‘India’s per capita income to hit a quarter of U.S. levels in 75 years’

• India will take 75 years for its per capita income to reach a quarter of U.S. income levels if current trends continue

Highlights:

• India may be the fastest growing major economy but it will take 75 years for its per capita income to reach a quarter of the U.S. the World Bank warned recently
• The World bank identified India as one of 100-odd countries including China that face the risk of falling into the “middle income trap”.
• While governments in India and other nations hope to accomplish the transition from a middle-income economy, like Korea had done
• The world bank said it would be a miracle if today’s middle-income economies manage to do in 50 years what Korea did in just 25.
• Noting that many middle-income countries still use a playbook from the last century, relying mainly on policies designed to expand investment,
• 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.
• At current trends, it will take China more than 10 years just to reach one-quarter of U.S. income per capita, Indonesia nearly 70 years, and India 75 years
• Nations such as China, India, Brazil, and South Africa face serious obstacles in their efforts to become high-income countries in the next few decades.
• Since 1990, only 34 middle-income economies have managed to shift to high-income status, with over a third of them benefiting from integration into the European Union or previously undiscovered oil reserves.
• By 2023, 108 countries were classified as middle-income, each with annual GDP per capita in the range of $1,136 to $13,845.
• Home to six billion people or 75% of the global population, with two out of every three persons living in extreme poverty, these countries generate more than 40% of global GDP.

Way Forward

• First focus on investment; then add an emphasis on infusion of new technologies from abroad; and, finally, adopt a three-pronged strategy that balances investment, infusion, and innovation.
• With growing demographic, ecological and geopolitical pressures, there is no room for error.

Prelims Takeaway

• Per Capita Income