India Needs Accelerated Reforms to Achieve High-Income Status by 2047: World Bank

The World Bank released the ‘India Country Economic Memorandum’ which highlights the requirement for expedited reforms to enable India's future advancement to high-income status during the year 2047.  This study draws comparisons between India's growth patterns with world economies because such advancement risks coming to a halt unless genuine reform measures are implemented. Financial-sector efficiency overlaps with increased public and private investments as well as trade liberalization for job creation through specific development strategies at the state level. According to moderate reform forecasts India will grow economically at an average rate of 6.6% but accelerated reforms could lift the growth to 7.8%. The implementation of such reforms will strengthen economic productivity while attracting more investments and establish long-term economic stability that enables India to achieve high-income nation status.

Key Findings of the Report

Global Experience in Economic Transition

• The successful transformation of middle-income to high-income status during two decades exists almost exclusively within Chile and four other nations including Romania and Poland and the Czech Republic and Slovakia.

• The economies of Brazil together with Mexico and Turkey have experienced long-term stagnation as upper-middle-income nations.

• Strong reform programs with determined execution provide the only solution for India to escape economic stagnation.

India’s Growth and Investment Projections

• India needs its Gross National Income to expand over eight times from existing levels of $2,540 (2023) to greater than $14,005 to classify its economy as high-income.

Under a moderate reform scenario:

• Investment: Peaking at 37% of GDP by 2035.

• Economic Growth: Averaging 6.6% annually.

• Under optimal conditions Total Factor Productivity (TFP) will achieve its peak growth rate of 2.5%.

• Female Labor Force Participation (FLFPR): Increasing to 45% by 2045.

With accelerated reforms:

• The investment percentage of GDP will rise to 40% throughout 2035.

• The yearly economic growth rate will cross 7.8% which will lead to high-income transition.

• TFP Growth would peak at 2.7%.

• The female labor force participation rate in India is expected to increase to 55% by 2050.

Key Reform Areas

1. Financial-Sector Reforms

• Efficient credit allocation as well as risk reduction should be maintained.

• The expansion of corporate bond markets enables more enterprises to obtain long-term financing across the economy.

• The accessibility of credit should improve for all Micro, Small and Medium Enterprises (MSMEs).

2. Boosting Private and Public Investments

• The government should invest more public funds into industries which naturally attract private capital investments including:

• Agriculture & allied industries.

• Urban development.

• Transport & logistics infrastructure.

3. Trade and Foreign Direct Investment (FDI) Liberalization

• Open trade through reduced protectionism will make companies more competitive.

• The participation in Global Value Chains (GVCs) must be strengthened as a way to enhance export volumes and productivity rates.

• The government should address market dominance by reducing state control over petroleum along with IT equipment and cement industries.

4. Creating Quality Jobs

• The economy should experience development in sectors where labor plays a significant role to meet labor force requirements.

• Development of MSMEs will expand the economic market to create additional employment opportunities in the economy.

• The service industries of hospitality together with trade along with communications require support through:

  • Better infrastructure.

  • Easing entry barriers.

  • Enhance intermediate manufacturing by:

  • Reforming labor laws.

  • Improving land availability.

  • Upgrading logistics networks.

5. State-Specific Growth Strategies

• The development process needs to tackle differences in state incomes to support overall inclusivity.

• A large-scale migration program between states should occur to stabilize the relationship between available workers and available jobs.

• Implement differentiated policy approaches:

• Less-developed states: Strengthen economic fundamentals.

• States which have already developed should focus their attention on implementing next-generation reform initiatives.

Conclusion

An India Country Economic Memorandum published by the World Bank emphasizes that the country requires a complete reform program to reach high income status by 2047. The mission requires financial-sector operation improvements coupled with investment growth and trade facilitation and job creation along with distinct policies for each state.