Five Indian states have individually crossed the World Bank’s upper-middle-income threshold of $4,636 per capita income. Delhi leads at $6,217, followed by Karnataka at $5,579, Telangana at $5,407, Tamil Nadu at $5,329, and Gujarat at $4,734. Three other major states came within striking distance — Maharashtra missed by just $8, Haryana by $9, and Kerala by $26. The data aligns with the World Bank’s annual global income reclassification for FY2027, released this week, which upgraded Sri Lanka, Vietnam and the Philippines to upper-middle-income status as countries. India as a whole remains classified as lower-middle-income with an Atlas-method per capita income of $2,760.
The transformation since liberalisation is real. In 1994, not a single Indian state had per capita income high enough to qualify as middle-income under current World Bank thresholds. Today, Delhi’s income is comparable to South Africa’s $6,270. Karnataka and Telangana sit above Indonesia and Vietnam. But the transformation has been radically uneven. Bihar records a per capita income of $984, Uttar Pradesh $1,403, and Jharkhand $1,470. All three earn less than Nepal and several sub-Saharan African countries. The Gini coefficient measuring interstate income inequality has widened from 0.230 in 1994-95 to 0.261 in 2025-26. The ratio between the richest and poorest states has grown from 2.38 times to 3.73 times.
Individual state trajectories make the divergence sharper. Uttar Pradesh and Odisha were at similar income levels thirty years ago. Odisha now earns 75 per cent more. Jharkhand and Assam were on equal footing. Assam’s per capita income is now 48 per cent higher. Punjab, the richest large state in 1994-95, now earns less than seven other states and sits at par with Rajasthan. Middle-income states grew the fastest over this period at 36.7 times their 1994-95 levels, outpacing the richest group at 28.3 times and the poorest at 26.6 times. The states that were positioned to industrialise pulled ahead. The states that were not fell into a structural loop where the absence of infrastructure, skills and governance made it harder to attract the investment that would build them.
The international narrative about India focuses on aggregate GDP milestones — fifth-largest economy, heading for third. These numbers tell a different story. A country where five states qualify as upper-middle-income while three of its most populous earn less than Nepal is not converging. It is running multiple economies under a single national framework, and economic growth over three decades has widened the distance between them rather than closing it.
Source: Moneycontrol
