Odds Are Against India Ever Becoming a High Income Developed Country

"The odds are against India becoming a high income developed country - there's no guarantee": World Bank Chief Economist, Indermit Gill, to Karan Thapar for The Wire.

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The Chief Economist of the World Bank, who is also the author of the middle income trap concept, has said: “The odds are against India becoming a high income developed country – there’s no guarantee”. Indermit Gill says the majority of middle income countries remain middle income countries. In India’s case, he believes it will easily progress from its present per capita income of $2,500 to levels of $8,000-$10,000 but then it could get stuck. Up till now no country of India’s size or demography has progressed from middle income status to high income developed country status.



In a comprehensive and detailed interview to Karan Thapar for The Wire, Dr. Gill, who is also the World Bank’s Senior Vice President for Development Economics, said if India gets stuck in a middle income trap it would be “pretty good” for some 400 million people i.e. the rich and the middle and upper middle classes but, he added, “it won’t be good at all” for the remaining 1 billion Indians.



In the interview, Dr. Gill identified three critical steps that need to be taken if India is to avoid the danger of getting stuck in a middle income trap. Briefly, these are, first, greater economic freedom, second, a far greater effort to ensure equal opportunity for all people of all faiths and both sexes and, third, massive investment in education.



This is a very detailed and closely-argued interview. No one in the world understands the middle income trap and its dangers better than Dr. Gill. He also has excellent knowledge and understanding of the Indian economy. He has, after all, been educated in India and is an Indian citizen. Therefore, if you want to understand both the middle income trap concept and the danger that India could get stuck within it I suggest you see this interview. I don’t want to take the risk of précising or paraphrasing what he said in case I misrepresent his views or convey the wrong impression through an attempt to be brief.



One of the important things Dr. Gill says is that countries in the middle income threshold need to learn from developed countries how to use the investment they have most effectively. In other words, as he puts it, don’t seek to reinvent the wheel, emulate and then adapt what the developed world has done. The Latin American countries, now caught in the middle income trap, attempted to re-invent the wheel behind economic barriers they erected and failed. This raises significant questions about the relevance of atmanirbhar. Dr. Gill discusses this. You will see it in the interview. Is it a mistaken policy for India? Or is the way it’s been emphasized wrong? Please see the interview to find out.



Another point Dr. Gill makes is that it could take India 75 years to reach just one quarter of the United States per capita income. At the moment India’s per capita income is $2,500. The US per capita income is $81,600. One quarter is $20,400. In other words, it will take India 75 years to increase its income from $2,500 to $20,400.



But even when that happens, will India have reached high income levels? At the moment, the threshold for high income countries is $13,000. But where will that threshold be 75 years from now? That’s the key question. Again, this is discussed in the interview.



I will stop here. However, to help you I will give you the list of main questions put to Dr. Gill. They weren’t necessarily asked in this order. Here they are:



1) I want to focus this interview on the concept of a middle income trap and the possibility that India could get caught in it. First, as the person who devised this concept, can you start by defining what is the middle income trap?



2) Is it true that the majority of middle income countries get caught in the middle income trap and it’s only a minority that progress to become high income developed countries? This majority I’m told includes countries like Egypt, Brazil and Turkey.



3) What is it about the economy of countries that get caught in the middle income trap that leads to this happening? In other words, what’s the difference between countries that get caught in the trap and those that progress to become high income developed countries?



4) Now three countries that have progressed through middle income to become developed countries are South Korea, Taiwan and, most people would agree, China. What are the qualities or characteristics that explain their success?













Here is the link:


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