World Bank releases the World Development Report 2024: Middle Income Trap

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Report provides a comprehensive roadmap to enable developing countries to escape the “Middle-Income Trap”.

Middle-Income Trap is a situation in which a Middle-Income Country (annual GDP per capita in range of $1,136 to $13,845) experiences systematic growth slowdowns as it is unable to take on new economic structures needed to sustain high-income levels.

Key Highlights

As countries grow wealthier, they usually hit a trap at about 10% of annual U.S. GDP per person ($8,000) and do not grow fast further.
- Since 1990, only 34 Middle-Income Countries (MICs) have managed to shift to high-income status.
At end-2023, 108 countries were classified as MICs with home to 75% of global population and generating >40% of global GDP.
- Challenges they face in escaping middle income trap include rapidly aging populations, rising protectionism in advanced economies, and need to speed up energy transition.
India joined club of Lower MICs in 2007 and has remained there since with its present GNI per capita at $2,540.
- At current trends, it will take India 75 years just to reach one-quarter of US income per capita.

3I (Investment, Infusion, and Innovation) strategy: First focus on investment; then add emphasis on infusion of new technologies; and, finally, adopt a three-pronged strategy that balances 3I.
Reward value-adding firms to stimulate business dynamism, and deepen capital markets.
Enhance social mobility by providing equal opportunities to women, minorities and disadvantaged groups.
- For instance, removing barriers to entrepreneurship for women in India would raise real income by 40%.
Enhance economic efficiency by reflecting environmental costs in energy prices.