New Delhi: Finance Minister Nirmala Sitharaman on Friday, July 3, described the middle class as the growth engine of India and said nearly 500 cities are poised to emerge as the country’s next centres of economic activity.
Participating in a panel discussion on ‘How to promote the rise of a new middle class’ at the Rencontres Economiques d’Aix-en-Provence, a major economic forum of France, Sitharaman said 31 per cent of India’s population is middle class as of today.
Since India opened its economy, the middle class is growing at an annual rate of 6.3 per cent, she noted.
“We think 93 per cent of all spending in India will be because of the middle class or the slightly affluent consumers…and again, this middle class is not concentrated in our metropolitan cities…India’s model has resulted in the development in such a way that the middle class is present not just in big cities but they are on the contrary in these tier two, tier three cities,” the finance minister said.
The distribution of wealth is therefore automatically seen spreading to cities beyond the metropolitan, she added.
“So, we see the middle class not just as a beneficiary of growth, but actually as the engines of growth. It is their consumption, which is happening, which is making the economy grow,” she said.
Quoting an OECD study, Sitharaman said India will surpass China in absolute terms in its middle-class population size between 2030 and 2035 on the back of several measures taken by the government.
Stressing that India remains the fastest-growing large economy after Covid-19, primarily because of consumption triggered by the middle class, she said, “Nearly 500 cities poised to emerge as the new centres of economic activity”.
To grow the size of the middle class, Sitharaman said, the government has taken several initiatives, including financial inclusion, recent GST rate rationalisation, providing collateral-free loans, and Pradhan Mantri Awas Yojana.
Talking about the middle class benefiting from AI, Sitharaman said people are continuously upgrading their technical skills to stay ahead.
For those who fear AI may displace jobs, there is extensive government support through AI-focused skilling programmes being conducted across the country, she said, adding that AI skilling camps are being organised in partnership with the private sector
at the district level.
As a result, the middle class is increasingly able to take advantage of emerging opportunities in India’s evolving economy.
One indicator of this transformation is that nearly 40 per cent of India’s exports come from micro, small and medium enterprises (MSMEs), and these enterprises are rapidly adopting AI-driven business models and are looking for skilled professionals who can provide AI-based solutions, she said.
Highlighting that India has emerged as the leading destination for Global Capability Centres (GCCs) and data centres, Sitharaman said companies continue to expand their presence in the country because India has a large pool of skilled talent capable of supporting AI-led growth and digital transformation.
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