

About 248 million people moved out of multidimensional poverty between FY14 and FY23 in India. The government has made formal access to the banking channel easier for hundreds of millions of people through Jan Dhan accounts. The government has acted as a guarantor to loans extended to a large number of budding and small entrepreneurs, thus bolstering access to formal credit, she said.

The recent income tax relief up to Rs 12 lakh a year. The government has also cut goods and services tax rates across a large number of products, she said. These steps, she indicated, will support consumption.

The government has also taken steps to make healthcare affordable to a large section of the population, she said. It has also raised focus on skilling people to improve their employability prospects.