India Low GDP Per Capita and Path to Development

India's path to development from its low GDP per capita involves leveraging its large population through sustained economic reforms to boost manufacturing and digital growth, thereby increasing per capita income and living standards. Key strategies include driving inclusive growth, focusing on individual economic output, and fostering a higher level of discretionary spending by moving per capita income closer to developed nation levels.

India's GDP per capita is low due to its enormous population, which distributes the total economic output among a vast number of people. Additionally, the dominance of the informal sector employs many people in low-productivity jobs, and premature deindustrialization limits the creation of formal, higher-wage employment opportunities, keeping per capita income low despite overall economic growth.

Sustained economic growth increases average incomes and is strongly linked to poverty reduction. GDP per capita provides a basic measure of the value of output per person, which is an indirect indicator of per capita income. Growth in GDP and GDP per capita are considered broad measures of economic growth.

India's path of development is marked by its ambitious goal to become a fully developed nation by 2047, focusing on sustained 8% economic growth, significant infrastructure development, increased digital public infrastructure, and a strong services sector to achieve its targets. Key strategies include a focus on key demographics like the youth, women, the poor, and farmers, while also addressing challenges like child malnutrition and inequality. India's development also includes a unique transition from agriculture to services, bypassing a large-scale industrialization phase seen in other nations.

India can increase its GDP per capita by investing in human capital through better education and healthcare, developing robust physical and digital infrastructure, improving its regulatory environment to become more business-friendly, and boosting manufacturing and productivity across all sectors. Key steps also include fostering competition, increasing female labor force participation, supporting small and medium enterprises, and attracting global capital through stable policy reforms.

The state of the global economy in 2050 will partly depend on how quickly and effectively India implements these changes. Given the right policies, the country could reach high-income status by 2047. Otherwise, it risks remaining a middle-income country plagued by low productivity and sluggish growth.

The World Bank highlights that India, currently a lower-middle-income country with a relatively low GDP per capita, needs to achieve accelerated, inclusive growth and increase investment significantly to reach its goal of becoming a high-income country by 2047. The path to development requires raising the investment rate, improving human capital through better education and jobs, and boosting female labor force participation.

India's GDP per capita is low, though it has been growing. The World Bank defines high-income countries as those with a GNI per capita above $14,005, while India's GNI per capita was around $2,540 in 2023, placing it in the lower-middle-income category.

ndia's economy has shown strong growth, but to become a high-income country, it needs to sustain an average real GDP growth rate of 7.8% over the next two decades.

India can leverage its large, young population by investing in human capital and creating more high-quality jobs to drive development.

India is one of the fastest growing economies of the world and is poised to continue on this path, with aspirations to reach high middle-income status by 2047, the centenary of Indian independence. It is also committed to ensuring that its continued growth path is equipped to deal with the challenges of climate change, and in line with its goal of achieving net-zero emissions by 2070.

India’s aspiration to achieve high income status by 2047 will need to be realized through a climate-resilient growth process that delivers broad-based gains to the bottom half of the population. Growth-oriented reforms will need to be accompanied by an expansion in good jobs that keeps pace with the number of labor market entrants. At the same time, gaps in economic participation will need to be addressed, including by bringing more women into the workforce.

Despite challenging global conditions, India remains the world’s fastest growing major economy, growing at a rapid clip of 8.2 percent in FY23/24.

Growth was spurred by public investment in infrastructure and rising household investments in real estate. A buoyant manufacturing sector grew by 9.9 percent, while services remained resilient, compensating for the underperformance in agriculture.

In the medium term, growth is expected to remain positive, especially in the services sector, reaching 7 percent in FY24/25 and remaining strong through FY25/26 and FY26/27.

Greater openness to trade will, in turn, enhance India’s technological capabilities, improve productivity, spur growth, and build long-term economic resilience.