In February 2025, the World Bank(WB) released its latest report titled ‘India Country Economic Memorandum, titled ‘Becoming a High-Income Economy in a Generation’, which is a comprehensive analysis of economic developments, prospects, and policy agenda of the country.
- As per the report, India will need to grow by 7.8% on average over the next 22 years to achieve India’s ambitious target of reaching High-Income Nation (HIN) status by 2047.
- The report highlighted though this target is achievable due to India’s strong growth averaging 6.3% between 2000 and 2024, but it still require to introduce reforms and their implementation to be as ambitious the target itself.
Points to Note:
i.The World Bank classifies countries based on their Gross National Income (GNI) per capita.
- Low Income: Countries with a GNI per capita of USD1,045 or less.
- Lower-Middle Income: Countries with a GNI per capita between USD 1,046 and USD 4,095.
- Upper-Middle Income: Countries with a GNI per capita between USD 4,096 and USD 12,535.
- High Income: Countries with a GNI per capita of USD 12,536 or more.
ii.According to the WB, India is a Low-Middle-Income(LMI) country with GNI per capita is between USD 1,136 and USD 4,465 in 2023.
Key Points:
i.The report has outlined 3 growth scenarios for India over the next 22 years, which will enable it to achieve HIN status in a generation, requires:
- Achieving faster and inclusive growth across states;
- Increasing total investment from present 33.5% of Gross Domestic Product (GDP) to 40% (both in real terms) by 2035;
- Increasing overall Labour Force Participation (LFP) from 56.4% to more than 65%; and promoting overall productivity growth.
ii.As per the report, India has the potential to take benefit of its demographic dividend by making investments in human capital, creating enabling conditions for more and better jobs and increasing female LFP rates from 35.6% to 50% by 2047.
iii.The report underscored that for the last 3 fiscal years, India has increased its average growth rate to 7.2% and in order to maintain this as well as to achieve an average growth rate of 7.8% (in real terms) over the next 20 years.
- It has recommended 4 key policy areas: increasing investment; creating more and better job opportunities; promoting structural transformation, trade participation and technology adoption; and enabling states to grow faster and together.
Key Recommendations:
i.The report has recommended to increase both private and public investment from 33.5% to 40% of GDP by 2035. This can be achieved by bolstering financial regulations, easing credit access for Micro, Small and Medium Enterprises (MSMEs) and simplifying Foreign Direct Investment (FDI) policies.
ii.It has further emphasized on expanding LFP currently at 56.4%, by promoting growth in labour-intensive sectors such as agro-processing, hospitality, and transportation, while ensuring skilled workforce and better access to finance.
- It has also recommended that women’s LFP should increase to 55% by 2050.
iii.It has also underscored that structural transformation is crucial, with 45% of workforce in agriculture sector. Thus, it recommended the allocation of land, labour, and capital to more productive sectors like: manufacturing and services, can help enhance firm and labour productivity, along with enabling states to grow faster and together.
iv.The report argued for a differential policy approach, with less developed countries focuses more on fundamental growth sectors like: health, education, and infrastructure, while, developed states promoting next-generation reforms, including business environment improvements and deeper Global Value Chains (GVCs).
About World Bank(WB):
President– Ajay Banga
Headquarters– Washington, DC, the United States of America (USA)
Established– 1944
