World Bank Report: India Could Be Stuck In Middle-Income Trap, See When Will It Reach 1/4 Of US' Per Capita Income

The World Development Report 2024: The Middle Income Trap stated that countries, including India, China, South Africa, and Brazil, could be stuck in the middle-income level due to some obstacles

The World Bank report said that at the current growth rates, China would need over 10 years to reach one-quarter of the income per capita level of the US. (Image Source: IMF)

Source : IMF

Over 100 nations could face serious challenges that might obstruct their efforts to achieve high-income levels in the coming few decades, a study by the World Bank revealed recently. The World Development Report 2024: The Middle Income Trap stated that these countries, including India, China, South Africa, and Brazil, could be stuck in the middle-income level due to some obstacles.

The study also stated in detail a pathway to help the developing countries escape this ‘middle-income trap’, reported Moneycontrol. The study noted that as the nations develop and become richer, they hit a ‘trap’ at nearly 10 per cent of their annual US GDP per person, that comes up to $8,000 in real time. 

Taking into account the learnings from the last five decades, the report said that since 1990, only 34 middle-income countries were able to transition to high-income level, and nearly a third of these either benefited from their integration into the European Union, or gained from previously undiscovered oil.

As of 2023 end, the study found that the global lender classified 108 nations as middle-income, with an annual GDP per capita between $1,136 and $13,845. At the same time, these nations accounted for 75 per cent of the world’s population, while having two out of every three individuals existing in extreme poverty.

The World Bank report said that at the current growth rates, China would need over 10 years to reach one-quarter of the income per capita level of the US, while to accomplish the same feat, India would need almost 75 years, and Indonesia would require 70 years.

Challenges To Growth

The major challenges expected to be faced by these countries include a fast-aging population, rapidly soaring debt, geopolitical and trade tensions, and the increasing difficulty in managing economic growth with environmental sustainability. However, the report added, that many of these economies still depend on policies of the past to drive growth.

What's Next?

Elaborating on the path ahead, Indermit Gill, Chief Economist, World Bank Group, said, “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.” The report suggested that these nations should adopt a more sophisticated combination of policies as detailed in the study.