India Needs 75 Years to Reach a Quarter of US Per Capita GDP: World Bank

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Introduction

According to the World Development Report 2024 by the World Bank, India could take 75 years to achieve one-quarter of the United States' per capita GDP at the current growth rate. This forecast highlights significant obstacles that India faces in its journey to becoming a high-income country.



Economic Projections for India

The Niti Aayog's approach paper for ‘Viksit Bharat @2047’ outlines India's ambitious goal to become a $30 trillion economy by 2047. This vision aims to raise India's per capita income from the current $2,392 to $18,000 per annum. However, the World Bank's report suggests that at current growth trends, it will take China more than 10 years, Indonesia nearly 70 years, and India 75 years to reach a quarter of the US income per capita.

Challenges in Growth Prospects

The report emphasizes the slow growth prospects for middle-income countries like India. Over the last decade, the global economy has transitioned from healthy to hobbling and from largely integrated to increasingly fragmented. Geopolitical tensions are constricting foreign trade and investment channels, further complicating growth.

Firm Growth and Market Dynamics

The growth rates of firms in India, Mexico, and Peru are significantly lower than those in the United States. In the US, small firms with at most four workers see a 60% decline by the age of 25, whereas in India, this decrease is only about 10%. This indicates a lack of creative destruction in India, where unproductive small firms are not efficiently displaced by more dynamic firms. This hinders the reallocation of resources to more productive users, stalling economic progress.

Middle-Income Trap

The World Bank's study reveals that more than 100 countries, including China, India, Brazil, and South Africa, face serious obstacles in becoming high-income countries. The report provides a comprehensive roadmap to help developing countries escape the "middle-income trap." Historically, countries tend to hit a growth "trap" at about 10% of annual US GDP per person, equivalent to $8,000 today. This figure lies in the middle range of what the World Bank classifies as “middle-income” countries.

Historical Context

Since 1990, only 34 middle-income economies have transitioned to high-income status. More than a third of these countries were either beneficiaries of European Union integration or discovered new oil reserves. As of the end of 2023, 108 countries are classified as middle-income, with annual GDP per capita ranging from $1,136 to $13,845.

Conclusion

India's journey to high-income status is fraught with challenges. While the vision for a developed India by 2047 is ambitious, significant structural changes and reforms are required to accelerate growth and overcome the middle-income trap. The World Bank's insights highlight the need for targeted policies and international cooperation to foster sustainable development and economic prosperity.

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  • Middle-income trap
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  • High-income country transition
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  • Economic growth projections

By addressing these key points and optimizing for SEO, this rewritten blog aims to provide a comprehensive, engaging, and accessible overview of India's economic challenges and growth prospects according to the World Bank's 2024 report.

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