Flags of India and the United States.
Credit: Reuters Photo
New Delhi: More than 100 countries, including India, face serious obstacles in becoming high-income countries in the next few decades, and New Delhi may take nearly 75 years just to reach one-quarter of US income per capita, a World Bank report said.
It will take China more than 10 years to reach one-quarter of US income per capita and Indonesia nearly 70 years, according to the World Development Report 2024: The Middle Income Trap.
Drawing on lessons of the past 50 years, the report finds that as countries grow wealthier, they usually hit a "trap" at about 10 per cent of annual US GDP per person - the equivalent of USD 8,000 today. That's 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 USD 1,136 to USD 13,845. These countries are home to six billion people - 75 per cent of the global population - and two out of every three people living in extreme poverty.
The road ahead has even stiffer challenges than those seen in the past: rapidly ageing populations and burgeoning debt, fierce geopolitical and trade frictions, and the growing difficulty of speeding up economic progress without fouling the environment, it said.
"Yet many middle-income countries still use a playbook from the last century, relying mainly on policies designed to expand investment. That is like driving a car just in first gear and trying to make it go faster," the report 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, said Indermit Gill, Chief Economist of the World Bank Group and Senior Vice President for Development Economics.
"At current trends, it will take China more than 10 years just to reach one-quarter of US income per capita, Indonesia nearly 70 years, and India 75 years," the report said.
Gill also said the battle for global economic prosperity will largely be won or lost in middle-income countries.
The report proposes a 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 Since 1990, only 34 middle-income economies have managed to shift to high-income status - and more than a third of them were either beneficiaries of integration into the European Union, or of previously undiscovered oil, the World Bank said.