A new World Bank report released today highlights that India must achieve an average growth rate of 7.8 per cent over the next 22 years to reach high-income status by 2047. The report, titled 'Becoming a High-Income Economy in a Generation,' asserts that this goal is attainable, given India's historical growth rate of 6.3 per cent from 2000 to 2024. However, it emphasises that ambitious reforms are necessary to meet this target.
World Bank Country Director Auguste Tano Kouamé stated that India can learn from countries like Chile, Korea, and Poland, which have transitioned to high-income status by integrating into the global economy. To achieve similar success, India must accelerate reforms and build on its past achievements.
The report outlines three growth scenarios for India over the next 22 years. The scenario leading to high-income status involves faster and inclusive growth across states, increasing total investment from 33.5 per cent of GDP to 40 per cent by 2035, raising labor force participation from 56.4 per cent to above 65 per cent, and boosting productivity growth.
Co-authors Emilia Skrok and Rangeet Ghosh highlighted the importance of investing in human capital, creating conditions for better jobs, and increasing female labor force participation from 35.6 per cent to 50 per cent by 2047.
India's growth rate has averaged 7.2 per cent over the past three fiscal years. To sustain this momentum and achieve a 7.8 per cent growth rate, the report recommends focusing on four critical areas: increasing investment, creating more and better jobs, promoting structural transformation, and enabling states to grow faster.
Increasing investment is crucial, with the report suggesting actions such as strengthening financial sector regulations, removing credit constraints for MSMEs, and simplifying FDI policies. Creating more jobs requires incentivizing the private sector to invest in labor-intensive sectors and fostering an innovation-driven economy.
Promoting structural transformation involves reallocating resources to more productive sectors like manufacturing and services, adopting modern technology, and streamlining labor regulations. These steps will enhance productivity and competitiveness, helping India match peers like Thailand, Vietnam, and China in Global Value Chain participation.
Finally, the report advocates for a differentiated policy approach to enable states to grow faster. Less developed states should focus on improving growth fundamentals, while more developed states should implement next-generation reforms. The center can support this through incentive-driven federal programs, helping low-income states improve public expenditure efficiency and catch up with leading states.