World Development Report 2024 :World Bank Report
A recent World Bank report titled “World Development Report 2024: The Middle Income Trap” has highlighted significant challenges faced by over 100 countries, including India, in achieving high-income status in the coming decades.
Highlights of the World Development Report 2024:
- India is among 100 countries, including China, at risk of falling into the “middle income trap,” where countries struggle to transition from middle-income to high-income status.
- India is at a crucial juncture, benefiting from favorable demographics and advancements in digitalization, but faces a tougher external environment compared to the past.
- India’s aim to become a developed nation by 2047 requires a comprehensive approach that enhances overall economic performance, rather than focusing on isolated sectors.
- The report notes that only 34 middle-income economies have transitioned to high-income status since 1990, often due to special circumstances like European Union integration or oil reserves.
- Middle-income countries face challenges in sustaining economic growth due to diminishing returns on physical capital.
- While low-income countries benefit from building physical capital and improving basic education like India in the 1980s, where capital deepening was crucial, middle-income countries encounter diminishing returns as they invest further.
- Simply increasing saving and investment rates to meet growth targets isn’t sufficient; these countries also need to address factors beyond physical capital.
- Despite having relatively high capital endowments, middle-income economies struggle with productivity issues, highlighting that physical capital alone isn’t the main barrier to further growth.
- The World Bank criticizes many middle-income countries for using outdated economic strategies focused mainly on expanding investment.
- Middle-income countries are home to six billion people, representing 75% of the global population, and generate over 40% of global Gross Domestic Product (GDP).
- The success or failure of these countries in achieving high-income status will significantly impact global economic prosperity
- India is identified as the fastest growing major economy, but it would take 75 years for its per capita income to reach a quarter of the US income levels if current trends continue.
- China would take over 10 years, Indonesia nearly 70 years, and India 75 years to reach a quarter of US income per capita.
