{"id":30725,"date":"2024-10-11T17:55:01","date_gmt":"2024-10-11T12:25:01","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=30725"},"modified":"2024-10-11T17:55:03","modified_gmt":"2024-10-11T12:25:03","slug":"escaping-the-middle-income-trap","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/11-10-2024\/escaping-the-middle-income-trap","title":{"rendered":"Escaping the Middle-Income Trap"},"content":{"rendered":"\n

Syllabus :GS 3\/Economy <\/strong><\/p>\n\n\n\n

In News<\/strong><\/h2>\n\n\n\n
    \n
  • The World Development Report 2024<\/strong> calls attention to the phenomenon of the \u201cmiddle-income\u201d trap, or the slowing down of growth rates as incomes increase.\u00a0<\/li>\n<\/ul>\n\n\n\n
    Do you know ?<\/strong>

    – The \u201cmiddle-income trap\u201d describes a situation where countries struggle to attain high-income status.
    – The concept introduced by Indermit Gill and Homi Kharas in 2007, highlights the challenges faced by countries transitioning from low to middle-income levels.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

    About the report <\/strong><\/h2>\n\n\n\n
      \n
    • It was authored by the World Bank\u00a0 and it estimates a stagnation of income per capita when economies reach a level of per capita incomes 11% of that of the U.S., hindering their journey to high-income status.\u00a0<\/li>\n\n\n\n
    • It details the policies and strategies necessary to break out of the trap based on the development experiences of those countries that did manage the transition.<\/li>\n<\/ul>\n\n\n\n

      Key Findings <\/strong><\/h2>\n\n\n\n
        \n
      • Global export<\/strong> growth has slowed, and many countries face protectionism.\n
          \n
        • Premature deindustrialization is affecting the manufacturing sector, diminishing its role in growth.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
        • Over the last 34 years, only 34 middle-income economies \u2014 defined as economies with per capita incomes between $1,136 and $13,845 \u2014 have transitioned to higher income levels.<\/li>\n\n\n\n
        • Many successful countries were part of the European Union, benefiting from free capital and labor mobility.<\/li>\n\n\n\n
        • Successful cases like South Korea and Chile <\/strong>illustrate the role of state intervention.\n
            \n
          • South Korea’s government directed private sector activities towards an export-driven growth model, rewarding successful companies with support while allowing underperformers to fail.\u00a0<\/li>\n\n\n\n
          • Similarly, Chile’s targeted interventions bolstered its natural resource sectors.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n

            Economic Challenges for India<\/strong><\/h2>\n\n\n\n
              \n
            • Scenario in India : <\/strong>The influence of billionaires close to the state has hindered domestic capital investment.\n
                \n
              • Stagnation in manufacturing and a shift back to low-productive jobs in agriculture post-pandemic.<\/li>\n\n\n\n
              • Real GDP growth<\/strong> is not translating to wage growth, leading to low consumption demand.<\/li>\n\n\n\n
              • Nominal wage increases have lagged behind inflation<\/strong>, resulting in minimal real wage growth.\n
                  \n
                • According to the PLFS, nominal wages for regular wage workers at the all-India level between April and June 2023-24 has only grown at around 5%, and that of casual workers at roughly 7%.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
                • Insufficient worker participation<\/strong> in economic growth risks perpetuating the middle-income trap.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n

                  Suggestions <\/strong><\/h2>\n\n\n\n
                    \n
                  • The recent report highlights the importance of the \u201c3i\u201d approach: investment, infusion, and innovation.\n
                      \n
                    • Economies must invest, ensure the infusion of new global technologies, and develop an environment conducive to domestic innovation.\u00a0<\/li>\n\n\n\n
                    • This is no easy task and requires nimble and responsive state policy.\u00a0<\/li>\n<\/ul>\n<\/li>\n\n\n\n
                    • In the modern economy, there are plenty of headwinds that India must overcome to successfully navigate the middle-income trap.\n
                        \n
                      • Powerful business entities can drive growth through investment and innovation.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
                      • Historical examples from South Korea and Chile demonstrate that authoritarian regimes can achieve rapid growth, but at a cost to democracy.\n
                          \n
                        • Therefore there is a need for Balancing effective state intervention with democratic principles is crucial for India to navigate the middle-income trap.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n

                          Source: TH<\/p>\n","protected":false},"excerpt":{"rendered":"

                          The World Development Report 2024 calls attention to the phenomenon of the \u201cmiddle-income\u201d trap, or the slowing down of growth rates as incomes increase.\u00a0<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-30725","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/30725","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=30725"}],"version-history":[{"count":1,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/30725\/revisions"}],"predecessor-version":[{"id":30726,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/30725\/revisions\/30726"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=30725"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=30725"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=30725"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}