New Delhi: Finance Minister Nirmala Sitharaman projected that India’s per capita income will double within the next five years, driven by the country’s burgeoning youth population and expanding middle class. Speaking at the third Kautilya Economic Conclave on Friday, Sitharaman highlighted that India’s per capita income is expected to rise by an additional $2,000 by 2028, marking a significant improvement in living standards across the nation.
The minister attributed this rapid growth to the demographic advantage India enjoys, with 43% of its population under the age of 24. “India’s young population has not yet fully explored its consumption potential,” Sitharaman noted, adding that, as these young individuals grow into “full-fledged consumers,” there will be an organic boost in domestic demand. She emphasized that this would lead to a surge in consumption, which, in turn, would stimulate innovation, attract foreign investment, and create a vibrant marketplace.
Middle class driving growth
In addition to the youth demographic, the minister emphasized the role of India’s rising middle class in driving the nation’s economic growth. The expanding middle class, known for its consumption-driven lifestyle, will further enhance domestic demand for goods and services, bolstering economic growth in the years to come. “A rising middle class will pave the way for strong consumption, inflow of foreign investment, and a vibrant marketplace,” Sitharaman said during the conclave.
Sitharaman also acknowledged the recent achievements of India’s economy, highlighting the country’s leap from the tenth to the fifth largest economy within just five years. She pointed out that these achievements were supported by high growth rates and stable inflation, which have helped elevate India’s global standing.
Rapid increase in per capita income
India’s per capita income, which currently stands at $2,730, took 75 years to reach this level. However, according to projections by the International Monetary Fund (IMF), it will take only five years to add another $2,000, underscoring the accelerated pace of economic progress. The finance minister described this period as a “defining era” for India, with the rapid rise in income levels bringing substantial improvements in the quality of life for millions.
“The upcoming decades will see the steepest rise in living standards for the common man, truly making it a period-defining era for an Indian to live in,” Sitharaman remarked.
The rise in income is also expected to be accompanied by a decline in income inequality. Sitharaman pointed out that the Gini coefficient, a statistical measure of income inequality, has already shown a decline in both rural and urban areas, indicating more equitable growth.
Impact of economic reforms
Sitharaman credited the government’s economic and structural reforms for this positive outlook. Over the last decade, these reforms have contributed to an environment conducive to sustainable economic growth. As the effects of these reforms continue to unfold, the minister projected further improvements in the nation’s economic trajectory.
She added that these reforms will be critical in helping India navigate the current global economic environment, which is less favorable than the conditions enjoyed by countries like China during the early 2000s. Despite this challenge, she noted that India’s proactive diplomatic efforts, such as its leadership during the G20 presidency, have positioned the country well for sustainable growth.
Fiscal discipline and investment growth
Sitharaman also emphasized the importance of fiscal discipline in maintaining the country’s growth momentum. The government’s focus on curbing the fiscal deficit is expected to help control bond yields and reduce borrowing costs across the economy. “The fiscal deficit is estimated to decline from 5.6% of GDP in FY24 to 4.9% in FY25,” she said, noting that the quality of government expenditure continues to improve.
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Capital expenditure is projected to grow by 17.1% in the current fiscal year, reaching ₹11.1 lakh crore. This increase in investment, which accounts for 3.4% of GDP, is a strong indicator of the government’s commitment to long-term economic growth. A larger share of the fiscal deficit is now being allocated to capital outlays, reflecting an investment-oriented approach to deficit financing.
Sitharaman also noted that falling commodity prices, particularly in the fertilizer and fuel sectors, have allowed the government to reduce its allocation for subsidies. This has helped restrain the growth of revenue expenditure while ensuring continuity in key policies.
Future of innovation
Looking ahead, the finance minister expressed optimism about India’s potential for innovation. She said the country’s ability to innovate will mature and improve in the coming decades, creating a fertile environment for technological advancements and economic growth. “India’s innovation ability will mature and improve over the coming decades,” Sitharaman concluded, stressing that these factors will contribute to India’s sustained economic success in the years to come.
