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According to the World Bank's 2024 World Development Report, titled "The Middle Income Trap," over 100 countries, including India, face significant challenges in transitioning to high-income status within the next few decades. The report underscores that achieving a high-income status is becoming increasingly difficult due to a variety of systemic issues.
According to the World Bank’s 2024 World Development Report, titled “The Middle Income Trap,” over 100 countries, including India, face significant challenges in transitioning to high-income status within the next few decades. The report underscores that achieving a high-income status is becoming increasingly difficult due to a variety of systemic issues. India, for instance, may take nearly 75 years to reach just one-quarter of the per capita income of the United States, as per the report. This projection reflects a broader trend observed across many middle-income nations. The report highlights that countries like China will need more than a decade to reach one-quarter of US income per capita, while Indonesia could take nearly 70 years. These projections reveal a stark reality for nations striving to elevate their economic status amidst various global pressures.
The “middle-income trap” described in the report refers to the phenomenon where countries experience stagnated growth as they transition from middle-income to high-income status. This trap often occurs at around 10% of annual US GDP per person, equivalent to about USD 8,000 today. As of late 2023, 108 countries were classified as middle-income, with GDP per capita ranging from USD 1,136 to USD 13,845. These nations collectively house approximately six billion people, representing 75% of the global population. Notably, two-thirds of people living in extreme poverty reside in these middle-income countries. The report highlights that current challenges are more severe than those in the past. Rapidly aging populations, mounting national debt, and intensified geopolitical and trade tensions pose additional hurdles. Furthermore, the growing difficulty of advancing economic progress without exacerbating environmental degradation complicates the path to higher income levels. The World Bank warns that many middle-income countries are still adhering to outdated economic strategies that primarily focus on investment expansion. This approach is likened to “driving a car just in first gear and trying to make it go faster,” suggesting that such methods are inadequate for overcoming the current economic hurdles.
Indermit Gill, the Chief Economist of the World Bank Group, emphasizes that the struggle for global economic prosperity will hinge on the success or failure of middle-income countries. Since 1990, only 34 middle-income economies have successfully transitioned to high-income status, with over a third benefiting from European Union integration or significant oil discoveries. The report advocates for a more sophisticated and sequenced mix of policies tailored to each country’s development stage to enhance the likelihood of achieving high-income status.
