In News:

The World Bank Group Country Income Classifications for Fiscal Year 2027 (released in July 2026) retained India in the Lower-Middle-Income category, a position it has held since 2009. In contrast, Sri Lanka, Vietnam and the Philippines were upgraded to the Upper-Middle-Income category.

What is the World Bank Country Income Classification?

The World Bank classifies economies every year on 1 July into four income groups based on their Gross National Income (GNI) per capita of the previous calendar year. The classification serves as an operational and analytical tool for development financing and cross-country comparison rather than a measure of overall development.

To improve comparability, GNI per capita is calculated using the Atlas Method, which smoothens the effects of exchange-rate fluctuations and inflation by averaging exchange rates over time. The income thresholds are revised annually using the Special Drawing Rights (SDR) deflator to account for global inflation.

Income Classification (FY 2027)

• Low Income: USD 1,175 or less
• Lower-Middle Income: USD 1,176–4,635
• Upper-Middle Income: USD 4,636–14,375
• High Income: Above USD 14,375

India's GNI per capita stood at USD 2,760 (2025), keeping it within the Lower-Middle-Income category.

Key Highlights

The latest classification reflects continued improvements in the global income landscape. While nearly 30% of economies were classified as low income in 1987, the share has declined to 11% by 2026.

This year, Sri Lanka, Vietnam, the Philippines, Jordan and Micronesia moved from the Lower-Middle-Income to the Upper-Middle-Income category, while Togo graduated from Low Income to Lower-Middle Income.

Vietnam and the Philippines achieved the upgrade through sustained export-led industrial growth, while Sri Lanka recovered from its recent economic crisis through the revival of tourism and financial services. Jordan and Togo benefited largely from revised statistical methodologies and updated national accounts.

Why Does India Continue to Remain a Lower-Middle-Income Economy?

Despite being one of the world's fastest-growing major economies, India's per capita income remains relatively low because of its large population, which dilutes gains in aggregate national income.

Significant regional disparities also persist. High-income States such as Tamil Nadu, Maharashtra and Gujarat coexist with relatively poorer States like Bihar and Uttar Pradesh, lowering the national average.

Another structural challenge is the dominance of the informal sector, where nearly 85% of the workforce is employed. Low labour productivity, disguised unemployment in agriculture and limited formal employment constrain growth in average incomes.

India also entered the Lower-Middle-Income category only in 2009. Historically, moving into the next income bracket requires sustained high economic growth over several decades.

In News:

The World Bank Group (WBG) has operationalised a unified Guarantee Platform to scale up the use of guarantees for mobilising private capital in developing countries. Initiated in 2024, the platform is housed at the Multilateral Investment Guarantee Agency (MIGA) and integrates guarantee products and expertise from the World Bank, the International Finance Corporation (IFC), and MIGA into a single, streamlined system.

Objectives

• Scale guarantee issuance to USD 20 billion annually by 2030.
• Serve as a one-stop shop for all WBG guarantee business.
• De-risk investments to catalyse private capital flows into emerging markets and developing economies.
• Improve simplicity, speed, and efficiency through a market-friendly menu of options.

What the Platform Offers

Clients can choose from a simplified menu of three guarantee/insurance coverages:

1. Credit Guarantees- for loans to public or private sector entities.
2. Trade Finance Guarantees- for trade finance projects involving public entities.
3. Political Risk Insurance- against non-commercial risks (e.g., expropriation, transfer restrictions) for private sector projects or PPPs.

Why Guarantees Matter

• Guarantees mitigate risk, lowering the cost of capital and crowding in private investment.
• They complement country-level reforms and project preparation, enhancing bankability.
• The approach aligns with global calls (including G20 expert recommendations) to expand guarantee use to unlock private finance.

Operational Significance

• Consolidation at MIGA removes duplication across WBG institutions and standardises processes.
• A scalable modelprioritises high-impact projects and optimises resource allocation.
• The platform supports diverse sectors such as energy access, climate action, and pandemic preparedness, working alongside IFC’s advisory and financial instruments.

Recent Performance (FY 2024)

• USD 10.3 billion in new guarantees issued across WBG products now aligned under the platform:
  • MIGA: USD 8.2 billion
  • IFC: USD 1.4 billion
  • World Bank: ~USD 0.7 billion

In News:

The World Bank has set a clear mission: ending extreme poverty and boosting shared prosperity on a livable planet. This new edition of the biennial series, previously titled Poverty and Shared Prosperity, assesses the three components of the mission and emphasizes that reducing poverty and increasing shared prosperity must be achieved without high costs to the environment.

Extreme Poverty in India:

• Current Poverty Status (2024):
  • 129 million Indians are living in extreme poverty, defined as earning less than $2.15 (?181) per day.
  • This marks a significant improvement from 431 million in 1990, demonstrating progress in poverty alleviation.
• Poverty Trends:
  • In 2021, there was a reduction of 38 million people in extreme poverty, bringing the total to 167.49 million.
  • However, higher poverty standards (set at $6.85 (?576) per day) now show more Indians below the poverty line than in 1990, mainly due to population growth.
• Survey Methodology:
  • The 2022-23 Household Consumption and Expenditure Survey (HCES) in India used the Modified Mixed Reference Period (MMRP) method to improve data accuracy.
  • The report suggests the need for careful analysis of the survey data, which may impact future poverty estimates.

