Let a middle-class boom fend off a middle-income trap

livemint.com:

₹1 lakh per year, will grow faster than its upper end. The middle class currently represents 31% of India’s population and is expected to reach 40% by 2031. The room for growth is huge, given the big gap in average income between India and developed countries and India’s large youth bulge in a rapidly ageing world.

This class is driving consumption growth, which in turn is driving rapid economic growth. India’s economy has been boosted by large investments from global technology majors . These firms are attracted to a large and fast-growing consumer market. New households entering India’s middle class buy more consumer durables than this class does in Europe and the US. Burgeoning demand for all kinds of durables, from cars to refrigerators, can be traced to this class.

Young and dynamic: India’s favourable demographic trend has set the stage for a continued rise of the middle class. India is poised to experience a fast increase in its working-age share of the population. This gain will likely be augmented by greater participation of women in the labour force.

Industrialization has large fixed costs and international trade can be costly, with many developing countries unable to find the capital for it. However, India’s demographic dividend and rising middle class can help enable the country to overcome that problem. The number of people with sufficient income to buy products and also save money is increasing rapidly.

This has the potential to create a virtuous cycle of increased incomes, savings, investments and higher economic growth. Although a massive shift towards a middle-class society is already in the making, there are concerns that we may face a middle-income trap. China, notably, has slowed down and many other