New Delhi, August 02 (The Street Press India) – Over 100 countries, including India, are facing significant challenges in becoming high-income nations in the coming decades, according to a World Bank report. The report suggests it may take India nearly 75 years to reach just one-quarter of the per capita income of the US.
The World Development Report 2024: The Middle Income Trap also notes that China will need more than 10 years to achieve one-quarter of the US per capita income, while Indonesia could take almost 70 years to reach that milestone.
The report, reflecting on the past 50 years, finds that as countries become wealthier, they often encounter a “trap” when their per capita GDP reaches about 10 percent of the annual US GDP per person, which is around USD 8,000 today. This figure falls within the range that the World Bank classifies as middle-income countries.
At the end of 2023, 108 countries were classified as middle-income, with annual GDP per capita ranging from USD 1,136 to USD 13,845. These countries are home to six billion people, representing 75 percent of the global population. Notably, two out of every three people living in extreme poverty reside in these middle-income nations.
The report warns that the road ahead poses even tougher challenges than before. Countries will have to navigate rapidly aging populations, burgeoning debt, intense geopolitical and trade frictions, and the growing difficulty of accelerating economic progress without harming 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 noted.
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, warned Indermit Gill, Chief Economist of the World Bank Group and Senior Vice President for Development Economics.
“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,” the report stated.
Gill also noted that the battle for global economic prosperity will largely be won or lost in middle-income countries.
The report proposes a strategy for countries to achieve high-income status. Depending on their stage of development, all countries need to adopt a sequenced and progressively more sophisticated mix of policies. Since 1990, only 34 middle-income economies have successfully transitioned to high-income status, with more than a third benefiting from integration into the European Union or previously undiscovered oil reserves, according to the World Bank.
