India needs to achieve average growth rate of 7.8% to become high-income economy by 2047: World Bank

The World Bank in its India Country Memorandum titled ‘Becoming a High-Income Economy in a generation’ has said that India will need to accelerate reforms to achieve an average annual growth rate of 7.8 per cent for becoming a high-income economy by 2047. In order to achieve this goal India would require reforms in financial sector as well as in land and labour market. Recognizing India’s fast pace of growth averaging 6.3 per cent between 2000 and 2024, the report notes that India’s past achievements provide the foundation for its future ambitions. In recent years, India has introduced a host of structural reforms to transform the country into a global manufacturing hub, to boost infrastructure, improve human capital, and leverage digitization, while at the same time bolstering macroeconomic stability. 

World Bank India country director Auguste Tano Kouame said lessons from countries like Chile, Korea and Poland show how they have successfully made the transition from middle to high-income countries by deepening their integration into the global economy. The report said that over the past decades, India has developed at a scale and pace that few would have thought possible. From 2000 to today, in real terms, the economy has grown nearly four-fold, and GDP per capita has almost tripled. Because India grew faster than the rest of the world, its share in the global economy has doubled from 1.6 per cent in 2000 to 3.4 per cent in 2023. India has become the world’s fifth largest economy. This remarkable development story also includes a steep decline in extreme poverty, and massive expansion of service delivery and essential infrastructure. Building on these achievements, India has set the ambitious goal of becoming a high-income country by 2047.

For India to become a high-income economy by 2047, its GNI per capita would have to increase by nearly 8 times over the current levels; growth would have to accelerate further and to remain high over the next two decades, a feat that few countries have achieved. The report recommended incentivising the private sector to invest in job-rich sectors like agro-processing manufacturing, hospitality, transportation, and care economy to harness the full potential of India’s demographic dividend. It said strengthening infrastructure, adopting modern technology, streamlining labour market regulations and lowering the compliance burden on firms will further drive productivity and competitiveness, and added that these steps will help India catch up to peers like Thailand, Vietnam and China in Global Value Chain (GVC) participation rates.

With regard to boosting investment, the report said strengthening financial sector regulations, removing constraints to formal credit for micro, small, and medium enterprises (MSMEs), and simplifying foreign direct investment (FDI) policies will be critical. The Centre can facilitate this growth process through more incentive-driven federal programmes such as the recently announced urban challenge fund to support better performance in lagging districts and states. More incentives and capacity building will help low-income states improve efficiency of public expenditure and enable them to catch up with the leaders.