Thursday, August 19, 2010
Indian middle class new engine of global growth: ADB
Asia's middle class population, led by China and India, will replace the role of the US and Europe as engines of growth for the world economy, said the Asian Development Bank (ADB) in New Delhi on Thursday.Asian consumers are likely to spend $32 trillion by 2030, accounting for 43 per cent of global total consumption, the ADB said."Developing Asia's rapidly expanding middle class is likely to assume the traditional role of the US and Europe as primary global consumers and help rebalance the global economy," ADB said in its annual statistical report.Asia's middle class – those consuming between $2 and $20 per day, as per the ADB – has grown from 21 per cent of the entire Asian population in 1990 to 56 per cent, or 1.9 billion people, in 2008, the ADB said in its report on 'Key Indicators for Asia and the Pacific'.ADB Chief Economist Jong-Wha Lee, while speaking to the press after the launch of the report, said Asia's middle class population is likely to grow to 2.7 billion by 2030 from the current 1.9 billion people."Asia's consumers spent an estimated $4.3 trillion (in 2005 purchasing power parity dollars), or about one-third of OECD consumption expenditure, in 2008 and by 2030, will likely spend $32 trillion, comprising about 43 per cent of the worldwide consumption," it said.Lee said the middle class in Asia is rapidly increasing its size and purchasing power and will be an increasingly important force in global economic rebalancing. While China has 817 million middle class people, India has 274 million."Asia will be able to move away from export-led to domestic-led consumption growth and reduce its exposure to negative external shocks, such as the 2008 global financial crisis, which began in the US," the report said.On India, the ADB report said the innovative and cheaply priced products like Tata Motor's $2,200 Nano car, Godrej group's $70 battery-operated refrigerator and cheap mobile phone rates targeted at India's booming middle class are helping spur domestic consumption and growth.However, the regional development bank said India's middle class remains vulnerable to economic shocks and carefully calibrated policy measures will be needed to sustain income gains in the longer term."More than 75 per cent of the country's middle class remain in the $2 to $4 daily consumption bracket, the lower end of the range of $2 to $20, leaving them at risk of falling back into poverty in the event of a major economic shock," the bank said.To help unlock the full potential of the Indian middle class as consumers and drivers of growth, the government must continue to remove structural and policy impediments to development and improve income distribution, it said.