India Overtakes China in Number of New Millionaires While Maintaining Traditional Approach to Wealth Storage

For millennia, philosophers have attempted to provide a clear answer to the question of who is wealthy. Income serves as a useful and easily measurable indicator. Furthermore, factors influencing happiness, such as good health, freedom, control over time, and leisure, correlate well with income levels; for example, people in high-income countries generally have more free time and better health.

World Bank's Classification of Countries

The most common classification of countries is conducted by the World Bank, which uses a threshold of $14,000 in nominal GDP per capita to assign high-income country status. This threshold was set at $6,000 in 1987 prices and has increased annually by approximately 2%, following inflation in developed economies. In 2024, at least 85 states achieved high-income country status, accounting for about 40% of the total.

Limitations of GDP Per Capita

However, GDP per capita is not an ideal measure. Firstly, it ignores income distribution within a country. If incomes are concentrated among a small number of people, many may remain poor even if the average per capita income is high. To address this, median income can be tracked—the middle value when incomes are ordered from lowest to highest. If there are many poor people and very few rich people, the median will be lower than the average. Nevertheless, it is noted that the gap between them narrows significantly as the economy prospers.

Secondly, material well-being better reflects consumption, which differs from income, since savings—the difference between income and consumption—vary across economies and between the rich and the poor. Some researchers even adjust indicators for leisure and life expectancy to obtain a concept of 'consumption-equivalent welfare,' but this is difficult to measure and compare accurately and frequently.

Importance of Purchasing Power

The third argument is that GDP per capita adjusted for purchasing power parity (PPP) is the best indicator of welfare because it accounts for differences in cost of living. For instance, a haircut or a taxi ride will cost significantly less in India than in the US, although they provide similar value. In nominal terms, the GDP per capita in the US is 29 times higher than in India, but under PPP, it is only seven times higher. By nominal GDP per capita, India ranked 140th out of 196 countries in the global ranking, improving from 162nd in 2005, and its rank is expected to reach 134th by 2030. Its PPP-adjusted ranking was 124th and is projected to rise to 117th by 2030, although these rankings converge over time.

Comparison with Other Economies

Thus, although the target indicator based on GDP per capita is not perfect, it remains the most suitable macroeconomic benchmark. India's growth over the last two decades has been one of the most stable globally, but China and Vietnam have demonstrated faster progress. In 2007, China had a GDP per capita equal to India's in 2025 and ranked 123rd. It advanced to 73rd place and is on the verge of high-income country status, with a per capita income almost five times higher than India's. Vietnam was at India's level in 2016 and now ranks 122nd, with its GDP per capita being approximately 60% higher than India's.

Conditions for Achieving High Income

Is it possible for India to achieve high-income country status and when? According to Chart 2, to overcome the high-income threshold by 2047, India needs to increase its GDP per capita in US dollars by at least 9% annually, and total GDP by 9.5%. If inflation averages 4% and the rupee depreciates by 2% annually against the US dollar, real growth must average 7.5% over the next 25 years.

Although this matches India's current growth rate, as the economy approaches the frontier of productivity, growth will begin to slow: economies at this frontier grow at less than 2.5% annually. Therefore, growth must be accelerated in the coming decade to compensate for the inevitable slowdown in the 2040s.

Strategies for Accelerating Economic Growth

How to accelerate growth? It is useful to view GDP growth as a result of labor force growth, capital formation, and productivity. Since labor force growth is linked to slowly changing demographics and cannot be quickly altered, India should and can increase the extremely low share of women in paid employment. A significant part of India's demographic dividend would otherwise be lost. Although weak labor demand is a serious problem, measures such as improving law enforcement, regulations facilitating part-time employment, and focusing on job creation in sectors where women dominate globally are necessary.

The main boost to growth must come from faster capital accumulation. Starting conditions were created by a significant reduction in the cost of capital, driven by fiscal discipline from the government and an impressive inflow of household savings into stocks (through systematic investment schemes, as well as insurance and pension funds) amounting to nearly 2% of GDP annually. Now, channels must be created to expand the potential of the financial system to ensure credit flows where it is needed, such as to small and medium enterprises (MSMEs), through mechanisms like OCEN (Open Credit Enablement Network).

Policy must also prioritize simplifying the housing supply through regulatory changes and urban infrastructure development. Real estate and infrastructure constitute a significant part of capital in developed economies—their construction creates demand for labor and materials and is an important driver of growth.

India must also maintain current productivity growth rates. Personal prosperity is impossible without productivity growth. Among other requirements (such as better healthcare and education), significant investments in science and technology are necessary. Unlike Japan, Taiwan, Korea, and even China, which observed this during their growth, India cannot rely on a 'assisted' takeoff but must prepare for a 'self-reliant' takeoff requiring the development of its own critical technologies. This is also important to avoid falling into the middle-income trap that plagued many Latin American and Eastern European countries. Proactively creating a venture capital and innovation ecosystem is crucial for transitioning from a middle to a high-income level.

While new technologies such as artificial intelligence (AI) and robotics will boost productivity globally, we believe they can help India even more by reducing unit costs in several critical sectors and overcoming vicious cycles that slow progress.

Finally, some societal changes pointed out by Joel Mokyr in his book 'The Culture of Scientific Revolution,' which contributed to the Industrial Revolution in Britain, are beginning to occur in India. Entrepreneurship is gaining social recognition and is now rewarded, seeds of an innovative system are appearing, and the government is beginning to perceive itself as a business partner rather than viewing it with suspicion.

If the focus is on building a high-trust society (supported by a modernizing judicial system) with a higher propensity for risk (not only for entrepreneurs and investors but also for policymakers), a high-income India by the late 2040s will not be an unattainable dream.