Middle Income Trap

World Bank’s World Development Report 2024: The Middle Income warns countries, including India, risk falling into the middle-income trap.

Definition: Rapidly growing economies stall at middle-income levels, struggling to reach high-income status.

Classification:

• MICs (Middle Income Countries): Per capita GNI between $1,136 and $13,846.

• Lower MICs: GNI $1,136 – $4,465 (India: ~$2,500).

• Upper MICs: GNI $4,466 – $13,845.

Key Trends & Challenges:

Global Trends:

•  Slower progression to high-income status, aging populations, rising debt, geopolitical conflicts, environmental challenges.

India’s Vulnerabilities:

• Untapped Human Capital

• Low employability (51% of graduates).

• Limited formal skill training (2.3% workforce trained).

Innovation Gaps: 

• Low R&D investment (0.64% of GDP) compared to China (2.4%) and the US (3.47%).

Income Inequality: 

• Top 1% holds 22.6% of income, impacting tax revenue, social stability, and economic growth.