Blitz Bureau
India is among the world’s largest and fastest-growing major economies and is widely projected to become the third-largest economy by 2028, behind only the United States and China, after overtaking Germany. Yet the latest World Bank income classification underlines that economic size alone does not guarantee prosperity. While several Asian neighbours have climbed into the upper-middleincome league, India remains in the lower-middle-income category, where it has stayed since 2007.
The World Bank classifies countries according to Gross National Income (GNI) per capita rather than total GDP. India’s per capita GNI is estimated around $2,500-$2,700, placing it within the lower-middle-income bracket of $1,136-$4,495. To qualify as an upper-middle-income economy, India must raise per capita income to at least $4,496, a milestone that remains some distance away despite sustained economic growth. The classification is based on the average income earned by each citizen rather than the overall size or growth rate of the economy.
Revealing comparison
The comparison with Asia is revealing. Sri Lanka has regained upper-middle-income status after recovering from its 2022 economic crisis through fiscal reforms, debt restructuring, stronger tourism, financial services and higher remittances. Vietnam has transformed itself into a global manufacturing powerhouse by attracting multinational investment, expanding exports and integrating deeply into global supply chains. The Philippines has also joined the upper-middle-income group after years of broad-based growth across manufacturing, services and business process outsourcing.
Today, all five major Southeast Asian economies – Singapore, Malaysia, Thailand, Vietnam and the Philippines – are classified as upper-middleincome or high-income economies. China crossed into the upper-middleincome category more than a decade ago after decades of export-led industrialisation and rising productivity. India’s continued presence in the lower-middle-income group, therefore, highlights not weak growth but the magnitude of the development challenge it still faces.
Economic gains in India are spread across far more people than in most Asian economies, meaning that even rapid GDP growth translates into slower increases in average income
Part of the explanation lies in the country’s population of more than 1.4 billion. Economic gains are spread across far more people than in most Asian economies, meaning that even rapid GDP growth translates into slower increases in average income. However, demographics alone do not explain the gap. Countries such as Vietnam consistently invested in manufacturing, logistics, education, export competitiveness and policy certainty, enabling millions of workers to move into higher-productivity, better-paying jobs.
The real milestone
For India to match its Asian peers, the focus must shift from growth alone to income growth. Expanding labourintensive manufacturing, integrating deeper into global value chains, boosting exports, improving education and skills, increasing female workforce participation, modernising agriculture, strengthening urban infrastructure, encouraging innovation and helping small enterprises scale up will raise productivity and wages.
India’s real economic milestone will not merely be becoming the world’s third-largest economy, but ensuring that prosperity reaches every household through steadily rising incomes, better employment opportunities and sustained improvements in living standards.
