India's Economic Transition and Challenges
In 2007-08, India was classified as a low middle income country, with a per capita income of $1,022 according to the International Monetary Fund (IMF). By 2024, this amount is estimated to increase to $2,697. The World Bank has set the threshold for transitioning to an upper middle income status at a per capita income of $4,516 by 2024-25.
Current Projections
- The IMF projects India's per capita income to reach $4,195 by 2029.
- India is on track to become an upper middle income economy by 2032, according to the World Bank.
- The challenge remains for India to become a high income developed country by 2047.
Middle Income Trap
Few countries have successfully transitioned from middle income to high income status, with South Korea, Czech Republic, and Romania as examples. Countries like Brazil, South Africa, and Malaysia have struggled with the middle income trap.
Growth Requirements
A recent World Bank report titled ‘Becoming a high-income economy in a generation’ suggests India needs to grow at 7.8% over the coming decades to achieve high income status by 2047. Historically, India grew at 6.7% over the two decades before the COVID-19 pandemic.
Policy Agenda for Growth
- Promoting structural transformation.
- Increasing investments and enabling states to grow faster.
- Facilitating the creation of more productive jobs and technology adoption.
The World Bank's "accelerated reforms" scenario aims for:
- Investment to GDP ratio rising to 40% by 2035 (currently around 33%).
- Female labor force participation increasing to 55% by 2050 (currently at 41.7% for ages 15 and above).
- Higher productivity and deeper, wide-ranging reforms by both central and state governments.
- There is an increase in employment in agriculture, with 46.1% of workers engaged in the sector in 2023-24, up from 44.1% in 2017-18.
