Continued rise in business productivity and competitiveness of Indian economy is likely to inflate incomes in the country by almost three times over the next two decades, according to a latest McKinsey study.

The rising income levels would lift 291 million people out of poverty and create a 583 million strong middle class in the next two decades, a report from McKinsey Global Institute reveals.

If India maintains the growth momentum over the next 20 years, income levels would almost triple, it added.

"Average real household disposable income will grow to Rs 318,896 (a year) by 2025 from Rs 113,744 in 2005," the global consultancy firm said. McKinsey is optimistic about India's economic growth rate and forecasts a real compound annual growth of 7.3 per cent from 2005-2025, a marked acceleration from the 6 per cent growth of the previous two decades.

"We believe the optimism is justified because of the substantial scope for continued productivity increases in Indian businesses, growing openness and competitiveness of the Indian economy and favourable demographic trends," it said.

The study titled 'The Bird of Gold' shows that India's rising income has already made a significant impact on poverty reduction. In 1985, 93 per cent of the population had an annual household income of less than Rs 90,000 a year which dropped by about two-fifth to 54 per cent in 2005.

More than 103 million people have moved out of desperate poverty in the course of one generation in urban and rural areas as well.

"In short, India's economic reforms and the increased growth that has resulted have been the most successful anti poverty programmes in the country," the McKinsey report said.

Interestingly, the research firm forecasts that overall economic growth would continue to benefit India's poorest citizens and the deprived segment would further drop to 22 per cent by 2025 from 25 per cent of the population in 2005.

"Overall, a further 291 million people will move out of poverty during a period when 32.2 million people will be added to the country's population. In effect, India will have 465 million fewer poor by 2025 than if the poverty rate remained at 2005 levels," the report said.

Besides, as Indian incomes rise the shape of the country's income pyramid would also change dramatically. Apart from substantial poverty reduction, India will create a sizeable and largely urban middle class.

In 2005, the Indian middle class was still relatively small, comprising about 5 per cent of the population or 13 million households.

"However, if India achieves the growth rates we assume its middle class would reach 41 per cent of the population or 12.8 crore (128 million) households by 2025," it said.

In addition, households with real earnings of more than Rs 1,000,000 a year would comprise about 2 per cent of the population but earn almost a quarter of its income.

If India sustains and accelerates its economic growth, it would jump into the premier league of the world's consumer markets by 2025 and would be ranked as fifth largest from its current 12th rank, surpassing Germany.

By then, the middle class would grow almost 12 times, from 5 crore (50 million) today to 58.3 crore (583 million), while over 2.3 crore (23 million) Indians would number among the country's wealthiest citizens.