Today's Editorial

Today's Editorial - 08 February 2024

How will we know that Bharat is Viksit?

Relevance: GS III (Economy)

  • Prelims: Interim Budget 2024;
  • Mains: State of Economy; Interim Budget 2024;

Why in the News?

The notion of a ‘developed economy’, as contrasted with a ‘developing economy’, does not exist any longer. There are several other metrics that can help pin down India’s progress.


  • "Viksit Bharat" is a term that was used in the interim budget speech and refers to an aspirational goal for India to become a developed country by 2047
  • The term means "India Shining" and was articulated by the Prime Minister in his 77th Independence Day speech. 

Measurement metrics and current dilemma:

  • The different metrics used to define "developed" can vary across industries and contexts. They include performance metrics, such as return on investment, profit, market share, and customer satisfaction. 
    • In the context of global development, key metrics may include population size, education access, energy consumption, and per capita income
  • The choice of metrics depends on the specific goals and objectives of the analysis or assessment. However, there is a need to define what "developed" means and what metric should be used to measure it. 


Some examples of metrics used to define "developed" countries include:

  • Gross Domestic Product (GDP) or Gross National Income (GNI) per capita: Countries may be classified as either developed or developing based on their GDP or GNI per capita. A higher GDP or GNI per capita is often indicative of a developed economy.
  • Human Development Index (HDI): The HDI assigns countries a score between 0 and 1 based on measures such as life expectancy, education, and per capita income. A higher HDI score is associated with developed economies.
  • Level of Industrialization: The degree of industrialization within a country is also used as a metric to determine its level of development.
  • General Standard of Living: The overall standard of living, including factors such as access to healthcare, education, and basic amenities, is considered in evaluating a country's development.
  • Technological Infrastructure: The amount of technological infrastructure available in a country is a key metric used to assess its level of development.
  • Per Capita GDP: A high per capita GDP is often associated with developed economies. Some economists consider a per capita GDP of $12,000 to $15,000 as sufficient for developed status.

Issues with categorisation:

  • Initially, the world economy was simpler and notions of development were relatively straightforward. The world was divided into developed, developing countries and LDCs.
  • With more than 190 countries in the world, and economies that are diverse and heterogeneous, it is doubtful if anything is gained by fitting all these into three neat straitjackets. (Think of finer differences like land-locked and small island economies).
  • A sovereign decision by a state, of course, robs the definition of all objectivity and if the definition is geography-driven, as stated by UNCTAD, and given those areas, India can never be developed. 
    • For Example, to borrow a word that originally comes from Scotland, this is plain “haverel”. At best, one can make an exception for LDCs because of special and differential treatment. 
  • The notion of a “developed economy”, as contrasted with a “developing economy”, does not exist any longer. 
    • That’s the reason UNCTAD has a list of 45 LDCs, one used by WTO for those that are WTO members. This is a physical listing, without explaining details of variables that go into identification. The developed versus developing dichotomy is weaker. 
    • All target economies are also categorized into developing or developed economies. This categorization is based on a distinction between developing and developed regions that was commonly used in the past and is maintained by UNSD (United Nations Statistical Division) with the understanding that being part of either developed or developing region is through sovereign decision of a state. 
      • The developing economies broadly comprise Africa, Latin America and the Caribbean, Asia without Israel, Japan, and the Republic of Korea, and Oceania without Australia and New Zealand. 
      • The developed economies broadly comprise Northern America and Europe, Israel, Japan, the Republic of Korea, Australia, and New Zealand. 
  • UN System:
    • There is no definition of developing and developed countries (or areas) within the UN system. Over time the use of the distinction between ‘Developed regions’ and ‘Developing regions’, including in the flagship publications of the United Nations, has diminished.
  • World Bank:
    • The World Bank’s categories are based on official exchange rates. With official exchange rates, India is in the lower-middle income category now.
    • The World Bank no longer uses terms like “developed” and “developing”. Instead, the categories are low-income, lower-middle income, upper-middle income and high income. 
      • Low income: Per capita income less than $1,085, 
      • Lower-middle income: Per capita income between $1,086 and $4,255, 
      • Higher-middle income: Per capita income between $4,256 and $13,205 and 
      • High income: Per capita income more than $13,205.
    • For cross-country comparisons, conversion to a common numeraire, like the US dollar, is required. Conversions of the rupee to a US dollar number can be done using the official exchange rate (the so-called Atlas method) or PPP (purchasing power parity) exchange rates. 

Conclusion: Thus, here are the options to pin down India in 2047. 

  1. HDI is more than 0.800. 
  2. A movement to the high-income category in constant US dollars. 
  3. A movement to the high-income category in current (2047) US dollars. 

We usually intend (2) or (3) and understandably, (3) is easier (than (2)) to reach.


Mains PYQ

Q. Some of the International funding agencies have special terms for economic participation stipulating a substantial component of the aid used for sourcing equipment from the leading countries. Discuss on merits of such terms and it, there exists astrong case not to accept such conditions in the Indian context. (UPSC 2014)

Q. The World Bank and the IMF, collectively known as the Bretton Woods Institutions, are the two inter-governmental pillars supporting the structure of the world’s economic and financial order. Superficially, the World Bank and the IMF exhibit many common characteristics, yet their role, functions and mandate are distinctly different. Elucidate. (UPSC 2013)

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