Union Finance Minister Nirmala Sitharaman said at the ‘Rencontres Economiques d’Aix-en-Provence’ in France that India’s middle class is going to become an even bigger engine of growth. It is expected that by 2036, 93 percent of the total expenditure in India will come from the middle class and aspirational consumers. He said that the geographical basis of this growth is also changing.
Nearly 500 cities are set to emerge as new centers of economic activity, and unlike many other economies, India’s middle class is not limited to Mumbai, Delhi, Bengaluru or Chennai. He said that on the contrary, they are also present in tier-2 and tier-3 cities. Therefore, the distribution of wealth actually seems to be expanding beyond the metros to the cities themselves.
Middle class is continuously increasing in India
Sitharaman described the middle class as “not just a beneficiary of growth, but an engine of growth” and said that consumption is the main reason that starts the virtuous cycle of economic activities. Today, 31 percent of India’s population belongs to the middle class and this class has grown at the rate of 6.3 percent annually since 1995. According to OECD estimates, India will overtake China in terms of the total size of the middle class population between 2030 and 2035.
The minister explained how efforts have been made to expand the middle class from low-income groups through policies. The first step was financial inclusion through Jan Dhan accounts launched in 2014. Citing World Bank and IMF data, he said that 248 million people have come out of multidimensional poverty, many of whom joined the formal banking system through these accounts.
provide concessional loans
To promote entrepreneurship, the government provided sovereign-guaranteed concessional loans so that even borrowers without collateral could start small businesses. He said that since then many people have taken big loans and improved their credit scores. Digital infrastructure was the second main pillar. Payment and banking services were made available not only on smartphones but also on feature phones and in regional languages, helping informal businesses become formal and improve their creditworthiness.
Tax free income up to Rs 12 lakh
Talking about taxation and welfare schemes, Sitharaman said that the income tax exemption limit was increased from Rs 2.5 lakh to Rs 12 lakh, due to which families had more money (disposable income) available to spend. GST rates on many items were cut to support consumption and small businesses. In the health sector, every family gets an insurance cover of Rs 5 lakh annually under a cashless scheme and generic medicines are available at up to 80 per cent lower prices from Citizens Pharmacy.
Government is building five university townships
For skill development, the government is funding girls’ hostels for STEM education in every district and creating five university townships for training. Besides, the government is also skilling the youth in AVGC (Audio-Visual, Graphics and Gaming) so that they can meet the needs of India’s film, OTT and export markets. He said that reforms help the middle class. And that is why today they are the engines of India’s growth.
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