20th October 2020

Confidant Classes

A Premier Judicial Service Coaching

India: A lower-middle-income country

The World Bank divides the world’s economies into four income groups: low-income countries, lower-middle, upper-middle and high income countries. The rankings are updated each year on July 1 and are based on the current GNI per capita in USD (using the exchange rates of the Atlas method) of the previous year (i.e. 2019 in this case).

The classifications change for two reasons

  • In each country, factors such as economic growth, inflation, exchange rates and population growth influence GNI per capita. Reviews of national accounts methods and data can also affect GNI per capita.
  • To maintain the income classification thresholds set in real terms, they are adjusted each year according to inflation. The special drawee rights (SDR) deflator is used, which is a weighted average of the GDP deflators of China, Japan, the United Kingdom, the United States and the euro area.This year, the thresholds have increased in line with this measure of inflation.

Highlights of this Classification

  • National accounts reviews played an important role in the upward review of Benin, Nauru and Tanzania.
  • For Sudan, the GNI series for 2009-2018 has been revised following the exchange rate revisions. The 2018 GNI per capita has been revised to $ 840 from the previously published $ 1,560.
  • Algeria, Indonesia, Mauritius, Nepal, Sri Lanka and Romania were very close to the respective thresholds last year.
  • Until last year (fiscal year 2019), the income classifications were for analytical purposes and did not influence the terms of the World Bank loans.
  • However, since the last fiscal year, the high income threshold has also been a determining factor for interest rates.
  • Surcharges apply to the interest rates of countries that have been classified as high income for two consecutive years.
  • New thresholds are determined at the start of the World Bank’s fiscal year in July and remain fixed for 12 months regardless of subsequent revisions to estimates.
  • The thresholds for income classification have increased from last year due to SDR inflation.

As of July 1, 2019, the new thresholds for classification by income are:

ThresholdJuly 2019/$ (new)July 2018/$ (old)
Low income
Lower-middle income1,026 – 3,995996 – 3,895
Upper-middle income3,996 – 12,3753,896 – 12,055
High income> 12,375> 12,055
Source: World Bank

The following countries are assigned to new income groups

 New groupOld groupGNI/Capita/$ (2018) as of July 1, 2019GNI/Capita/$ (2017) as of July 1, 2018
ComorosLower-middle incomeLow income1,320760
GeorgiaUpper-middle incomeLower-middle income4,1303,790
KosovoUpper-middle incomeLower-middle income4,2303,890
SenegalLower-middle incomeLow income1,410950
Sri LankaUpper-middle incomeLower-middle income4,0603,840
ZimbabweLower-middle incomeLow income1,790910
ArgentinaUpper-middle incomeHigh income12,37013,040
Source: World Bank

India is in lower – middle class

India continues to be a lower-middle-income country along with 46 others, while Sri Lanka has climbed to the upper-middle-income group for the fiscal year 2020, according to the World Bank’s classification of countries by income levels, released on July 1.

  • Sri Lanka entered the lower-middle-income group in the fiscal year 1999, from the low-income category and continued for over two decades, before moving to the upper-middle-income group this year.
  • India became a lower-middle-income nation from low-income in the fiscal year 2009.
  • Of 218 economies, 80 are in the high-income group, 60 in the upper-middle, 47 in the lower-middle and 31 in the low-income group.
  • The classification is updated on the first day of July every year. The gross national income per capita used for this year’s classification is based on 2018 data.
  • Besides Sri Lanka, in 2019 six other countries – Argentina, Comoros, Georgia, Kosovo, Senegal and Zimbabwe – have seen classification changes based on income levels.
  • Argentina is the only country that slipped from the high-income to upper-middle-income group. The rest moved up.

India and BRICS

  • The Maldives with a gross national income of $9,310 or Rs 6,36,432 and Sri Lanka with a gross national income of $4,060 or Rs 2,77,542, are the only two countries in South Asia in the upper-middle-income group.
  • India with a gross national income of $2,020 or Rs 1,38,087; Bangladesh with a gross national income of $1,750 or Rs 1,19,630; Bhutan with a gross national income of $3,080 or Rs 2,10,549 and Pakistan with a gross national income of $1,580 or Rs 1,08,009 fall in the lower-middle-income group.  
  • Meanwhile, Afghanistan with a gross national income of $550 or Rs 37,598 and Nepal with a gross national income of $960 or Rs 65,626 are among the low-income group economies.
  • Among fellow developing economies – BRICS – India is the only country in the lower-middle-income group.
  • The others: Brazil at $9,140 or Rs 6,24,810; Russia at $10,230 or Rs 6,99,323; China at $9,470 or Rs 6,47,369 and South Africa at $5,720 or Rs 3,91,019 are in the upper-middle-income group.
  • The high-income threshold is also a deciding factor for lending rates since 2018-19, before which income classifications did not influence lending terms.
  • “Surcharges are applied for lending rates of countries which have been categorized as high income for two consecutive years,” a World Bank release said.
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