Next phase of India’s consumption growth, the main driver of the economy, depends on wage growth and upward mobility, Finance Minister Nirmala Sitharaman said on Tuesday.
“India stands at a structural inflection point: the next phase of consumption will be driven by upward mobility into brackets where discretionary spending accelerates,” Sitharaman said at All India Management Association’s (AIMA’s) 53rd National Management Convention on Tuesday.
At the same time, demographic changes will alter the composition of household spending, Sitharaman said. As the median age rises, lower youth dependency and greater longevity are expected to shift household budgets towards healthcare, personal wellness, consumer durables and quality services. The minister, however, cautioned corporate India against designing its consumption strategy only around the formal urban elite.
“India’s consumption base rests on working families across agriculture, rural construction, transport, and informal enterprise,” she said, adding that a strategy focused only on premiumisation for urban consumers could undermine the durability of growth.
Private consumption, which accounts for over half of India’s gross domestic product (GDP), grew 7.2 per cent in FY26 as the government offered income tax rebate for earnings upto~12 lakh (~12.75 lakh for the salaried) and rationalised slabs and cut rates under the Goods and Services Tax (GST). India’s GDP rose by 7.8 per cent in FY26.
While the government has set the stage with tax cuts and various other reforms to boost growth, the industry also needs to come forward and support growth by increasing expenditure towards research & development and building trust, the minister said.
Chief Economic Adviser (CEA) V Anantha Nageswaran had on Monday said India’s economic growth can translate into meaningful transformation only when its gains are shared fairly between workers and corporates, Business Standard reported.
Fairness is not an act of charity but a condition for a healthy and sustainable market economy, the report said.
Sitharaman said on Tuesday the next phase of economic expansion would require Indian companies to focus on quality, innovation and higher productivity rather than scale alone.
India’s gross expenditure on research and development (R&D) stands at 0.83 per cent of GDP, significantly below the OECD average of 2.7 per cent, China’s 2.6 per cent and the US’ 3.5 per cent, she said.
The private sector contributes only 36 per cent of India’s total R&D spending, compared with more than 70 per cent in leading advanced economies, she said, urging companies to increase spending on research and development.
“Our ambition must move from ‘Made in India’ to ‘Imagined in India’—products not only manufactured here, but conceived, designed and technologically developed here, and then taken to markets across the world,” Sitharaman said.
She also called for management practices and curricula to adapt to emerging challenges, including geopolitical and supply-chain risks.
“We are living through an unpredictable period in the world economy. We face a parallel shift in the architecture of global trade and supply chains,” the minister said. “In such an environment, resilience cannot mean retreating into economic isolationism. For India, resilience means deep domestic capacity, fiscal strength, and industrial scale, so that global shocks are absorbed without interrupting national development.”
India’s challenge over the next two decades, she said, would be not merely to create more startups but to help existing ones evolve into large, professionally managed and enduring companies.
