India must go beyond economic efforts to dodge a middle-income trap

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Subscribe to enjoy similar stories. As we come to the end of the year, I want to draw attention to a debate that ought to have received greater attention. In August, Indermit Gill, World Bank’s chief economist, shocked everyone by arguing that on current trends, it would take India 75 years to achieve a quarter of the United States’ per capita gross domestic product (GDP).

China would achieve this in just 10 years. Gill called for a new approach nd structural reforms for India to escape what he calls “the middle income trap" (a situation where growth slows down once per capita income is in the range of $1,100 to $13,000 per annum). No one can say if Gill’s prediction is accurate.

While he has received criticism and brickbats for challenging the euphoric popular narrative, he actually deserves appreciation for offering a dose of negative feedback that can help us reflect on our economic policies. There are useful recommendations in the latest World Development Report that Gill’s team has produced. Whether or not you believe in the existence of a middle-income trap, promoting competition, leveraging human capital and improving energy efficiency are sensible policy directions.

India, like other middle-income countries, is likely to benefit from adopting them. In an earlier work, Gill and his co-author Homi Kharas have inferred that middle-income countries grow when they have mechanisms for increasing investment in physical and human capital, incentives for innovation and institutions that can successfully carry out structural reforms. If we aspire to be a developed country by 2047, we should pay attention to these underlying factors.