It will take nearly 75 years for India’s per capita income to reach a quarter of the income levels of the United States if current trends continue, the World Bank said on Thursday.
In a report titled “World Development Report 2024: The Middle Income Trap”, the World Bank said that over 100 countries, including India, faced serious obstacles in becoming high-income ones in the next few decades.
The report, which studied trends from the past 50 years, said that China may take over 10 years to reach one-quarter of the US’ income per capita, while Indonesia nearly 70 years at current trends.
The World Bank said that as countries grow wealthier they usually hit a “trap” at around 10% of the US’ annual GDP per person, which is currently the equivalent of $8,000 or Rs 6.7 lakh. This is in the middle of the range of what the financial institution terms “middle-income” countries.
Only 34 middle-income economies had managed to shift to become high-income ones since 1990, the report said, adding that over a third of them benefitted from their integration into the European Union or due to oil reserves that were previously undiscovered.
The World Bank said that 108 countries were termed middle-income at the end of 2023. Each of these countries had an annual GDP per capita that fell between $1,136 (Rs 9,95,193) and $13,845 (Rs 11,60,175).
These countries together had a population of about six billion, which was 75% of the global population, with two out of every three person living in extreme poverty.
“The road ahead has even stiffer challenges than those seen in the past: rapidly aging populations and burgeoning debt, fierce geopolitical and trade frictions, and the growing difficulty of speeding up economic progress without fouling the environment,” wrote Indermit Gill, chief economist at the World Bank group.
“Yet many middle-income countries still use a playbook from the last century, relying mainly on policies designed to expand investment,” he added. “That is like driving a car just in first gear and trying to make it go faster.”
Gill added that if countries stuck to the old playbook, most would lose the race to create “reasonably prosperous societies by the middle of this century”.
The report also proposed a framework for countries to “escape” the trap. “First focus on investment; then add an emphasis on infusion of new technologies from abroad; and, finally, adopt a three-pronged strategy that balances investment, infusion, and innovation,” it said.
In the report, the World Bank also referred to Prime Minister Narendra Modi’s vision to turn India into a developed economy by 2047.
Modi has on several occasions emphasised the goal of India becoming a developed economy by 2047, when the country will complete 100 years of independence.
According to the report, while governments in India and other countries hoped to accomplish the transition from a middle-income economy like South Korea, “it would be fair to conclude that it would be a miracle if today’s middle-income economies manage to do in 50 years what Korea did in just 25”.
In April, Franziska Ohnsorge, the World Bank’s chief economist for South Asia, said that India will not be able to achieve its target of becoming a developed economy by 2047 without introducing reforms to boost employment.
Ohnsorge pointed out that achieving the 2047 target remained a distant dream “in a no-reform scenario”.
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