Aditi Sharma
Viksit Bharat 2047 envisions transforming India into a developed nation. The Government has set clear milestones: achieving upper-middle-income status (per capita income between $4,496 and $13,935) by 2030 and high-income status by 2047. Yet, at present, India remains a lower-middle-income country and continues to have the lowest GDP per capita among G20 nations.
From poverty reduction to income transition
The World Bank’s revised international extreme poverty line is $3.00 per day, amounting to about $1,095 annually – below the lower-middle-income country (LMIC) threshold of $1,136 to $4,495 per capita. Based on this $3 line, 5.3 pc of India’s population in 2022 lived in extreme poverty.
However, since India is classified as a lower-middle-income country, the more appropriate benchmark is the LMIC poverty line of $4.20 per day. At this level, nearly 24 pc of the population remains poor.
Broad challenge
These numbers reveal a challenge that is broad rather than deep. Extreme deprivation has narrowed, but economic vulnerability remains widespread. This distinction is crucial. India’s inclusive growth strategy cannot focus solely on eliminating extreme poverty. The larger task lies in supporting the much wider segment of low-income and vulnerable households.
For this quarter of the population, development cannot be measured merely by marginal improvements in health or education indicators, nor by lifting them just above a statistical poverty band. What they require is sustained income growth, productive employment, and economic resilience.
The Union Budget 2026–27 recognises this reality in its second kartavya: fulfilling aspirations and building the capacity of 25 crore individuals who have emerged from multidimensional poverty. Addressing these aspirations demands structural reform rather than temporary relief. The framework that emerges out of the Budget rests on three reinforcing pillars – strengthening MSMEs, deepening the services sector, and improving ease-of-living.
Structural bottlenecks
The MSME sector forms the backbone of the country’s productive economy. MSMEs remain central to broad-based growth. Yet their potential is often constrained by structural bottlenecks, particularly delayed payments and limited access to affordable working capital.
Reforms around the Trade Receivables Discounting System (TReDS), as proposed in the Budget, aim to ease these constraints. Mandating TReDS usage for Central Public Sector Enterprise (CPSE) procurement can ensure timely payments while signalling best practice to the private sector. Expanded credit guarantee support through CGTMSE reduces lender risk and encourages greater credit flow.
However, liquidity reform alone will not secure long-term competitiveness. MSMEs must also adopt technology, invest in skilling, integrate into value chains, and operate within a more predictable regulatory environment.
Alongside MSMEs, the Budget signals renewed emphasis on the services sector, marking a calibrated shift from a singular manufacturing focus. This reflects the structural reality of India’s economy, where services already account for a substantial share of output and employment.
AI-resilient sectors
To guide this transition, a high-powered ‘Education to Employment and Enterprise’ standing committee is proposed. Its mandate is to identify priority growth areas and align education outcomes with evolving labour market needs — particularly in an era shaped by AI-led disruption.
The Economic Survey and Budget also identify AI-resilient sectors, including the care economy and other skill-intensive domains, as pathways for sustainable employment. Rather than viewing technological change solely as displacement, the approach recognises the need to channel workforce preparation towards sectors where demand is durable and human skills remain central. In this sense, the services pillar is not simply about expanding output. It is about matching capability with opportunity — ensuring that new aspiration is supported by employability.
Compliance complexity
As formalisation expands, the everyday economic interaction between citizens and the state becomes increasingly significant. From 2013-14 to 2024-25, the number of taxpayers more than doubled to 12.13 crore, and this base will continue to grow as incomes of the people lifted out of multidimensional poverty will rise. The third pillar, therefore, addresses the experience of economic compliance.
Tax simplification, reduced TCS on overseas education, travel, and medical remittances, clarification of TDS provisions, and automatic issuance of lower or nil deduction certificates for eligible taxpayers all aim to reduce friction. Dispute resolution reforms allow honest taxpayers to settle cases through structured payments rather than prolonged penalty proceedings. Customs rationalisation further lowers transactional burdens.
These measures may appear administrative, but their impact is tangible. Reduced compliance complexity improves liquidity, lowers uncertainty, and strengthens confidence — particularly for households transitioning into formal economic participation.
New citizen class
India has lifted millions out of multidimensional poverty. That is a monumental achievement. But survival is not aspiration. Today’s India is home to a new class of citizens: families who are no longer desperately poor but not yet economically secure. Taken together, the three pillars – MSMEs, Services, and Ease-of-Living – reflect an evolution in India’s development strategy. They shift the emphasis from direct social intervention towards enabling broad-based income transformation.
Viksit Bharat will ultimately depend not only on reducing poverty ratios but also on strengthening the institutional foundations through which citizens earn, invest, and scale their efforts. The first phase built protection. The next must build progression.
(The writer is Research Consultant at Chintan Research Foundation’s Centre for Economy and Trade. The above article is an abridged version of her column published on the CRF website)
India’s inclusive growth strategy cannot focus solely on eliminating extreme poverty. The larger task lies in supporting the much wider segment of low-income and vulnerable households