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Achieving High-Income Status by 2047
Context:
India will need to sustain an average annual growth rate of 7.8% over the next 22 years to achieve its goal of becoming a high-income economy by 2047, according to a new World Bank report.
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- While India’s rapid growth, averaging 6.3% between 2000 and 2024, has laid a strong foundation for future aspirations, the report highlights that achieving this ambitious target will require bold and extensive reforms.
Path to High-Income Status
- Going Beyond Business-as-Usual: India’s economy is projected to expand by 6.5% in the current financial year. However, the report, titled Becoming a High-Income Economy in a Generation, emphasises that reaching high-income status will not be possible under a business-as-usual scenario.
- GNI: The country’s Gross National Income (GNI) per capita would need to increase nearly eightfold from its current levels, requiring accelerated and sustained economic growth over the next two decades—an achievement that only a few countries have managed.
- Integration with Global Economy: Lessons from countries like Chile, Korea, and Poland show how they successfully transitioned from middle-income to high-income status by deepening their integration into the global economy.
Key Growth Scenarios and Requirements
- The report outlines three possible growth scenarios for India’s economic trajectory over the next 22 years. The scenario that enables India to reach high-income status requires:
- Achieving faster and inclusive growth across all states.
- Increasing total investment from 33.5% of GDP to 40% (in real terms) by 2035.
- Raising overall labor force participation from 56.4% to above 65%.
- Accelerating overall productivity growth.
- To meet these targets, India must implement significant reforms in the financial sector, land and labor markets, and infrastructure development.
- Additionally, leveraging digital transformation, boosting human capital, and enhancing macroeconomic stability will be crucial in sustaining high growth rates.
India’s Economic Achievements and Future Aspirations
- Reforms: In recent years, India has introduced various structural reforms aimed at transforming the nation into a global manufacturing hub, strengthening infrastructure, and improving human capital.
- Macroeconomic Stability: Simultaneously, the country has made significant strides in macroeconomic stability and digital integration.
- Outcome: As a result, India’s share in the global economy has doubled from 1.6% in 2000 to 3.4% in 2023, making it the world’s fifth-largest economy.
- Decline in Poverty: The country has also witnessed a substantial decline in extreme poverty and a significant expansion in essential infrastructure and service delivery.
The World Bank’s report evaluates India’s economic and social progress over the past two decades, examines current challenges, and provides strategic recommendations to ensure sustainable and inclusive long-term growth. As India aims for high-income status, the successful execution of these recommendations will be vital in shaping the country’s economic future.
