World Bank’s “The Middle-Income Trap” Report: At current trends, India will need 75 years to reach one-quarter of US income per capita

The World Bank has said in a report that at current trends, it will take China more than 10 years just to reach one-quarter of the US’ income per capita while it will take India 75 years to reach the mark.

In the report titled “The Middle-Income Trap,” the World Bank pointed out that economic growth rates in middle-income countries have been falling and are expected to average just 4% in the 2020s, down from 5% in the 2010s and more than 6% in the 2000s.

The World Bank presently classifies 108 countries as “middle-income”— that is, those nations with annual income per capita ranging from $1,136 to $13,845.10.

It said that economic expansion, on average, begins to decelerate and often reaches a plateau in income per capita growth, typically at about 11% of US GDP per capita. “Today, this figure would be about $8,000, or around the level at which countries are firmly considered upper middle-income,” it said.

The report further stated that the pace of progress in middle-income countries is slowing with average annual income growth in these countries slipping by nearly one-third in the first two decades of this century—from 5% in the 2000s to 3.5% in the 2010s.

“A turnaround is not likely soon because middle-income countries are facing ever-stronger headwinds with rising geopolitical tensions and protectionism that can slow the diffusion of knowledge to middle-income countries, difficulties in servicing debt obligations, and the additional economic and financial costs of climate change and climate action,” it said.

The World Bank believes that to achieve more sophisticated economies, middle-income countries need two successive transitions. The report elaborates that in the first transition, investment is complemented with infusion, so that countries focus on imitating and diffusing modern technologies.

“In the second, innovation is added to the investment and infusion mix, so that countries focus on building domestic capabilities to add value to global technologies, ultimately becoming innovators themselves,” the report stated.

In general, middle-income countries need to recalibrate the mix of the three drivers of economic growth—investment, infusion, and innovation—as they move through the middle-income status, the report stated.