India Sets its Sights on Upper-Middle Income Status by 2036

India is widely recognized as the fastest-growing economy among G20 developing nations and is set to reach new economic heights in the coming decades. According to projections by India Ratings and Research (Ind-Ra), the Indian economy is expected to transition into an upper-middle income country, with a per capita income of $4,466, between the financial years 2033 and 2036. This milestone would mark a significant achievement for a nation previously classified as a low-income country until 2006.

Journey from Low to Upper-Middle Income

India's economic trajectory has been remarkable, with the nation moving from a low-income country to a lower-middle income country in 2007, a status it has maintained since then. As of 2022, India's per capita GDP stood at $2,390, according to Ind-Ra's report. The World Bank categorizes countries with a per capita income ranging from $4,466 to $13,845 as upper-middle income economies, a threshold that India is anticipated to cross within the next decade.

India's $15 Trillion Economy Goal by 2047

While the projections for India's ascent to upper-middle income status are encouraging, the nation's economic aspirations stretch even further. Ind-Ra estimates that the size of the Indian economy could reach $15 trillion by 2047, which is approximately half of the government's ambitious target of a $30 trillion economy by the same year.

However, attaining the $30 trillion target by 2047 is a tough challenge, requiring a sustained annual growth rate of 9.7% in current dollar terms from FY24 to FY47. Historically, only two instances over the past 50 years have seen such high growth rates maintained for a decade: 1973-1982 and 2003-2012.

Sunil Kumar Sinha, the Senior Director and Principal Economist at Ind-Ra, acknowledges the difficulties of sustaining such high growth rates as economies mature. "Cross-country experience also shows that no major economy has been able to grow 7% (real) per annum on a sustained basis without the support of global demand/trade," Sinha noted.

Factors Shaping India's Economic Trajectory

The onward journey of the Indian economy from its estimated $3.6 trillion GDP in FY24 will depend on the interplay of real GDP growth, inflation (GDP deflator), and the INR/USD exchange rate. Ind-Ra has modeled various scenarios based on different assumptions for these variables, projecting per capita income ranging from $9,218 to $9,920 between FY43 and FY47. This would place India in close proximity to the high-income country verge of $13,846 per capita.

Driving Forces: Energy Transition, Low-Carbon Economy and the Rising Middle Class

India's economic trajectory will be shaped by its energy transition efforts, focus on low-carbon industries and the expanding middle class. At COP26, India showcased its renewable energy ambitions, targeting 500GW capacity by 2030 and a net-zero economy by 2070. The nation's first green hydrogen-based stainless steel plant, commissioned in March 2023, exemplifies the low-carbon approach. 

Meanwhile, rising incomes are driving consumer demand, with the middle class expected to swell to 715 million by 2030-31 and 1.02 billion by 2046-47, according to People Research. Despite challenges, India's economic prospects are promising, positioning it as a potential global powerhouse in the coming decades.