Noting that India's growth is expected to continue and elimination of extreme poverty in the decade is within reach, it said at the same time, the country's development trajectory nonetheless faces considerable challenges.

For this, the World Bank said, India will need to achieve greater resource efficiency as it sustains growth, given its resource endowments and large population. Land will need to be used more productively in urban areas by the spatial transformation of cities achieving "agglomeration economies" and in rural areas by increased agricultural productivity, it said.

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India's water management will need to provide for shifting water allocation to higher-value uses and policies to increase the value of water use within sectors. In addition, 230 million people are not properly connected to the electricity grid while generation will need to be less carbon-intensive, the World Bank pointed out.

"More generally, India's rapidly growing economy needs investment in infrastructure, an estimated 8.8 percent of GDP or USD 343 billion a year until 2030," it said. Second, sustained growth will also need to accelerate inclusion, especially to create more and better jobs. While an estimated 13 million people enter the working-age population each year, only three million new jobs are being generated on an annual basis, the financial institution said.

The World Bank said a particular challenge lies in India's declining female labour force participation, which at 27 percent is among the lowest in the world despite overcoming gender gaps in education.
"Finally, India's public sector institutions will need to be modernised to deliver services and regulations that match the aspirations of a middle income country; this will entail improving accountability and effectiveness, improving the ability of the state to interface with the private sector, and strengthening the compact among tiers of government to improve service delivery," the bank said.

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