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

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

Sub: Eco

Sec: National Income

Current Trends and Comparisons:

• Projection: At current trends, India will take 75 years to reach a quarter of the United States’ per capita GDP, as per the World Development Report 2024 by the World Bank.
• Other Comparisons:
  • China: More than 10 years to reach a quarter of US income per capita.
  • Indonesia: Nearly 70 years to achieve the same.

India’s Economic Goals:

• Niti Aayog’s Vision:
  • Strive to be a $30 trillion economy by 2047.
  • Aim for a per capita income of $18,000 per annum.
  • Current figures are $3.36 trillion economy and $2,392 per capita income.

Challenges Highlighted:

• Economic Growth: India faces significant obstacles in becoming a high-income country.
• Global Economic Shifts:
  • From healthy to hobbling.
  • From largely integrated too increasingly fragmented.
  • Foreign trade and investment channels are becoming more restricted due to geopolitical tensions.

Firm Growth Rates:

• Comparison with the US:
  • Firms in India, Mexico, and Peru expand by less than a factor of 3.
  • In the US, small firms with up to four workers decline by 60% by age 25.
  • In India, this decline is only about 10%.

Economic Mechanisms:

• Creative Destruction:
  • Lack of dynamism in firms with growth potential.
  • Ineffective selection among firms hinders resource reallocation to more productive users.

Middle-Income Trap:

• Global Perspective:
  • Over 100 countries, including India, face challenges in becoming high-income countries.
  • The World Bank report outlines a roadmap to escape the “middle-income trap.”
• Historical Context:
  • Only 34 middle-income economies have shifted to high-income status since 1990.
  • Successful transitions often involved EU integration or newly discovered oil.

Middle-Income Countries Classification:

• Statistics:
  • As of the end of 2023, there are 108 middle-income countries.
  • Annual GDP per capita ranges from $1,136 to $13,845.