India likely to enter upper-middle income group by 2030: SBI Research

According to an SBI Research report, India is expected to enter the World Bank's upper-middle income category by around 2030, though faster growth will be needed to reach high-income status by 2047

India is expected to move into the World Bank’s upper-middle income category by around 2030, with per capita income projected to touch $4,000 within the next four years, according to a report by SBI Research.

 

The assessment is based on trends in gross national income (GNI) per capita and India’s growth record over the past two decades.

 

India became a lower-middle-income country in 2007, after taking about 60 years to move out of the low-income bracket, the report noted. It added that per capita GNI could reach to $4,000 by 2030, placing India in the upper-middle income group alongside countries such as China and Indonesia.

 

 

Notably, while India may take another four years to enter the upper-middle-income category, it is projected to become the world’s third-largest economy by 2028 and reach a $5 trillion gross domestic product (GDP) by 2027-28.

 

How and when will India become a high-income country?

Looking further ahead, the report said India’s ability to reach high-income status by 2047 will depend on the pace of per capita income growth. "If we consider the current per capita GNI threshold for high income country of $13,936 to be reached by 2047, India’s per capita GNI has to grow by a compound annual growth rate (CAGR) of 7.5 per cent," it said, adding that it seems achievable given India's per capita GNI has grown at a compounded annual rate of 8.3 per cent between 2001 and 2024.

 

However, the report cautioned that the high-income threshold is likely to rise over time. "If the threshold for high income country gets changed to $18,000, then India’s per capita GNI needs to grow by a higher rate, CAGR of around 8.9 per cent in the next 23 years," the report noted. 

 

Under this scenario, and assuming average population growth of 0.6 per cent and a deflator of about 2 per cent—based on trends in major economies—India’s nominal GDP in dollar terms would need to grow by roughly 11.5 per cent annually over the next two decades, the report said.

 

"Clearly, India can and will transition to the upper middle-income country, which has the threshold per capita GNI of around $4,500," the report said, adding that sustaining reforms would be critical to achieving the higher growth required to eventually enter the high-income bracket by 2047.