The correct answer is (a) a moderately indebted country.
The World Bank classifies countries into four categories based on the size and composition of their external debt:
- Low-income countries (LICs) have an external debt-to-GNI ratio of more than 70% and an external debt service-to-exports ratio of more than 25%.
- Lower-middle-income countries (LMICs) have an external debt-to-GNI ratio of between 40% and 70% and an external debt service-to-exports ratio of between 15% and 25%.
- Upper-middle-income countries (UMICs) have an external debt-to-GNI ratio of between 20% and 40% and an external debt service-to-exports ratio of between 10% and 15%.
- High-income countries (HICs) have an external debt-to-GNI ratio of less than 20% and an external debt service-to-exports ratio of less than 10%.
India is classified as a moderately indebted country because it has an external debt-to-GNI ratio of 22.2% and an external debt service-to-exports ratio of 1.6%.
The World Bank’s classification of countries is based on a number of factors, including the size of the country’s external debt, the composition of the debt, the country’s economic performance, and the country’s debt sustainability. The World Bank’s classification of countries is used to determine eligibility for certain types of financial assistance and to monitor the progress of countries in reducing their external debt.