Highlighting the challenges faced by countries in transitioning to the high-income country status, the World Bank, in its report, has stated that India might take nearly 75 years to achieve just one-quarter of the United States' income per capita. More than 100 nations face major obstacles in achieving the high-income status in the coming decades, the report revealed.
Offering the first comprehensive layout for the developing nations to overcome the middle-income trap, the report titled ‘World Development Report 2024: The Middle Income Trap’ highlighted that China is going to take more than a decade to reach a quarter of the US income per capita, while Indonesia will require about 70 years to achieve the same.
The World Bank report talked about a ‘middle-income trap’, which is based on studies from the last 50 years. As nations grow wealthier and their economy expands, they hit a ‘trap’ at about 11 per cent of the annual US GDP per person, which translates into USD 8,000 today. The economic expansion, on average, begins to decelerate and reaches a plateau in income per capita growth.
The report labelled the rapidly ageing populations, increasing debt, geopolitical and trade frictions and the consistent failure to achieve economic progress without damaging the environment as the major hurdles which are going to pose a challenge in the coming years.
“Many middle-income countries still use a playbook from the last century, depending mainly on policies designed to expand investment. That is like driving a car in just first gear and making it go faster,” the report mentioned.
Indermit Gill, Chief Economist of the World Bank Group and Senior Vice President for Development Economics said, “If they stick with the old playbook, most developing countries will lose the race to create reasonably prosperous societies by the middle of this century.”
The World Bank, presently, classifies 108 countries as middle-income countries. The annual income per capita of these nations ranges from USD 1,136 to USD 13,845. They account for nearly 40 per cent of the global economic countries, with more than 60 per cent of people living in extreme poverty.
Since 1990, only 34 middle-income countries have scaled to the high-income status.
According to the report, depending on their stage of development, countries need to adopt a more sequenced and sophisticated mix of policies to over the middle-income trap, the report highlighted.
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