'Middle class is India's engine of growth': Nirmala Sitharaman on how reforms drive consumption

Union Finance Minister Nirmala Sitharaman on Friday described India's expanding middle class as the country's "engine of growth", saying that rising consumption, backed by financial inclusion, digital infrastructure, tax reforms and welfare initiatives, has played a crucial role in driving the economy.

Speaking at a session titled "How to promote the rise of a new middle class?" during Les Rencontres Économiques d'Aix-en-Provence 2026 in France, Sitharaman said middle-class consumption has been one of the strongest contributors to India's economic expansion in the years following the pandemic.

"In India, the middle class is the engine of growth. And since COVID, you've seen India remaining the fastest- growing large economy. Primarily, it is because of the consumption, which is triggered by the middle class," she said.

The Finance Minister noted that the middle class now represents around 31 per cent of India's population and has continued to grow steadily since the country's economic liberalisation.

"Between 1995 and 2021... the middle class is growing at a 6.3 per cent annual rate. And as per OECD's projection, India will surpass China in absolute number terms in its middle class population size between 2030 and 2035," she said.

She said this expanding segment has emerged as a key pillar of economic resilience and domestic demand.

"We see the middle class not just as a beneficiary of growth, but actually the engines of growth. It is their consumption... which is making the economy grow," Sitharaman said.

Sitharaman also emphasised that India's development model has ensured that the benefits of growth are not confined to major metropolitan centres. Instead, the middle class has expanded significantly across tier-II and tier-III cities, helping spread economic opportunities and consumption across a wider geographic base.

Explaining the government's strategy to broaden the middle-income segment, she said initiatives such as Jan Dhan financial inclusion accounts, improved access to institutional credit and the rapid expansion of digital payment systems have enabled millions of people to become part of the formal economy.

She added that collateral-free government-backed lending programmes have empowered small entrepreneurs to establish businesses, improve their financial standing and build credit histories. At the same time, digital payment platforms, including those accessible through feature phones, have made financial services available to a much larger section of the population.

Highlighting policy measures aimed at supporting the middle class, Sitharaman said the government has rationalised GST rates on several goods, increased investments in education and skill development, particularly to encourage greater participation of women in STEM disciplines, and introduced training programmes in emerging industries such as animation, visual effects, gaming and digital content creation.

She further said that recent income tax relief measures are expected to leave more disposable income in the hands of households, thereby supporting higher consumer spending and economic activity.

"People earning 1.2 million rupees up to that number don't pay any tax at all. As a result we've allowed people to have more money in their hands which again goes into the consumption cycle," she said.

Concluding her address, the Finance Minister said initiatives such as universal health insurance coverage and wider availability of affordable generic medicines have helped reduce household healthcare expenses, enhancing the purchasing power of India's middle class.

Sitharaman is currently on a four-day official visit to France, where she is participating in a series of high-level meetings focused on strengthening the India-France Strategic Partnership and expanding cooperation in areas including investment, technology, innovation and economic relations.