Sri Lanka has returned to the World Bank's upper-middle-income category just four years after its worst economic crisis, while India continues to remain in the lower-middle-income group despite being one of the world's fastest-growing major economies. The difference lies not in the size of their economies, but in the average income earned by each citizen.
The World Bank's latest income classification has upgraded Sri Lanka, Vietnam and the Philippines to the upper-middle-income group. India has remained in the lower-middle-income category since 2007.
The World Bank classifies countries based on Gross National Income (GNI) per capita rather than Gross Domestic Product (GDP).
While GDP measures the total value of goods and services produced in a country, GNI per capita reflects the average income earned by each resident after dividing national income by the population.
For the latest classification:
Lower-middle-income economies have a GNI per capita between $1,136 and $4,495.
Upper-middle-income economies have a GNI per capita between $4,496 and $13,935.
India's GNI per capita is estimated at around $2,500-$2,700, keeping it within the lower-middle-income category.
Sri Lanka's promotion marks a significant turnaround after the country defaulted on its external debt in 2022 amid its worst economic crisis in decades.
According to the World Bank:
The Sri Lankan economy grew 5 percent in 2025.
Tourism made a strong comeback.
Financial services and several other sectors rebounded.
The country narrowly crossed the upper-middle-income threshold.
The World Bank described the upgrade as a recovery story following years of painful economic adjustment.
Vietnam's elevation to the upper-middle-income group reflects years of sustained export-led growth.
Key factors behind its rise include:
Exports increased by more than 15 percent in both 2024 and 2025.
GDP expanded by 7 percent in 2024 and 8 percent in 2025.
GNI recorded an average annual growth of around 10 percent between 2021 and 2025.
The country's manufacturing strength and integration into global supply chains have played a major role in lifting average incomes.
India has become the world's fourth-largest economy and continues to post robust GDP growth. However, its massive population of around 1.4 billion means total national income is spread across far more people.
As a result:
Rapid GDP growth does not automatically translate into higher per capita income.
A larger economy does not necessarily mean a richer population on average.
India's per capita income remains well below the World Bank's upper-middle-income threshold.
This explains why India has climbed the global GDP rankings without changing its income classification.
The World Bank updates its income classifications every year using the previous year's GNI per capita estimates, calculated using the Atlas method, which smooths the impact of exchange-rate fluctuations.
Several factors influence a country's classification, including:
Growth in national income.
Exchange-rate movements.
Population changes.
Revisions to national accounts.
For India, however, the key requirement remains straightforward: average income per person must exceed the World Bank's upper-middle-income threshold. Until then, regardless of the country's economic size or growth rate, India will continue to be classified as a lower-middle-income economy.