In what marks a historic achievement for Asian economies, four countries—Vietnam, the Philippines, Sri Lanka and Jordan—moved from the lower-middle-income to the upper-middle-income category by the World Bank in 2026. India missed the mark and by a wide margin, underscoring the missing link in the “fastest-growing” emerging economy narrative: rapid aggregate growth has not translated into incomes rising fast enough for its vast population.
India, despite having an economy roughly eight times the size of Vietnam's or the Philippines' and far larger than Sri Lanka's and Jordan's, remains in the lower-middle-income group, still about halfway away from the cut-off.
The comparison is most relevant with Vietnam and the Philippines, both fast-growing emerging economies. Vietnam has used an export-led manufacturing boom to pull well ahead of India on incomes. The Philippines has benefited from broad-based, steady growth over decades. Sri Lanka, meanwhile, reclaimed the upper-middle-income tag just three years after staring at an economic collapse.
The World Bank classifies economies based on per capita gross national income (GNI) in US dollars, a measure of the average income earned by a country's residents. India's per capita GNI at current prices stood at $2,760—about half the $4,496 lower threshold for the upper-middle-income category. Vietnam and the Philippines crossed the mark with per capita GNIs of $4,970 and $4,850, respectively.
The gap is partly a story of where these economies started. But India's progress has also been too slow relative to the scale of its opportunity.
Since entering the lower-middle-income category in 2007, India's per capita GNI has risen steadily—but not fast enough, especially compared with Vietnam's trajectory. India's growth has been slightly better than the Philippines', but its historically lower starting point has kept it behind.
More broadly, India has failed to deliver the China-like economic miracle that was once anticipated over the past two decades. That story now belongs to Vietnam. The Philippines, however, offers a different lesson: India may still have time to catch up.
The Vietnam gap
Vietnam, a war-torn country in the 1960s and early 1970s, began an economic turnaround in the 1990s—the same decade India benefited greatly from globalization and economic liberalization. Both entered the lower-middle-income category around the same time: India in 2007 and Vietnam in 2009. Since then, Vietnam has raced ahead, with per capita GNI now roughly twice India's.
The divergence is striking because the two countries have recorded somewhat similar GDP growth rates over the past four decades. But India's population has been 14-15 times Vietnam's. Similar overall growth, therefore, has not translated into similar gains for their populations.
Vietnam's rise has been driven largely by the China-plus-one strategy, as companies diversified manufacturing and sourcing to an additional developing country. The result has been a manufacturing and export boom that has pushed Vietnam's share of global exports above India's despite its much smaller economy.
That helped Vietnam create millions of jobs and reduce the share of its population living in extreme poverty from 60% in the 1990s to about 1.2% now. Net foreign direct investment (FDI) inflows currently amount to 4.2% of GDP.
India's export share also rose rapidly earlier, but has stagnated at around 1.7% since 2014. That has made its progress look modest against Vietnam's. There is hope that recent momentum in electronic assembly will improve India's performance.
Lesson from the Philippines
The Philippines presents a less daunting comparison. Its income advantage over India is longstanding: even in the 1960s, its per capita GNI was more than twice India's.
India has narrowed that gap over the decades as its growth surpassed that of the Philippines. The difference has fallen from 2.5 times to 1.8 times.
If India sustains its current growth advantage, it could reach the upper-middle-income category sooner than the Philippines did. The Philippines took 38 years to make the upgrade.
According to the World Bank's 2024 India economic memorandum, India was on track to become an upper-middle-income country by 2032, about 25 years after entering the lower-middle-income category. That would be slower than China's 13 years and Vietnam's 16 years, but broadly similar to Indonesia's 26 years and significantly faster than the Philippines' nearly four decades.
The 2047 challenge
The next upgrade, however, is only an intermediate milestone. India has set itself the goal of becoming a high-income country by 2047. If it reaches the upper-middle-income category in 2032, it will have 15 years to make the next jump.
That would require a China- and Vietnam-like economic success story, along with structural shifts that generate broad-based growth and translate aggregate economic expansion into higher incomes for India's massive population.
India still has one advantage: its demographic dividend is far from over and is expected to continue for another two decades. But the income gains recorded during the demographic dividend phase so far have been modest. Since entering the phase—when the working-age population of 15-64 years grows faster than the dependent population—India has recorded average per capita GNI growth of roughly 5-5.5%. China and Vietnam, as they approach the end of the phase, have recorded growth of around 13% and 10%, respectively.
The World Bank's assessment of India's trajectory carries a warning. India will not reach the high-income category under a “business-as-usual” scenario.
It noted that many of India's emerging-market peers, including Brazil, Malaysia, Mexico and Türkiye, have spent more than 20 years in the upper-middle-income group without graduating to high-income status. This is commonly known as the middle-income trap.
“Reviving investment and creating more and better jobs, while creating the conditions for continued TFP (total factor productivity) growth, will be critical for India to accelerate and sustain its growth going forward,” the World Bank said.