India faces middle income trap, may take over 75 years to reach one-quarter of US income per capita, says World Bank

India faces middle income trap, may take over 75 years to reach one-quarter of US income per capita, says World Bank/Representative image

MINT | August 4, 2024 | 02:59 PM IST | India | Follow on Google News

India faces middle income trap, may take over 75 years to reach one-quarter of US income per capita, says World Bank

India faces middle income trap, may take over 75 years to reach one-quarter of US income per capita, says World Bank

India is among over 100 countries that will face “serious obstacles” in the next few decades to become high-income countries, as per a new World Bank report. It noted that India could take as many as 75 years to attain one-quarter of the United States income per capita, PTI reported.

The ‘World Development Report 2024: The Middle Income Trap’ report by the international bank further noted that China may take over 10 years to achieve this feat, and Indonesia close to 70 years, it added.

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‘The Middle Income Trap’

The report said lessons from the past 50 years shows that countries usually hit a “trap” when they reach 10 per cent of the annual US GDP per capita or middle of the range as per what the World Bank classifies as middle-income countries — equivalent to $8,0000 as on date.

By 2023-end, 108 countries with a total population of six billion (75 per cent of the world) were classified as ‘middle-income’. They each had annual GDP per capital between $1,136-13,845, and two out of three people still living in poverty, the report added.

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“The road ahead has even stiffer challenges than those seen in the past: rapidly ageing populations and burgeoning debt, fierce geopolitical and trade frictions, and the growing difficulty of speeding up economic progress without fouling the environment,” the WB report said.

‘Playbook From Last Century’

“Yet many middle-income countries still use a playbook from the last century, relying mainly on policies designed to expand investment. That is like driving a car just in first gear and trying to make it go faster,” it added.

According to Indermit Gill, Chief Economist of the World Bank Group and Senior Vice President for Development Economics, if middle-income countries stick to the old playbook, they “will lose the race to create reasonably prosperous societies by the middle of this century”.

“At current trends, it will take China more than 10 years just to reach one-quarter of US income per capita, Indonesia nearly 70 years, and India 75 years,” as per the report.

Gill also said the battle for global economic prosperity will largely be won or lost in middle-income countries.

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The report said all countries need to adopt a sequenced and progressively more sophisticated mix of policies.

Notably, since 1990, only 34 middle-income economies have managed to shift to high-income status — and more than a third of them were either beneficiaries of integration into the European Union (EU), or of previously undiscovered oil, the World Bank said.

(With Inputs from PTI)

MINT