Question

What is the main criterion used by the World Bank in classifying different countries? What are the limitations of this criterion, if any?

Answer 1

The World Bank considers a country’s income to be a key criterion for determining its various groups. Countries with high incomes are considered developed, while those with low incomes are regarded as less developed. It is assumed that more revenue means that all of the things that humans require will be available in plenty. People will be able to obtain whatever they desire as a result of increased money. That is why increased income is considered the primary criterion for categorizing different classes.

The World Bank utilizes this criterion in its World Development Reports, updating the specific financial thresholds over time. For instance, based on data from 2022, countries with a per capita income of $13,205 or more are considered rich, while countries with a per capita income of $1,085 or less are classified as low income. India falls into the middle-income category, recording a per capita income of $2,277 in 2021.

Limitations of this criterion:

It does not tell us how this average income is distributed among the people in the individual countries. Two countries with the same per capita income might be very different with regard to income distribution. One might have an equitable income distribution, while the other might have significant disparities between the rich and the poor.