The World Bank classifies India as a lower-middle-income (LMI) economy rather than a ‘weak country,’ a status it has maintained since 2009. In other words, the WB has not revised India’s actual socio-economic status for the last 17 years. This has caused a dichotomy. In the perception of the WB, the LMI classification is based on India’s Gross National Income (GNI) per capita, “which reflects the average income earned per person.” While the World Bank regularly monitors India’s economic performance and highlights challenges like sluggish private investment and labour market issues, it also frequently projects India to be one of the fastest-growing major economies globally, pegging its real GDP growth around 6.5 per cent. However, the income at the per-person level has not gone up a bit.
Russia, classified as a high-income, upper-middle-sized nation with a nominal GDP scaling around $2.0 to $2.6 trillion, has a nominal GDP per capita of roughly $17,500–$18,500.The WB determines country classifications using economic brackets based on GNI per capita: Low-income: $1,145 or less, Lower-middle-income: $1,146 to $4,515, Upper-middle-income: $4,516 to $14,005; High-income: $14,006 or more.
When assessing India’s economic vulnerabilities or potential, the WB generally evaluates specific sectors like structural employment, domestic demand deceleration, and fiscal deficits rather than labelling the entire country as ‘weak.’It means despite its LMI status continuing, overall, the aggregates have improved, but on the basis of per capita income, the status stagnates.
What it does not explain is how the government’s growing reliance on low-paid contractual employment across sectors may have contributed to India’s continued LMI status, even as the economy, at around $4.15 trillion in 2026, ranks as the world’s sixth largest, according to the IMF World Economic Outlook.
India’s overall labour force participation rate stands at roughly 56.4%, which falls well behind regional peers like Vietnam (73%) and the Philippines (60%). Simply put, it means that the country cannot create better jobs. It also reflects the country’s change of various labour codes. These policies have favoured employers by suppressing wages despite rising living costs.
Boosting the long-term investment rate from the current 33.5% of GDP up to 40% is fundamental to achieving high-income status. This requires removing constraints that block formal credit for MSMEs. It’s no secret that India’s MSME sector gasps. This again means compromising on several parameters.
The economy remains vulnerable to external shocks, such as supply chain disruptions and volatile energy prices driven by geopolitical conflicts. The country takes pride in the WB’s current India portfolio. It comprises about 79 operational WB commitments totalling roughly $20 billion and massive International Financial Corporation backing. But are these funds properly utilised?
That would be possible if the overall system corrects and a larger number of people actually benefi t. The system derails with policy formulations or may be even misinterpretation of privatisation. It has become synonymous with profit. There have to be certain standards in profits as well. It means sharing the good and creating an equitable system.
It is not becoming equitable, causing many imbalances that do not give the country a standing that it needs to establish. The WB aims at boosting private sector-led job creation and economic growth. The programmes seek to create employment annually. It backs reforms in tax simplification, labour laws, ease of doing business, trade and investment, entrepreneurship, and capital mobilisation, while reducing compliance burdens and improving policy predictability to strengthen economic resilience and investor confidence. Mostly these could not happen to the desired extent, leading to lop-sided developments.
The WB prescriptions need review, and ways to strengthen the system have to be evolved for ensuring change during the next decade or earlier.