Global Poverty Trends:

• Slowdown in Poverty Reduction:
  • Global poverty reduction has slowed considerably, with 700 million people (8.5% of the global population) living in extreme poverty in 2024.
  • The slowdown is attributed to factors like low economic growth, the COVID-19 pandemic, and increased fragility.
• Challenges in Achieving Targets:
  • The global extreme poverty rate is expected to be 7.3% in 2030, which is double the World Bank's target of 3%.
  • At current rates, extreme poverty eradication by 2030 is unlikely. It could take decades to eradicate extreme poverty, and over a century to lift people above the $6.85/day threshold.
• Impact of Polycrisis:
  • Polycrisis refers to the confluence of multiple crises—slow growth, climate risks, and increased uncertainty—making global poverty reduction more challenging.
  • Global prosperity has also been impacted, with slower income growth, particularly after the pandemic.

India's Role in Global Poverty Reduction:

• Contribution to Global Poverty:
  • India’s contribution to global extreme poverty is expected to decline significantly over the next decade. However, even if India eradicates its extreme poverty by 2030, the global extreme poverty rate would only fall from 7.31% to 6.72%, still above the UN SDG target of 3%.

Proposed Pathways for Addressing Poverty:

• Faster and Inclusive Growth:
  • Focus on increasing labor productivity, income, and employment to boost economic growth inclusively.
• Climate Resilience:
  • Strengthen risk management and mitigation efforts to protect vulnerable populations from climate shocks, ensuring that growth does not worsen environmental degradation.

Global Priorities:

• Low-Income Countries: Prioritize poverty reduction through investments in human, physical, and financial capital to foster growth.
• Middle-Income Countries: Focus on inclusive income growth that reduces vulnerability, and seek synergies such as cutting air pollution alongside poverty reduction.
• High-Income Countries: Accelerate climate mitigation efforts while managing the transition costs involved.

Why is it in the News?

India's ranked improved to 113 out of 190 countries in the World Bank’s Women, Business and Law index, according to the 10th edition of the report released Monday.

About Women, Business and Law Index:

• The "Women, Business and the Law (WBL)" index is a project of the World Bank Group, specifically designed to measure the legal environment for women's economic opportunities across 190 economies.
• It's distinct from a general "Gender Equality Index" as it focuses specifically on legal frameworks and their impact on women's involvement in business and professional life.

What does it Measure?

• The WBL index assesses legal frameworks across eight indicators:
  • Mobility (freedom of movement)
  • Workplace (discrimination, maternity leave, etc.)
  • Pay (equal pay for equal work)
  • Marriage (property rights, domestic violence)
  • Parenthood (parental leave, child custody)
  • Entrepreneurship (starting and running a business)
  • Assets (ownership and inheritance)
  • Pension (access to and benefits)
• Scoring: Each indicator is scored on a scale of 0 to 100, with 100 representing the highest level of legal rights and protections for women.
  • The overall score for a country is the average of these eight indicators.
• Latest version: The latest edition is "Women, Business and the Law 2024", released in October 2023.
• This version also introduces two new indicators:
  • Safety (addressing violence against women)
  • Childcare (availability, affordability, and quality)

Highlights of the Report:

• Women spend an average of 2.4 more hours a day on unpaid care work than men—much of it on the care of children.
• Only 62 economies—fewer than a third—have quality standards governing childcare services, which has an adverse impact on the employment opportunity of women as mothers with young children have their battles to pick.
• Women face hindrances in areas such as entrepreneurship as just one in every five economies mandate gender-sensitive criteria for public procurement processes, meaning women are deprived of significant economic opportunities.

About India:

• According to the 10th edition of the Women, Business and Law index, India ranks 113 out of 190 countries in the Index.
  • The addition of Safety and childcare as indicators in the new index is believed to have improved India’s ranking slightly.
• The index shows that in India, women enjoy 60% of the legal rights compared to men, which is lower than the global average of 64.2%, but much higher than the 45.9% of the legal protections compared to men.
• Over the years, India’s score has remained constant at 74.4%, whereas a total of 14 countries around the world, including Denmark, Canada, and Finland, score a perfect 100 in the legal framework score.
  • Some of the less developed countries like Ethiopia, Namibia, and even Burundi have better scores than India.
• India’s performance is much lower in providing supportive frameworks, such as programs, services, budgets, procedures, inspections, and sanctions for non-compliance with quality standards.
  • Only 54.2% of the supportive frameworks needed were established in the country.

Why in the News?

The Indian Chief Economic Adviser recently expressed worry about credit rating agencies using the World Bank's Worldwide Governance Indicators to assess ratings, particularly for developing countries.

About Worldwide Governance Indicators:

• The Worldwide Governance Indicators is based on a long-standing research programme of The World Bank.
• It was first established in 1996 to measure the quality of governance in over 200 countries.
• These aggregate indicators are derived from over 30 individual data sources produced by a variety of survey institutes, think tanks, non-governmental organizations, international organizations, and private sector firms.
• The indicators capture six key dimensions of governance including:
• Voice and Accountability
• Political Stability and Absence of Violence
• Government Effectiveness
• Regulatory Quality
• Rule of Law
• Control of Corruption
• According to The World Bank, corruption is the single greatest obstacle to economic and social development.

About The World Bank:

• The World Bank is an international financial institution that provides financial and technical assistance to developing countries around the world.
• Its goals are to reduce poverty and support development.
• It helps by offering a growing range of free tools, research, and knowledge to help people address the world’s development challenges, for instance, comprehensive, downloadable indicators about development in countries around the globe.