Can India get out of the middle income trap?

In the mid-1980s, international financial institutions moved away from calling their member countries as poor and rich countries, or as developed and less developed countries.

- Dr. T. K. Jayaraman

The World Bank began classifying its member countries based on per capita gross national income (GNI) at constant prices (taking away the influence of changes in price level) for the purpose of concessional lending The GNI is defined, as total income earned by a nation’s people and businesses, including investment income, regardless of where it was earned. It also covers money received from abroad such as foreign investment, inward remittances and economic development aid. There are four categories based on ranges of average per capita GNI as follows:

(i) Low income

(ii) Low middle income

(iii) Upper middle income

(iv) High income

These classifications and income limits are updated every three years. The latest announcements categorizing the World Bank member countries are of July 2023 for FY 2024 in US dollars.

Table 1 shows the ranges of the four categories.

Table 2 shows average per capita GNI for India as well as other Indian subcontinent neighbors and Southeast Asian countries.

Nepal is classified as the only low-income country in the Indian subcontinent. All other five subcontinent countries are low middle income countries. In Southeast Asia, no country is in the low-income category. All other countries are low middle income countries except Malaysia. Malaysia is in the upper middle country, with a current per capita income (GNI) of $11,830. Singapore in South East Asia, is the only country, which is generally known as developed or advanced country at a high average per capita income ($67,353).

Malaysia is expected soon to graduate to become a highincome country from the upper-middle income class, when its average per capita income is expected to hit 13,386 in 2027.

Many people are wondering when India would become a high income country.