India & China being high-income countries to bring disruption

By Consultants Review Team Wednesday, 26 April 2023

worldWorld Bank Chief Economist Indermit Gill said if the large economies of China and India were to become high-income economies, it will bring a huge disruption in the world. This is because the US and other Western European nations have got to a certain stage of growth and share in the world economy.

“The world is not used to such transitions and there are 30 countries, which have reached high income since 1950, mostly tend to be small economies,” he said. He was speaking at a webinar on ‘Economic Growth in Middle-Income Countries’ organized by the Centre for Social and Economic Progress. He also highlighted the problems behind countries getting trapped, such as rising wages in middle-income countries, resulted in the loss of labor-intensive sectors. These nations have trouble getting into more capital-intensive or more innovative sectors.

“The other thing is that they actually got to the middle-income country just by accumulating a lot of things like a higher labour force participation rate, or higher capital and so on. But that growth model doesn’t actually work, and they don’t have another one, which allows them to switch to productivity, enhancing growth, innovation and others,” he added. He further added that these countries also have a whole lot of pressure to actually move to cleaner, more expensive sources of energy, and that might actually slow them down too.

Somik Lall, staff director, of World Bank’s 2024 World Development Report, said the upcoming report will reframe the debate about the middle-income trap from being about levels of income to stages of development.

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