Narendra Modi has pledged to convert India into a developed, high-income nation by 2047. Several forecasts predict India will be the 3rd largest economy in six years. However, attaining high-income status will require significant challenges.
Present Economic Condition
According to the World Bank, High-income economies must have a per capita Gross National Income (GNI) of $13846 (£10870) or more. India’sIndia’s per capita pay is around $2400 (£1885), which makes it a lower-center pay country. Economists say the Indian economy may be heading to a “middle-income trap,” where growth slows, and the government can’t compete with advanced economies.
Middle-Income Trap
A new World Bank report raised the same concerns. If current growth continues at this rate, it will take India 75 years to reach a quarter of America’s per capita income, according to the World Development Report 2024. It points out that over 100 nations, including India, China, Brazil, and South Africa, will face “serious obstacles” as they try to become high-income countries within the nOverecades.
Over two-thirds of international carbon emissions come from these Middlewich accounts, which account for around 40% of world economic output but have three-quarters of their population below extreme poverty. According to researchers who studied them, these nations also deal with issues such as aging populations, increasing protectionism, and the need for speedier energy transitions.
Economic Strategies and Challenges
Indermit Gill, the World Bank’s chief economist, emphasizes that many middle-income countries rely on outdated strategies to achieve advanced economic status. These strategies often depend on prolonged investment or premature shifts to innovation. For instance, businesses in India, Mexico, and Peru typically double in size over 40 years, compared to a seven-fold increase in the US during the same period. This indicates that firms in middle-income countries struggle to grow significantly yet survive for decades.
Successful Examples
South Korea exemplifies this approach. In 1960, its per capita income was $1,200, which rose to $33,000 by 2023. South Korea initially boosted public and private investment and adopted an industrial policy encouraging domestic firms to utilize foreign technology and advanced production methods. Companies like Samsung transitioned from producing noodles to becoming global innovators by adopting and developing new technologies.
Other countries, like Poland and Chile, have followed similar paths. Poland boosted productivity by adopting Western European technologies, while Chile encouraged technology transfer to drive local innovation. For example, Chile famously adapted Norwegian salmon farming techniques to become a top salmon exporter.
India Path Forward
Historically, many countries hit a “trap” at around 10% of US GDP per capita ($8,000 today), placing them in the middle-income range. Since 1990, only 34 middle-income countries have transitioned to high-income status. Economists Raghuram Rajan and Rohit Lamba estimate that even at a 4% growth rate, India’s per capita income will reach $10,000 only by 2060, which is lower than China’s current level.
To achieve high-income status, India must generate good employment opportunities for its youth to accelerate growth and leverage the potential population dividend before aging becomes a major issue. This requires a strategic focus on investment, technology adoption, and innovation, as well as learning from the successful examples of other countries.
