Finance Minister Nirmala Sitharaman on Friday said India's middle-class and slightly affluent class will account for 93% of the country's consumption by 2036 due to the tax relief and welfare measures implemented by the government that have aided to boost the spending capacity of the population.
During her address at the Rencontres Économiques d’Aix-en-Provence, a major economic forum, at Aix-Marseille University, France, Sitharaman said, “By 2036, on the back of several of these measures, we believe that 93% of all spending in India will come from the middle-class or the slightly affluent consumers. And again this middle class is not concentrated in our metropolitan cities.”
She emphasised that the wealth distribution in India has gone beyond the metropolitan cities and the middle-class emerging across cities are just a beneficiary of growth but the engine of growth. It is their consumption which is making the economy grow.
Citing OECD projections, she said India is expected to bypass China in terms of the size of its middle-class population between 2030 and 2035. She said about 31% of India's population currently belongs to the middle class, which has expanded at an average annual rate of 6.3% since 1995.
Citing the World Bank and the IMF estimates she said that 248 million people had moved out of multidimensional poverty with the Jan Dhan financial inclusion programme bringing millions into the formal banking system. With government-backed credit guarantee schemes, first-time entrepreneurs have been able to start their business without collateral to access concessional loans and credit histories.
“So the guarantee is given by government through a particular agency, which is the deposit guarantee and the guarantee for the loans. As a result, today some of them have graduated from the lower level of loan giving which is for small amounts for small businesses to a second level to a third level because their performance has been very prudentially wise and they have wonderful credit scores today,” added Sitharaman.
Sitharaman said the spread of digital payments and banking through smartphones and feature phones had formalised small businesses and improved their access to institutional finance. She affirmed that the government's approach to poverty reduction extends beyond welfare. "India's approach to transforming lives is holistic - affordable housing with interest subsidies, skilling, internships and concessional loans to start enterprises," she said. On artificial intelligence, Sitharaman said with industry-backed skilling programmes and AI-ready talent, India's middle class is powering innovation and making India the preferred destination for Global Capability Centres.
Sitharaman and French Economy Minister Roland Lescure on Friday co-chaired the India-France Economic and Financial Dialogue in Aix-en-Provence, discussing cooperation on critical minerals, high-speed rail, cross-investments and financial sector linkages and explore holding the next dialogue in 2027.
