India needs 75 yrs to reach quarter of US per capita GDP: World Bank

“At current trends, it will take China more than 10 years just to reach one-quarter of US income per capita, Indonesia nearly 70 years, and India 75 years,” according to the World Development Report 2024 published by the multilateral agency.

India faces serious obstacles to its efforts to become a high-income country in the next few decades, according to a new World Bank study that found that India could take 75 years to reach a quarter of the United States’ per capita GDP at the current rate.

According to the approach paper for ‘Viksit Bharat @2047’ put out by the Niti Aayog recently, India will strive to be a $30 trillion economy by 2047 with a per capita income of $18,000 per annum from $3.36 trillion and $ 2,392 per annum, respectively.

“At current trends, it will take China more than 10 years just to reach one-quarter of US income per capita, Indonesia nearly 70 years, and India 75 years,” according to the World Development Report 2024 published by the multilateral agency.

“In India, the prime minister’s vision is to transform the nation into a developed economy by 2047 — the hundredth year of independence… but the growth prospects of middle-income countries are not improving.

“Over the last decade, the global economy has gone from healthy to hobbling and from largely integrated to increasingly fragmented. Foreign trade and investment channels are also becoming more constricted — or at least encumbered —by geopolitical tensions,” the report noted.

The growth rates of firms in India, Mexico, and Peru are far lower than those of firms in the United States, with firms expanding by less than a factor of 3.

Conversely, when firms with growth potential lack dynamism, they fall short of displacing unproductive small firms from the market. This absence of creative destruction results in a stark contrast: although the share of small firms with at most four workers declines by 60% by the age of 25 in the United States, the decrease is only about 10% in India.

“Consequently, the Indian economy lacks the mechanism for effective selection among firms, hindering the reallocation of resources to more productive users,” it said.

More than 100 countries—including China, India, Brazil, and South Africa — face serious obstacles that could hinder their efforts to become high-income countries in the next few decades, according to a new World Bank study that provides the first comprehensive roadmap to enable developing countries to escape the “middle-income trap.”

Drawing on lessons of the past 50 years, the World Bank report finds that as countries grow wealthier, they usually hit a “trap” at about 10% of annual US GDP per person — the equivalent of $8,000 today. That’s in the middle of the range of what the World Bank classifies as “middle-income” countries.

Since 1990, only 34 middle-income economies have managed to shift to high-income status — and more than a third of them were either beneficiaries of integration into the European Union, or of previously undiscovered oil.

At the end of 2023, 108 countries were classified as middle-income, each with annual GDP per capita in the range of $1,136 to $13,845.

https://www.financialexpress.com/policy/economy-india-needs-75-yrs-to-reach-quarter-of-us-per-capita-gdp-world-bank-3571746/