SBI Research has released a new report with bold predictions for India's economic future. The report forecasts that India is on track to become the world's third largest economy by 2028. It also projects that the country will transition into an 'upper-middle income' nation by 2030.
Achieving Upper-Middle Income Status
According to the SBI Research report, India will join China and Indonesia as an 'upper-middle income' country by 2030. The World Bank classifies countries based on their per capita Gross National Income in US dollars. This classification includes low income, lower-middle income, upper-middle income, and high-income categories.
India moved from the lower-middle income category in 2007. At that time, its per capita GNI had jumped from $90 in 1961 to $910 in 2007. This represented an annual growth rate of 5.3% over those years.
Historical Context of Income Classifications
The report provides interesting historical data about global income classifications. In 1990, the World Bank had 51 low-income countries among its 218 member nations. There were 56 lower-middle income countries, 29 upper-middle income countries, and 39 high-income countries.
By 2024, the landscape had changed significantly. Only 26 countries remained in the low-income category. The report shows 50 countries in the middle-income bracket, 54 as upper-middle income, and 87 as high-income nations.
Path to Becoming Third Largest Economy
SBI Research indicates India will become the world's third largest economy even faster than previously expected. The report notes India reached the $1 trillion economy mark in 2007. It achieved $2 trillion in 2014, $3 trillion in 2021, and $4 trillion in 2025.
The trend shows a narrowing gap in growth rates. Based on this pattern, India is projected to reach the $5 trillion mark in just two more years. This would make it the world's third largest economy by 2028.
How Achievable Are These Projections?
The SBI report examines India's growth trajectory to assess the feasibility of these projections. India achieved $1,000 per capita income in 2009, which took 62 years since Independence. It reached $2,000 per capita in 2019, taking another 10 years. The $3,000 per capita mark came seven years later.
"India is set to touch $4,000 per capita in another four years in 2030," the report states. This would enable the transition to upper-middle income status, joining China and Indonesia at their current classification levels.
India's growth performance in the last decade shows significant improvement. Its percentile rank in cross-country distribution of average real GDP growth has increased from the 92nd percentile over 25 years to the 95th percentile. This represents a rightward shift in relative position, placing India deeper into the upper tail of global growth distribution.
Requirements for High-Income Status by 2047
The report considers what India needs to achieve high-income country status by 2047, as envisioned in the Viksit Bharat plan. The current per capita GNI threshold for high-income countries is $13,936. To reach this by 2047, India's per capita GNI must grow at a compound annual growth rate of 7.5%.
This target appears achievable because India's per capita GNI has grown at a CAGR of 8.3% during the last 23 years from 2001 to 2024.
Potential Challenges Ahead
However, the report acknowledges potential challenges. The threshold level for high-income countries may change by 2047. If the threshold increases to $18,000, India's per capita GNI would need to grow at a higher rate of approximately 8.9% CAGR over the next 23 years.
The report makes calculations based on several assumptions:
- Average population growth of 0.6%
- Average deflator of China, Japan, the UK, the US, and Euro area at around 2%
- This translates to growth of nominal GDP in dollar terms of approximately 11.5% for the next 23 years
"India should continue its reform agenda so that we can get higher incremental growth required to reach the high-income bracket," the report emphasizes.
Clear Path to Upper-Middle Income Status
The report clearly states that India can and will transition to upper-middle income country status. The threshold per capita GNI for this category is around $4,500.
To achieve this, India needs growth of nominal GDP in dollar terms of approximately 11.5%. This target appears achievable because this growth rate was around 11% before the pandemic during FY04-FY20. It has been approximately 10% during FY04-FY25.
Global Economic Rankings
SBI Research notes that the United States remains the world's largest economy, followed by China. India is transitioning to become the third largest economy, surpassing Germany by 2028.
India has made remarkable progress in global economic rankings. The country transitioned from 14th position in 1990 to fourth place by 2025.
The report projects India will become a $5 trillion economy by 2027 or FY28. It further forecasts that India will reach $10 trillion by 2035 or FY36.
These projections paint an optimistic picture of India's economic future. They highlight both the progress already made and the challenges that remain on the path to higher income status.
