India to Achieve Upper-Middle-Income Status by 2030, Joining China: SBI

India is poised to achieve upper-middle-income status by 2030, joining China and Indonesia, according to a recent report from the State Bank of India (SBI). This significant development highlights a transformation in India’s income profile. The report anticipates that India’s per capita income will reach $4,000 within four years, facilitating its transition into this new classification.

India’s Economic Progression

India’s journey towards higher income levels has seen steady progress. It took the country 60 years to transition from low-income status to lower-middle-income, achieving this milestone in 2007. During this period, the gross national income (GNI) per capita increased dramatically from $90 in 1962 to $910 in 2007, with a compound annual growth rate (CAGR) of 5.3%.

The momentum of growth accelerated significantly thereafter. India reached a $1 trillion economy six decades after gaining independence. This threshold was followed by the addition of another trillion dollars in just seven years, the third trillion by 2021, and the fourth trillion projected for 2025. The economy is expected to surpass $5 trillion within the next two years at its current trajectory.

Future Projections

• Per capita income milestones:
  • $1,000 reached in 2009
  • $2,000 achieved in 2019
  • Projected $3,000 by 2026

India’s economic growth has also improved in global rankings. Its percentile rank for average real GDP growth has shifted from the 92nd to the 95th over a 25-year period. This indicates that India is now positioned in the upper echelons of global economic performance.

Goals for High-Income Status

Looking towards the future, India aims to meet the high-income GNI threshold of $13,936 by 2047. To align with the Viksit Bharat vision, the country needs to achieve a CAGR of 7.5% for per capita GNI. Historical data shows that between 2001 and 2024, India’s GNI grew at an 8.3% CAGR, suggesting this goal is attainable.

However, increasing aspirations for high-income status might elevate the threshold to approximately $18,000 by 2047, necessitating a faster growth rate of around 8.9%. Accounting for an average population growth rate of 0.6% and a deflation rate similar to that of advanced economies, nominal GDP growth of about 11.5% will be essential over the next two decades.

Reform and Growth Momentum

Sustaining this growth will require ongoing economic reforms. The transition to upper-middle-income status, with a GNI threshold of around $4,500, appears attainable. Achieving the necessary nominal GDP growth of 11.5% is within the realm of possibility, as India has previously maintained this pace.

Global Context

The World Bank classifies countries into categories based on per capita GNI. These categories include low income, lower-middle income, upper-middle income, and high-income. In 1990, the classification indicated 218 countries: 51 in low income, 56 in lower-middle income, 29 in upper-middle income, and 39 in high-income status. Recent data for 2024 shows a significant shift towards higher income brackets, with 54 countries classified as upper-middle income and 87 as high-income, marking a clear trend of global economic advancement.