India's Economic Transformation: Rural Poor Closing Wealth Gap as Asset Ownership Soars

Nirmala Sitharaman stated, "The Rural Poor have experienced a significant growth in purchasing power".

New Delhi:

Union Finance Minister Nirmala Sitharaman informed parliament on Monday that growth over the past decade has been "broad-based" and the consumption gap between rich and poor across both urban and rural India is rapidly diminishing. She described India as the fastest growing major economy, advancing at a rate of 8.2 percent while global economic growth stands at 3.2 percent, using consumption patterns to illustrate her point.

According to Sitharaman, actual household consumption data reveals that the Bottom 40 percent (B40) of the population is acquiring wealth and assets at a significantly faster pace than the Top 20 percent (T20). The inequality in asset ownership has rapidly declined, particularly for essential assets like motor vehicles and refrigerators.

The minister emphasized that this trend is most evident in rural areas. Among the rural poor, "asset poverty" - defined as households owning none of the key assets - has dramatically decreased from approximately 30 percent to merely 5 percent. "The Rural Poor have experienced a significant growth in purchasing power," she noted.

Cellphone ownership has become nearly universal, increasing from 66.5 percent to 94.3 percent. Refrigerator ownership has grown eight-fold, rising from 2.9 percent to 22.5 percent. Between 2011-12 and 2023-24, ownership of motor vehicles has surged seven-fold, from 6.2 percent to 47.1 percent.

"In Urban India, the consumption gap is not just closing, for some assets, it has completely reversed," Sitharaman remarked. For the first time, the Bottom 40 percent in urban areas possess more televisions (77.4 percent) than the Top 20 percent (72.1 percent).

"The ownership gap for aspirational goods like refrigerators in urban areas collapsed from 46.3 percentage points in 2011-12 to just 12.3 percentage points in 2023-24," she added.

This remarkable growth, the minister explained, is why every global institution is raising their growth outlook for India in the current fiscal year. Emphasizing that "no dead economy gets a credit rating upgrade," she noted that India has received rating upgrades from three major global agencies - Morningstar DBRS, S&P, and R&I.

Despite the once-in-a-century COVID-19 pandemic, India has consistently remained the fastest growing major economy for three to four years, she said.

"Is it not something that the people of India should be recognized for? India had to deal with high twin deficits - both fiscal deficit, which was 4.9 percent in FY13, and current account deficit, which was 4.8 percent at the time. Inflation in food articles averaged 12.2 percent annually in the five years ending 2013-14," she added.