India needs 7.8% annual growth to become a high-income nation by 2047, says World Bank

New Delhi: India must maintain an average annual economic growth of 7.8% to attain high-income/developed nation status by 2047, with a business-as-usual approach delivering welfare gains but falling short, a slowdown in reforms widening the gap, and only an accelerated reform strategy ensuring success, the World Bank said in a report on Friday.

In its latest India Country Economic Memorandum, titled Becoming a High-Income Economy in a Generation, the World Bank noted that while this goal is achievable—given India's strong growth averaging 6.3% between 2000 and 2024—it will require reforms and their implementation to be as ambitious as the target itself.

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The World Bank's Country Economic Memorandum is a comprehensive analysis of a country's economic developments, prospects, and policy agenda.

The report outlines three growth scenarios for India over the next 22 years, with the high-income trajectory requiring faster, inclusive growth across states, investment rising from 33.5% to 40% of gross domestic product (GDP) by 2035 in real terms, labour force participation increasing from 56.4% to over 65%, and accelerated productivity growth.

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“India can take advantage of its demographic dividend by investing in human capital, creating enabling conditions for more and better jobs and raising female labour force participation rates from 35.6% to 50% by 2047,” said Emilia Skrok and Rangeet Ghosh, co-authors of the report, in a statement.

To be sure, the latest World Bank report identifies four key policy areas, which India needs to focus on to reach its target of becoming a developed nation, which include boosting investment, creating better jobs, enhancing productivity, and supporting state-led growth.

The report calls for raising both private and public investment from 33.5% to 40% of GDP by 2035, strengthening financial regulations, easing credit access for MSMEs and simplifying foreign direct investment (FDI) policies.

To improve job creation, India must expand labour force participation (currently 56.4%) by fostering growth in labour-intensive sectors such as agro-processing, hospitality, and transportation, while ensuring a skilled workforce and better access to finance, the report said.

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It added that structural transformation is essential, with 45% of the workforce still in agriculture and redirecting resources to higher-productivity sectors like manufacturing and services—along with improved infrastructure, technology adoption, and streamlined regulations—will boost competitiveness and Global Value Chain participation.

The World Bank report argues for a differentiated policy approach, with less developed states focusing on foundational growth areas like health, education, and infrastructure, and advanced states driving next-generation reforms, including business environment improvements and deeper Global Value Chain integration.

"The centre (central government) can facilitate this growth process through more incentive-driven federal programs such as the recently announced Urban Challenge Fund to support better performance in lagging districts and states," it said.

"More incentives and capacity building will help low-income states improve the efficiency of public expenditure and enable them to catch up with the leaders," it added.

To be sure, the Indian government plans to undertake transformative reforms in six key domains to spur economic growth and accelerate the country’s journey to becoming a developed economy, finance minister Nirmala Sitharaman said in the Union Budget for 2025-26, announced earlier this month.

The minister highlighted reforms in taxation, power, urban development, mining, finance and regulations, saying these would boost India’s growth potential and global competitiveness.

“Lessons from countries like Chile, Korea and Poland show how they have successfully made the transition from middle- to high-income countries by deepening their integration into the global economy,” said Auguste Tano Kouame, World Bank Country Director (India). 

“India can chart its own path by stepping up the pace of reforms and building on its past achievements," he added.