India, China and 106 other countries need to follow a 3i approach that focuses on investment, innovation and infusion of new technologies to escape the middle income trap, said World Bank in a report released on August 1.
The report noted that at current pace, India will take 75 years to reach a quarter of US’ per capita income, slower than Indonesia’s 70 years and 7.5 times more than China, which will achieve the goal in 10 years.
The multilateral institution highlighted that these 108 economies classified as middle income at present and with a per capita income between $1,136 and $13,845 faced serious obstacles that could hinder efforts to become high income countries.
“With growing demographic, ecological and geopolitical pressures, there is no room for error,” noted Indermit Gill, chief economist, World Bank Group.
Since 1990, only 34 countries have been able to escape the middle-income trap, where per capita income plateaus at $8,000 per annum or 10 percent of the US GDP.
“More than a third of them were either beneficiaries of integration into the European Union, or of previously undiscovered oil,” it pointed out.
India has a per capita income of $2,370, which it plans to increase to $18,000 by 2047 as it eyes a developed nation status.
“(Countries) face far bigger challenges than their predecessors in escaping the middle-income trap: rapidly aging populations, rising protectionism in advanced economies, and the need to speed up the energy transition,” it said.
The World Bank study cited the example of South Korea to have implemented the 3i strategy. The country had a per capita income of $1,200 in 1960, which increased to $33,000 by 2023.
“Success will depend on how well societies balance the forces of creation, preservation, and destruction. Countries that try to spare their citizenry the pains associated with reforms and openness will miss out on the gains that come from sustained growth,” said Somik V. Lall, Director of the 2024 World Development Report.
