Based on the World Bank’s recent report, India may take approximately 75 years to reach a quarter of US per capita income and it is the first general plan for developing countries to avoid “middle-income trap.”
According to this report, more than 100 countries including India, China, Brazil, and South Africa will face severe challenges in becoming high-income countries in the next few decades.
World Development Report 2024: The Middle-Income Trap says that with current trends, it will take China over ten years to catch up with one fourth of United State’s per capita income. Similarly, Indonesia almost needs sixty or so years while India would need seventy five or so years for the same.
The study said that as nations get richer they usually fall into what is called a “trap” about 10% of annual U.S. GDP per capita equaling $8000 in today’s terms. This is why there are countries within middle-income brackets as defined by World Bank as the median country falls within this range.
By end of 2023, there will be 108 middle-income economies in the world each with annual per capita GDP ranging between US$1,136 and US$13,845; these nations have a population of six billion representing three quarters (75%) of global population but only one percent (1%) accounts for 75% of global population.
This includes an aging population at break-neck speed debt build-up pressures and rising tensions over geopolitics and trade relations; and finally accelerating economic growth without adversely affecting environment becomes much harder than before.
“Still those many countries still following practices from last century relied primarily on policies aimed at boosting investments like driving car in first gear to make it run faster,” says Indermit Gill.
However, these countries need new strategies and policy options tailor-made for their future challenges as well as towards sustainable economic advancements according to this report.
Developing countries can no longer do business as usual; by the middle of this century, most developing countries will be struggling to create reasonably prosperous societies. This competition has failed.
“Middle income countries will largely determine the world’s economic success or failure” Gill commented.
“However, too many of these nations pursued outdated strategies for becoming developed economies simply sticking with getting on investment–or they jump to innovation prematurely. It requires a different approach…” he said. “As demography, ecology and increasing geopolitical pressure, there is no room for error.”
The World Bank report outlines strategies for achieving high-income status in these countries, which involve implementing an orderly and increasingly complex mix of policies relative to their present stage of development.
According to World Bank report; Only 34 such economies have successfully moved from Middle Income Economy status achieved after 1990 into High Income category and almost one-third of them have been either beneficiaries of EU integration or previously unnoticed oil beneficiaries.
