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UPSC » Daily News Analysis ‘World Bank’s Income Classification System’ : 4 August

Daily News Analysis ‘World Bank’s Income Classification System’ : 4 August

Table of Content

What Is Gross National Income (GNI) per Capita?

  • Gross National Income (GNI) refers to the total income earned by the residents of a country during a specific period. 
  • It is calculated by taking the Gross Domestic Product (GDP), subtracting the income paid to non-residents, and adding the income received by residents from abroad. 
  • In other words, GNI = GDP – income paid to foreign entities + income earned from abroad.
  • GNI is calculated in local currency and then converted to US dollars using exchange rates.

World Bank’s Four Income Groups (2024)

Income Group GNI per Capita (in USD)
Low-income $1,135 or less
Lower-middle income $1,136 – $4,495
Upper-middle income $4,496 – $13,935
High-income More than $13,935

Key Features of the Classification:

  • Absolute system: Based on fixed thresholds, not relative to other countries.
  • Updated yearly: Adjusted for global inflation.
  • A country may move up or down based on:
    • Actual income change
    • Currency exchange rate
    • Population data updates
Why in News?
  •  The World Bank’s 2024–25 update of its income classification system shows how countries are grouped based on Gross National Income (GNI) per capita, helping compare their economic status over time.