World Bank to change classification of countries; India will now be called ‘lower-middle income’ -ET

MUMBAI: For decades, ‘developed’ and ‘developing’ have served as agreeable economic nomenclatures to classify countries based on their prosperity and standards of living. That’s about to change, with the World Bank switching to more precise, though unvarnished, descriptions of economies.



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And India — which till now found a place under the common umbrella with other ‘developing’ countries —will now be called ‘lower-middle income country/South Asia’.


The more specific definitions are aimed at categorising economies which though ‘developing’ in character, differ dramatically from one another. For instance, India, Mexico and Malawi may be hardly comparable even if a few economic and social parameters overlap.

With economies becoming less and less homogeneous, the multilateral agency will group countries based on geographical coverage and income levels to capture the changing world.


In its annual edition of world development indicators (which was released a fortnight ago), the World Bank has no longer distinguished countries as developing and developed. Till now, developing stood for low-and middle-income countries while high-income countries were called ‘developed’.

Few, except developmental economists, bothered beyond it. But rising global prosperity coupled with growing inequality will now call for a sharper, less benign — and certainly less politically correct — nomenclatures. A fast changing world has made the earlier terms less relevant and not reflective of the heterogeneous sample of countries.


For instance, Mexico, China and Brazil are ‘upper-middle income’; India, Pakistan, and Bangladesh are ‘lower-middle income’ (a categorisation that could irk not only New Delhi but most Indians); while ‘Malawi’ is, understandably, a notch lower at ‘low income’. So far, all were ‘developing countries’.

The bank’s logic: Malawi with per capita gross national income (GNI) of $250 can’t be in the same group as Mexico with per capita GNI of $9,860.


On measures like fertility and infant mortality rates — often considered proxies for a country’s overall well-being — the stark difference that once existed between developed and developing regions has narrowed.


In its publications and databases, the World Bank has already started phasing out the term ‘developing world’; instead, it’s focussing on the ‘sustainable development goals’ for the entire world.


According to the World Bank data, India languishes on world indicators like labour force participation rate, electricity generation and access to improved sanitation facilities.

However, there is an improvement in certain aspects, such as under-five mortality rate and maternal deaths.


Time required to start a business in India was 29 days in June 2015 against the global average of 20 days.

In 2015, only 40% of Indians had access to improved sanitation facilities, against the world average of 68%.


The World Bank decision (to change the way countries are classified) may prompt theUnited Nations to follow suit. The international body has no formal definition of developing countries, but still uses the term for monitoring purposes and considers as many as 159 countries as developing.


Under the UN’s current classification, all ofEurope and Northern America along with Japan, Australia and New Zealand are classified as developed regions, and all other regions are developing.

It also maintains a list of ‘Least Developed Nations’, which are based on per capital GNI, human capital, and economic vulnerability.

Chances are as long as the UN continues to use the good old tags of ‘developing/developed countries’, economists, politicians as well as the media may stick to them.

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