World Bank, in itsrecent report said Leveraging Strengthsand Opportunities,states tha India shouldmake a transition tothe knowledge economyand if it uses itsknowledge then theper capita income ofIndia will increase from a little over US $1000

what does this means?

The concept of knowledge economy is new one and is the next stage in the evolution of economies. An under developed nation is based on agricultural activities since it is not developed so much to carry on manufacturing in factories .A developing nation has a blend of agriculture and manufacturing sector with emphasis on the later to pace up the growth. A developed economy,conventionally thought to be based on secondary sector is actually now based on "knowledge" or service sector where besides the tangible output,intangible thoughts and ideas carry more value.

In context of India,the statement in RBI's report asserts that if India makes a transition to become a "knowledge economy" then this would increase the per capita income of the country to $1000.This is a possibility and is considered too, because India's service sector is strong and is further strengthening.The number of BPO's entering India is increasing.To add to that, India's proportion of young population is more and youth is more interested  in knowledge processing and outsourcing which also add to India's advantage.