Paper: GS – III, Subject: Economy, Topic: Growth and Development, Issue: World Bank’s classification of countries.
Context:
The World Bank’s groups nations into low, lower-middle, upper-middle, and high-income categories based on Gross National Income (GNI) per capita which is crucial for global policy, lending decisions, and Sustainable Development Goals monitoring.
Key Highlights:
Classification Methodology:
- GNI per Capita Basis: Measured in U.S. dollars using the World Bank Atlas method (accounts for exchange rates and inflation adjustments).
- Absolute Thresholds (2024 Values):
| Low-income | Lower-middle-income | Upper-middle-income | High-income |
| Less than $1,135 | $1,136 – $4,495 | $4,496 – $13,935 | More than $13,935 |
- Annual Revision: Thresholds are updated each year for inflation. In accordance with it, Countries move groups when their GNI per capita crosses thresholds.
Trends & Data (From 2004 to 2024):
- Population Share by Group
| Low-income | Lower-middle-income | Upper-middle-income | High-income |
| Decreased from 37.4 % (2004) to 7.6 % (2024) | Decreased from 38.1 % to 38.2 % | Increased from 8.9 % to 34.7 % | Increased from 15.3 % to 17.4 % |
- Geographical Shifts: Rapid upward mobility in upper-middle and high-income categories in East Asia & Pacific while Some conflict-affected states such as Syria and Yemen moved downward.
Significance of World Bank’s classification:
Challenges:
- Rigid framework: It uses fixed cut-offs which may not reflect regional cost-of-living differences.
- Data Limitations: World Bank relies on national reporting accuracy which poses problems in accurate measurements in case of countries like China.
- Income Over‐reliance: Income group can overshadow other dimensions of development such as inequality, human development.
Conclusion:
The World Bank’s income classification provides a standardised, quantitative framework for assessing economic performance.While it is essential for global policy and financing, it must be complemented by broader development indicators to capture multidimensional progress.
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