Middle income trap could hinder progress in India alongside other developing countries: World Bank report

More than 100 countriesincluding China, India, Brazil, and South Africaface serious obstacles that could hinder their efforts to become high-income countries in the next few decades, according to a new World Bank study that provides the first comprehensive roadmap to enable developing countries to escape the middle-income trap. Drawing on lessons of the past 50 years, the World Development Report 2024 : The Middle Income Trap finds that as countries grow wealthier, they usually hit a trap at about 10% of annual U.S. GDP per personthe equivalent of $8,000 today. Thats in the middle of the range of what the World Bank classifies as middle-income countries. At the end of 2023, 108 countries were classified as middle-income, each with annual GDP per capita in the range of $1,136 to $13,845.

 

The report proposes a 3i strategy for countries to reach high-income status. Depending on their stage of development, all countries need to adopt a sequenced and progressively more sophisticated mix of policies. Low-income countries can focus solely on policies designed to increase investmentthe 1i phase. But once they attain lower-middle-income status, they need to shift gears and expand the policy mix to the 2i phase: investment and infusion, which consists of adopting technologies from abroad and spreading them across the economy. At the upper-middle-income level, countries should shift gears again to the final 3i phase: investment, infusion, and innovation. In the innovation phase, countries no longer merely borrow ideas from the global frontiers of technologythey push the frontier, the report noted.

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