How worrisome is India’s risk of slipping into a “middle-income trap”? According to Indermit Gill, chief economist at the World Bank, the global record shows that the odds of breaking into the bracket of developed countries are slim.
Since 1990, only 34 countries have gone from middle- to high-income, and they’re home to just 250 million people. Most economies that do well end up stuck at a per-capita income level of $4,000-7,000.
To escape this trap, in Gill’s analysis, India needs greater economic freedom, equal opportunities for women and improved education quality. None of these is easy to achieve. The case for a reduced role of the state in our economy has been losing traction, while the other two challenges are formidable.
No less worryingly, an uneven distribution of earnings could also get in our way. The fortunes of asset owners have brightened, as surveys indicate, while stagnancy stares at a vast majority.
These trends need to be reversed. It will probably prove hard to get beyond a point if too many of our citizens get left behind in our quest for prosperity. How to take a more equitable path without slowing growth is the policy puzzle we must crack.