I-Day speech: PM bets on middle class beyond metros to power next growth phase

India’s economic growth ambitions are predicated upon the emergent spending power of the neo-middle class, whose ranks, the Prime Minister said, has surged as development lifts millions of people out of poverty.

On August 15, 2023, delivering his Independence Day speech from the ramparts of the Red Fort, Prime Minister Narendra Modi reiterated his ‘guarantee’ of India breaking into the club of the ‘top three economies of the world’ in the next five years.

Importantly, the Prime Minister turned his lens on the swelling middle class to power the next phase of India’s growth boom. “In the last five years, more than 13.5 crore people came out of poverty and became a part of the neo-middle and middle classes," Modi said.

The first visible signs of an expanding economy can be spotted in the neighbourhood malls and shopping areas. Household spending, driven by a growing middle class, has been the edifice of the India growth story.

Also read: 'Bharat Mata' is voice of every Indian: Rahul Gandhi on I-Day

India’s economic growth ambitions are predicated upon the emergent spending power of the neo-middle class, whose ranks, the Prime Minister said, has surged as development lifts millions of people out of poverty.

Tier II & III cities hold the key

Data does show growing economic and entrepreneurial activity in smaller towns—often described as Tier-I and Tier-II cities. According to government data, Tier II & III cities account for nearly half of recognised startups In India.

“The regional growth through the efforts of States and Union Territories (UTs) has created a national ecosystem to give a thrust to our economic objectives. There is at least one recognised startup from every State and UT and nearly 50 percent of the recognised startups are from Tier-II and III cities. Recognised startups are spread across 640 districts and have reported the creation of more than 7 lakh jobs, with an average of 11 jobs created by a recognised startup”, Minister of Commerce and Industry, Piyush Goyal, said in a reply to the Rajya Sabha on March 25, 2022.

By 2047, the middle class is projected to make up for 61 percent (about 1.22 billion) of India’s total population of about 1.66 billion, according to PRICE’s ICE 360 pan-India survey of 200,000 households, conducted across three cycles in 2014, 2016, and 2021. This is a significant jump from 432 million (about 32 percent) of the total population of 1.3 billion in 2021.

The survey defined the middle-class as households with an annual income of between Rs 5 lakh and Rs 30 lakh. This category was further divided into “seekers”, or those earning between Rs 5-15 lakh annually, and “strivers” who earn Rs 15-30 lakh.

“By 2047, if political and economic reforms have their desired effect, the India income pyramid will have a smallish layer at the bottom comprising the Destitute and Aspirer groups, a huge bulge of the middle class and a big creamy ‘rich’ layer on top,” says the report.

The average annual household disposable income is set to rise to about Rs 20 lakh ($27,000) at 2020-21 prices. “This growth will not only make the Indian Middle Class the biggest income group in the country in numerical terms, but it will also transform it into a major driver of economic, political and social growth,” PRICE’s ICE360 survey said.

Also read: Independence Day 2023: Hotel bookings jump 2.5 times as long I-Day weekend boosts travels

Foreign trade policy target

The foreign trade policy announced on March 31, 2023, has set an ambitious export target of $760 billion by 2030, riding upon, among other things,  by emerging areas and e-Commerce Developing Districts as Export Hubs and streamlining SCOMET (Special Chemicals, Organisms, Materials, Equipment and Technologies) policy.

For India to make a decisive leap forward, the backward districts have to figure prominently when policymakers sit down in Delhi and state capitals to draw development plans.

The multiplier effect of new world class infrastructure, such as the Poorvanchal Expressway, Delhi-Dehradun Highway, the new Delhi-Mumbai expressway, the Bengaluru-Chennai expressway, and the Delhi-Srinagar expressway spread far beyond the roads’ visible horizons.

The emphasis on seamless multi-modal connectivity through Pradhan Mantri Gati Shakti National Master Plan and national waterways draws from the premise that these will unleash strong economic benefits encompassing logistics and trade.

Such active waterways have made large areas of the hinterland accessible to the routes of trade and commerce, making goods from these areas part of the national and global supply chain network, opening up new markets for everyone—from farmers to craftspeople to factories.

Analysts sometimes describe India as a veritable mix of three geographies: Europe, Indonesia, and Sub-Saharan Africa. By 2047, (conditions apply), much of this would have merged closer to current day Europe, which the Prime Minister has envisioned in his Independence Day speech.