World Bank Income Classification: Why India Hasn't Moved Up Yet

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By Prof. S.S. SOMRA

India continues to rank as a lower-middle income country despite its rapid economic expansion and status as one of the world’s largest economies. This opinion piece explores why per capita income, rather than GDP alone, will determine India’s transition to upper-middle income status and its journey toward Developed India 2047.

Jaipur, July 5, 2026 — The latest income classification of countries released by the World Bank on 1st July, 2026 places India back in the Lower Middle Income category. India has remained in this category since 2007. At first glance, this fact appears surprising, as India is among the world’s fastest-growing major economies and has established itself among the world’s top economies based on total gross domestic product (GDP). India’s current per capita GNI is approximately US$2500–2700, while to enter the upper-middle income category, it should be US$4496 or more. The World Bank reclassifies countries based on their per capita GNI of the previous calendar year on July 1st each year.

The Atlas Method is used, which reduces the impact of short-term exchange rate fluctuations. Income classification is not merely a statistical exercise; it also forms the basis for a country’s development assistance, concessional loan eligibility, and global economic comparisons. Economic growth is not the only determining factor in this classification, but factors such as population growth, national accounts revisions, inflation, and exchange rates also play a significant role.

India’s economy has been consistently performing strongly over the past few years. Investment in infrastructure, the expansion of the digital economy, a boost to the manufacturing sector, a strengthening of the services sector, and structural reforms have accelerated economic growth.

However, in a country with a population of over 1.4 billion, national income gains are relatively slow at the per capita level. This is why India’s continued presence in the lower-middle income category reflects its population structure more than the limitations of its development journey.

This year, the World Bank included Sri Lanka, Vietnam, and the Philippines in the upper-middle income category. These countries’ successes stem from different factors. Vietnam achieved sustained high economic growth through export-led manufacturing and attracting global investment.

The Philippines achieved balanced growth across all major sectors through broad economic expansion. Sri Lanka, after a severe economic crisis in 2022, made a remarkable comeback on the strength of tourism, financial reforms, debt restructuring, and remittances from Indian expatriates.

These examples illustrate that rapid economic growth alone is not enough; stable policies, productive investment, export potential, and sustained growth in per capita income are equally essential.

India needs to move into the upper-middle income category in the next few years., GDP growth alone will not be enough. This will require a development model that accelerating labor-intensive manufacturing, expanding productive employment from agriculture to industry and services, investing in skills development and human capital, improving the quality of education and health, increasing women’s labor force participation, promoting export competitiveness and technological innovation, reducing regional and income disparities at the center.

The World Bank’s income classification is certainly an important indicator of a country’s economic situation, but it is not the only measure of development. A nation’s true progress should also be measured by its citizens’ living standards, quality employment, social security, education, health, and equal access to opportunities.

India today stands at a juncture where it has the opportunity to transform rapid economic growth into widespread social prosperity. If the benefits of development reach every segment of society and per capita income continues to rise, entering the upper-middle income group will not be merely a statistical achievement but a symbol of a real improvement in the living standards of millions of Indians.

India’s continued presence in the lower-middle income group is not a cause for disappointment, but rather a clear signal to policymakers that the next phase of development should shift from “high GDP” to “high per capita income.”

A strategy of economic expansion, productive employment, investment in human capital and inclusive growth will not only propel India to the next World Bank income category but also provide a more realistic basis for the goal of “Developed India 2047”.

(This is an opinion piece. Views expressed are the author’s own.)