Union Finance Minister Nirmala Sitharaman on Friday said India’s expanding middle class has become the “engine of growth”, with household consumption playing a key role in supporting the country’s post-pandemic economic momentum.
Speaking at a session on “How to promote the rise of a new middle class?” at Les Rencontres Economiques d’Aix-en-Provence 2026 in France, Sitharaman said India’s growth story was being powered not just by investment and reforms, but also by the spending strength of its middle class.
“In India, the middle class is the engine of growth. And since after COVID, you’ve seen India remaining the fastest-growing large economy. Primarily, it is because of the consumption, which is triggering from the middle class,” she said.
Domestic demand remains key growth driver
Her remarks come at a time when domestic demand has remained a key cushion for the Indian economy amid global uncertainty. India’s real GDP grew 7.7% in FY26, while growth in the January-March quarter stood at 7.8%, according to official estimates released by the Ministry of Statistics and Programme Implementation.
Sitharaman said the middle class now accounts for about 31% of India’s population and has expanded steadily since the economic reforms of the 1990s.
“Between 1995 and 2021, the middle class is growing at a 6.3% 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.
Growth beyond metro cities
The Finance Minister said India’s middle-class expansion was no longer limited to major metropolitan centres. A large part of the new demand, she said, was coming from tier-II and tier-III cities, helping spread economic activity beyond traditional urban hubs.
“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.
Tax relief aimed at boosting consumption
The government has repeatedly projected the middle class as central to India’s growth strategy. In Budget 2025, Sitharaman had announced income tax relief under the new tax regime, making annual income of up to Rs 12 lakh tax-free. For salaried taxpayers, the effective limit was Rs 12.75 lakh after the standard deduction of Rs 75,000.
At the time, she had said the move would leave more money in the hands of households, boosting consumption, savings and investment. Indian Express reporting had noted that the change in tax slabs and the higher rebate limit were estimated to benefit at least 1.75 crore citizens.
On Friday, Sitharaman again linked higher disposable income with consumption-led growth. She said individuals earning up to Rs 12 lakh annually do not pay tax under the new regime, allowing households to retain more income.
“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 remarks, Sitharaman said universal health insurance coverage and affordable generic medicines have reduced household expenses, further strengthening the purchasing power of the middle class.
The Finance Minister is presently on a four-day official visit to France in a series of high-level engagements aimed at strengthening the India-France Strategic Partnership and deepening cooperation in investment, technology, innovation and economic ties.
Notably, Sitharaman’s visit comes at a time when the Indian economy is recuperating from the disruption of global supply chains, FII outflows and falling domestic currency pressures that had been sparked by US-Israel’s war with Iran.