Blasé Capital $5 TRILLION?

ndia is set to transition from its current middle-income status into an upper middle-income nation in five years. According to a recent report by SBI Research, by 2030, India will join China and Indonesia, which are at the upper end of the economic classification, as per the World Bank. This is based on historical GDP and per capita income trends since 1947, and recent developments in the past decade or so. In the first 60 years since Independence, India achieved a GDP of $1 trillion by 2007. It transited from a low-income nation to lower middle-income one, as the per capita gross national income (GNI) went up 10 times from $90 in 1962 to $910 in 2007. In the next seven years, by 2014, the GDP doubled to $2 trillion, and by a further trillion dollars to $3 trillion in another seven years, by 2021. The target of $4 trillion was reached faster within four years, by 2025.

It took more than six decades (62 years), by 2009, for per capita income to cross the $1,000 mark, and this figure doubled to $2,000 in the next 10 years, or 2019. By 2026, or another seven years, the per capita will increase by another $1,000 to $3,000. By 2030, or the next four years, the per capita will be $4,000. This will enable India to enter the upper middle-income category among the 139 developing and emerging economies tracked by the World Bank. By 2047, or the culminating year under the Viksit Bharat mission, which marks 100 years of Independence, India may gain the high-income status as it inches towards the requisite milestone per capita of $14,000. According to the SBI research report, for this to happen, “India’s per capita GNI has to grow by a CAGR (compounded annual growth rate) of 7.5 per cent. This seems achievable as India’s per capita GNI has grown by a CAGR of 8.3 per cent during the last 23 years (2001-24).” 

However, there is a huge caveat. The threshold to enter the high-income category is currently $13,936, or nearly $14,000. But, by 2047, the World Bank may increase this limit based on inflation, cost-of-living expenses, and income growth over the next two decades. Therefore, SBI Research contends that if the new threshold is, say, $18,000, “India’s per capita GNI needs to grow by a higher rate, CAGR of 8.9 per cent (and not 7.5 per cent) in the next 23 years for it to become high-income country by 2047. Assuming 0.6 per cent average population growth, and average deflators of China, Japan, the UK, the USA, and Euro are of around two per cent (average between 1992 and 2024), this translates into growth of nominal GDP in dollar terms of around 11.5 per cent for the next 23 years.” Hence, according to SBI Research’s analysis, it is imperative for the country to “continue its reform agenda so that we get higher incremental growth required to reach the high-income bracket.”

Of the 139 nations in the World Bank’s list, 32 grew at an annual pace of five per cent and more in the past 25 years. Of these, 14 nations grew at more than six per cent, or higher than the average growth achieved by India. The 14 included China, as expected, apart from the smaller nations in Asia, Middle East, and Africa such as Qatar, Vietnam, Cambodia, Rwanda, Ethiopia, Myanmar, Uzbekistan, and Azerbaijan. Of the 139 nations, only 20 grew at an average pace higher than five per cent in the past 10 years. Of the latter, only six grew at a pace that was higher than India’s. The elite six included four from the previous list, or Guyana, Ethiopia, Rwanda, and Tajikistan. In 1990, as per the World Bank, of the 139 nations, 29 were in the middle upper-income category, and 39 in high-income one. In 2024, the respective figures were 54, and 87. The number of the low-income group halved from 51 to 26.

SBI Research analysed the growth of 48 low- and middle-income nations that transited into a higher category since 1990. China’s transformation was exceptional. It was dubbed as low-income in 1990 with a per capita of $330. Within a decade, by 1999, it became a low middle-income nation with a per capita of $860. In just over a decade, by 2010, it was in the upper middle-income category with a per capita of $4,410. It has stayed there since. Guyana was the best performer. In 1997, it was in the low middle-income group with a per capita of $390. In eight years, by 2015, it was an upper middle-income nation with a per capita of $5,530. In another seven years, by 2022, it became a high-income nation. A dramatic changeover in 25 years. Indonesia transitioned from low-income to upper middle-income in less than 25 years, between 1990 and 2024. India, as mentioned earlier, took decades to cross over from low-income to lower middle-income one. But this is supposed to be the Asian Century. Over the past decade or so, India’s growth was frenetic, and high. Hence, it may take two decades or so for it to become a high-income nation.