Sitharaman calls middle class growth engine; 500 cities to drive next wave of economic activity

New Delhi: Finance Minister Nirmala Sitharaman, addressing a panel on “How to promote the rise of a new middle class,” outlined a vision where India’s economic rise is anchored not in its traditional metropolises alone, but in a broad-based surge of affluence across tier-two and tier-three cities.

She cited an OECD study indicating that India’s middle class, expanding at 6.3 percent a year since the economy was opened up, will outstrip China’s in absolute terms within the next decade. “We think 93 percent of all spending in India will be because of the middle class or the slightly affluent consumers,” she said, noting that this demographic is no longer concentrated in metropolitan hubs but spread widely across smaller cities.

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This geographic diffusion, she argued, means wealth distribution is “automatically seen spreading to cities beyond the metropolitan,” creating a nationwide consumption base. “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,” Sitharaman said. She highlighted that India remains the fastest-growing large economy post-Covid, primarily due to this middle-class-driven consumption bonanza.

To further expand the middle class, the government has pursued financial inclusion, rationalised GST rates, offered collateral-free loans, and pushed the Pradhan Mantri Awas Yojana for housing. These measures, she said, are designed to lift more households into the middle-income bracket and sustain demand-led growth.

On technology, Sitharaman stressed that the middle class is increasingly positioned to benefit from artificial intelligence, provided it continuously upgrades its skills. “People are continuously upgrading their technical skills to stay ahead,” she said. For those worried about AI-driven job displacement, she pointed to extensive government support through AI-focused skilling programmes, including AI skilling camps organised in partnership with the private sector at the district level.

The result, she argued, is a middle class increasingly capable of seizing emerging opportunities in India’s evolving economy. One indicator of this transformation, she noted, is that nearly 40 percent of India’s exports now come from micro, small and medium enterprises (MSMEs), which are rapidly adopting AI-driven business models and seeking skilled professionals to deliver AI-based solutions.

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Sitharaman also highlighted India’s rise as a leading destination for Global Capability Centres (GCCs) and data centres. Companies, she said, continue to expand their presence in the country because India offers a large pool of skilled talent capable of supporting AI-led growth and digital transformation.

In her overall message, the Finance Minister presented a dual narrative: India’s next growth phase will be driven by a widening, geographically dispersed middle class, and that this class must be continuously equipped with AI and digital skills to remain at the centre of the country’s economic ascent.

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