Why India Will Take 75 Years to Reach One-Quarter of US Income Per Capita according to World Bank

Last updated on September 5th, 2024 at 12:21 am

According to the World Development Report 2024 at current development rate in India , it might take almost 75 years to reach just one-quarter of the per capita income of the United States.

But what’s the reasons behind World Bank prediction and what it means for India and other countries trying to grow their economies.

we will try to cover in this article

The Middle-Income Trap

According to World Bank there is a “middle-income trap” in so many developing nations meaning when a country’s economy grows to a certain point but then gets stuck and can’t move up to high-income status.

Usually, this trap occurs when a country’s income per person is about 10% of the annual income per person in the US, which is around $8,000 today. At this stage, economic growth slows down, making it hard for these countries to get richer.

Current Middle-Income Status Countries

As of the end 2023, the World Bank marked 108 countries with middle- Income country status. In these countries per person income ranges from $1,136 to $13,845 a year. They are home to six billion people, which is 75% of the world’s population. Two out of every three people living in extreme poverty also live in these middle-income countries.

Challenges in front of developing nations

The report points out several major challenges that preventing countries to become richer:

• Aging Populations: Many countries, including India, have more elderly people now. This puts pressure on social services and reduces the working-age population, which can slow down economic growth.

• Rising Debt: High levels of national debt can limit a country’s ability to invest in important areas like infrastructure and education, which are needed for economic growth.

• Geopolitical and Trade Tensions: Conflicts and trade issues between countries can disrupt economic stability and growth.

• Environmental Concerns: Balancing economic growth with environmental sustainability is becoming harder. Ignoring environmental issues can harm long-term economic prospects.

According to World Bank Developing Nations Economic Strategies is not good in Long terms, many middle-income countries are using outdated economic policies, which will take a long leap to become a High-income country.

Indermit Gill, the Chief Economist of the World Bank Group, compared it to driving a car in first gear and expecting it to go faster.According to Gill , with current economic strategy it will be very hard to make any significant progress.

India’s Long Road Ahead

If current trends continue, India might need around 75 years to reach one-quarter of the US income per person. This prediction shows how tough the road to economic prosperity is for India.

The Global Perspective

India is not alone in facing these challenges. The report also says that China will need over 10 years to reach the same income level, and Indonesia might need nearly 70 years. This indicates that many developing countries are in similar situations.

Path to High-Income Status

To escape the middle-income trap and become high-income countries, the World Bank suggests that nations need to adopt a mix of sophisticated policies that suit their stage of development. Since 1990, only 34 middle-income countries have transitioned to high-income status, often with the help of joining the European Union or discovering new oil resources.

Conclusion

The World Bank’s prediction for India, suggesting it will take 75 years to reach one-quarter of the US income per capita, highlights the significant economic challenges.

Ageing populations, rising debt, geopolitical tensions, and environmental concerns all contribute to the difficulties in achieving sustained economic growth.

To overcome these challenges, India and other middle-income countries must move away from outdated economic strategies and adopt more innovative and customised approaches to development. The path to prosperity is long and complex, but with the right policies and strategies, it is achievable.