NEW DELHI: India may take nearly 75 years just to achieve one-fourth of US income per capita, as per a recent World Bank report that offers the first extensive blueprint for developing countries to overcome the “middle-income trap.”
More than 100 countries, including India, China, Brazil, and South Africa face serious challenges in becoming high-income countries in the next few decades, the report said.
According to the World Development Report 2024: The Middle Income Trap, “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.”
“Drawing on lessons of the past 50 years, the study finds that as countries grow wealthier, they usually hit a “trap” at about 10% of annual US GDP per person—the equivalent of $8,000 today. That’s in the middle of the range of what the World Bank classifies as “middle-income” countries,” the report said.
“At the end of 2023, 108 countries were classified as middle-income, each with annual GDP per capita in the range of $1,136 to $13,845. These countries are home to six billion people—75% of the global population—and two out of every three people living in extreme poverty,” the report added.
The future presents even more formidable obstacles compared to those encountered in the past, including rapidly aging populations, mounting debt, intense geopolitical and trade tensions, and the increasing difficulty of accelerating economic growth without damaging the environment.
“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,” the report said.
The report suggests that these nations need to adopt new strategies and policies to effectively navigate the challenges ahead and achieve sustainable economic progress.
Chief Economist of the World Bank Group and Senior Vice President for Development Economics Indermit Gill said developing countries must not stick with the old playbook, most developing countries will lose the race to create reasonably prosperous societies by the middle of this century.
“The battle for global economic prosperity will largely be won or lost in middle-income countries,” Gill said.
“But too many of these countries rely on outmoded strategies to become advanced economies. They depend just on investment for too long—or they switch prematurely to innovation. A fresh approach is needed… With growing demographic, ecological and geopolitical pressures, there is no room for error,” he added.
The World Bank report outlines a strategy for these nations to attain high-income status, which involves implementing a sequenced and increasingly sophisticated combination of policies based on their current stage of development.
“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, or of previously undiscovered oil,” the World Bank report added.
(With inputs from agencies)
