NEW DELHI: More than 100 nations, including India and China, face “serious obstacles” in their transition to high-income status, according to a World Bank report released on Thursday. The report, part of the World Development Report 2024, highlights that since 1990, only 34 middle-income nations have successfully advanced to high-income status.
Key Challenges for Middle-Income Nations
“Middle-income countries will have to work harder. They can’t rely on the old playbook. That’s like driving a car with its first and second gears missing,” said the report.
The primary challenge for these 108 middle-income countries is the decline of traditional growth engines, like trade and the expansion of open economies. The report warns that this decline is making it harder to maintain growth as adaptation mechanisms are becoming less effective.
Economic Complexities and Future Prospects
The global economy is increasingly complex, influenced by geopolitical tensions, de-globalization, and technological shifts. If middle-income countries do not adapt, the report states that it could take China over a decade to reach three-quarters of US income per capita, and Indonesia 70 years to achieve half of this benchmark.
India’s Demographic Challenge
The report highlights India’s potential demographic crisis. A recent Niti Aayog meeting emphasized the need for managing the aging population. CEO BVR Subrahmanyam mentioned, “Some states have requested addressing the demographic management. India will need a demographic manager to tackle the elderly population.”
Investment and Innovation Critical for Progress
The report urges developing nations to focus on capital investment and innovation to break free from the middle-income trap. While larger economies must pivot to new growth models and innovation, middle-sized countries face challenges such as managing aging populations and adapting to falling death rates.
India’s Path Forward
Gill’s remarks on India’s Aadhaar-enabled public infrastructure suggest the country has the potential to leapfrog into the future, much like the Tata Group’s historical pivot from imports to technology-driven exports.
The report concludes that merely borrowing and applying technologies is insufficient; nations must push the frontier of innovation to achieve high-income status.
