India will take 75 years to reach a per capita income of a quarter of that of the United States, according to the World Bank’s latest World Development Report 2024, which paints a gloomy picture of the challenges it confronts like other middle-income countries.

As India turns from an ageing to an aged society in the next 25 years, its working-age population will reduce significantly, which will affect employment and growth. Besides, there will be a need to develop senior-friendly policies and infrastructure that will require more spending.

The report adds that middle-income countries like India will need policies that support savings, especially by the working-age population, and ensure upgrading working skills, leveraging automation and other technologies to make up for the decreasing workforce.

Also Read: Banks Warn Of APK Frauds: What Are They And How You Can Protect Yourself Against Them?

The ‘Middle-Income Trap’

The “World Development Report 2024: The Middle Income Trap,” released on August 1, highlights that as countries’ wealth grows, they hit a “middle-income trap,” which happens when they stop achieving expected growth rate—or hit a “trap” at about 10 per cent of the US annual GDP per person—or an equivalent of $8,000 currently.

At the end of 2023, the per capita income in the 108 middle-income countries ranged between US$1,136 and US$13,845. Since 1990, only 34 middle-income economies could break the trap and enter high-income status, mainly due to their integration into the European Union.

These countries currently have around 75 per cent of the world’s population (6 billion), generating over 40 per cent of the global GDP. Of them, two in every three persons live in extreme poverty. Their rapidly ageing population could further hit them due to labour shortages.

According to the report, “Today’s middle-income countries are aging more rapidly than high-income countries did in the past. Transitioning from an aging society to an aged society took about 61 years in today’s high-income countries and as long as 69 years in the US and 115 years in France. By contrast, transitioning from an aging society to an aged society is estimated to take about 26 years for today’s middle-income countries.”

What Can Middle-Income Countries Do?

The report states that many middle-income countries have done well since the 1990s to escape low-income levels and eradicate extreme poverty. However, the ambition of the more than 100 economies with per capita income between US$1,100 and US$14,000 is to reach high-income status within the next generation. When assessed against this goal, their record is discouraging.

Indermit Gill, chief economist of the World Bank Group and senior vice president for development economics said, “Too many of these countries rely on outmoded strategies to become advanced economies. They depend just on investment for too long—or they switch prematurely to innovation. A fresh approach is needed”.

Strategy To Prosperity:

The report adds that “These countries will have to time the shift from simpler investment-led growth strategies that worked well in the early stages of development to augmenting investment accelerations with intentional policies that aid the infusion of know-how from abroad, and only then expend sizable resources on innovation. Put another way, they will have to become more efficient in their use of capital—both financial and human—and labor and energy.”

Also Read: Removal of GST On Life, Medical Insurance: How This Will Benefits Senior Citizens

The middle-income countries need to value reliable information to make fast structural changes along with a “durable increase in living standards and income”. So, in short, the countries depending on their developmental stage need to take a mix of measures.

According to Somik V. Lall, director of the 2024 World Development Report, “Success will depend on how well societies balance the forces of creation, preservation, and destruction. Countries that try to spare their citizenry the pains associated with reforms and openness will miss out on the gains that come from sustained growth”.