India is on track to overtake Germany and emerge as the third-largest economy by 2028. (AI image)

India is all set to join China as an upper middle income country by the end of this decade, according to an analysis by the State Bank of India (SBI). India’s Gross Per Capita Income or GNI is expected to hit $4,000 bringing it in the upper middle income group, alongside countries like China and Indonesia as per the latest World Bank classification cited by the SBI report.World Bank data classifying countries by per capita gross national income shows a clear rise in the number of high-income and upper-middle-income economies between 1990 and 2024. China, which had a per capita GNI of $330 in 1990 and was classified as low income, has since risen to the upper-middle-income group by 2024. Indonesia has followed a similar trajectory, also graduating from low income to upper-middle income during this timeframe.

India To Become Upper Middle Income Country Soon

The World Bank groups economies into four income categories – low income, lower-middle income, upper-middle income and high income – using per capita gross national income measured in US dollars as the defining criterion.In 1990, when the World Bank classified 218 economies, 51 were in the low-income bracket, 56 were put in the lower-middle-income group, 29 were designated as upper-middle income economies, and 39 were classified as high income. By 2024, this distribution had shifted markedly. The number of low-income countries had fallen to 26, while 50 economies were classified as lower-middle income. At the same time, the upper-middle-income category expanded to 54 countries, and the count of high-income economies more than doubled to 87.

India’s Transition Since 1990

Among major economies, the United States continues to hold the position of the world’s largest economy, followed by China. India, meanwhile, is on track to overtake Germany and emerge as the third-largest economy by 2028.India’s transition to better levels of per capita income has been more gradual compared to other economies. As SBI notes:It took six decades for India to move from low income to the lower-middle-income category in 2007, with per capita GNI rising from $90 in 1962 to $910, reflecting a compound annual growth rate of about 5.3 percent. India became a $1 trillion economy after 60 years, doubled to $2 trillion in the next seven years by 2014, added another trillion by 2021, crossed $4 trillion by 2025 and is projected to reach $5 trillion in roughly two more years. Per capita income crossed $1,000 in 2009, doubled to $2,000 by 2019, and is expected to reach $3,000 in 2026.As per latest projections quoted by SBI, India’s gross national income per capita will hit $4,000 by 2030 – positioning India to enter the upper-middle-income category.The SBI report notes an important point: India’s performance over the past decade indicates a marked improvement in its relative growth standing globally. Its percentile rank in the cross-country distribution of average real GDP growth has risen from the 92nd percentile when measured over a 25-year horizon to the 95th percentile, reflecting a clear rightward movement that places the country more firmly in the upper end of the global growth spectrum.“If we consider the current per capita GNI threshold for high income country of $13,936 to be reached by 2047 (as per Viksit Bharat vision), India’s per capita GNI has to grow by a CAGR of 7.5%. This seems achievable as India’s per capita GNI has grown by a CAGR of 8.3% during the last 23 years (2001-2024),” says SBI.However, as SBI notes this benchmark for high income itself is likely to rise over time. Should the high-income threshold increase to around $18,000, India would need to sustain faster per capita GNI growth of roughly 8.9 percent over the next 23 years to reach that category by 2047.“Clearly, India can and will transition to the upper middle-income country, which has the threshold per capita GNI of around $4500. Growth of Nominal GDP in dollar terms required to achieve this is around 11.5% which is achievable as this growth has been around 11% before the pandemic (FY04-FY20) and around 10% during FY04-FY25,” says SBI.