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Informist, Thursday, Aug 1, 2024

 

NEW DELHI – India faces serious hurdles that could keep it from becoming a high-income country in the next few decades, the World Bank said today. China, Brazil, and over 100 other countries also face similar obstacles that could keep them in the 'middle-income trap', the multilateral institution said in its World Development Report.

 

At the current pace, India will take another 75 years just to reach 25% of US per capita income, the World Bank said. China will take 10 years, and Indonesia nearly 70 years for the same.

 

The report said that as countries become richer, they usually hit a "trap" at about 10% of annual US GDP per person, which is the equivalent of $8,000 today. That's in the middle of the range of what the World Bank classifies as "middle-income" countries.

 

Since 1990, only 34 middle-income economies have managed to become high-income nations. 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. India became a middle-income country in 2007.

 

"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 World Bank report said. "They generate more than 40% of global GDP and more than 60% of carbon emissions."

 

These nations also face far bigger challenges than their predecessors in escaping the middle-income trap, such as rapidly ageing populations, rising protectionism in advanced economies, and the need to speed up the energy transition, the report said. 

 

The report proposes a "3i strategy" for these 108 countries to reach high-income status. "Depending on their stage of development, all countries need to adopt a sequenced and progressively more sophisticated mix of policies," the World Bank said.

 

Low-income countries can focus solely on policies designed to increase investment--the 1i phase. Upon reaching the lower-middle-income status, these countries need to expand the policy mix to the 2i phase: investment and infusion, which consists of adopting technologies from abroad and spreading them across the economy, the report said.

 

"At the upper-middle-income level, countries should shift gears again to the final 3i phase: investment, infusion, and innovation. In the innovation phase, countries no longer merely borrow ideas from the global frontiers of technology--they push the frontier."  End

 

US$1 = 83.72 rupees

 

Reported by Shubham Rana

Edited by Rajeev Pai

 

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