{"id":8310,"date":"2021-08-24T15:54:08","date_gmt":"2021-08-24T10:24:08","guid":{"rendered":"https:\/\/www.ixambee.com\/blog\/?p=8310"},"modified":"2021-08-24T15:54:14","modified_gmt":"2021-08-24T10:24:14","slug":"middle-income-trap-a-cause-of-worry-for-india","status":"publish","type":"post","link":"https:\/\/blog.ixambee.com\/middle-income-trap-a-cause-of-worry-for-india","title":{"rendered":"Middle Income Trap: A Cause of Worry for India"},"content":{"rendered":"\n

Growth is the driver of any country’s development. What if the growth stucks in a trap and endangers a country’s economic growth. Many economists believe that India runs the risk of getting caught in this growth stuck trap and runs the dangers of entangling into the Middle-Income trap in the medium to long term. PM Narendra Modi\u2019s economic advisory council former member, Rathin Roy<\/strong> also stated his concern some years ago that India runs the risk of getting caught in the middle-income trap. He stated that \u201cThe country\u2019s growth has mostly been driven by the demand generated by the richest 100 million Indians. As this demand cannot keep growing infinitely, a failure to broaden the income base\u2014and, therefore, the demand base or the market size\u2014could act as a growth barrier, resulting in India slipping into a middle-income trap.<\/strong>\u201d<\/p>\n\n\n\n

Let\u2019s get into some crisp content on Middle Income Trap<\/p>\n\n\n\n

What Is a Middle Income Trap?<\/strong><\/h2>\n\n\n\n

The term \u201cMiddle Income Trap” was coined by Economists Indermit Gill and Homi Kharas at the World Bank, in 2006 while working on growth strategies for East Asian economies. The Middle Income Trap is a theoretical economic development situation in which a country that attains a certain income (due to given advantages) gets stuck at that level. Such countries are not able to move up to the Higher income levels due to several adverse factors. In other words, low-income countries with access to ready-made technology and cheap workforce grow faster and become wealthier but once they reach middle-income status, they tend to slow down and fail to converge with wealthier nations. Thus not able to go beyond middle-income status. <\/p>\n\n\n\n

Basis of Classifying Nations into various categories<\/strong><\/h3>\n\n\n\n

GNI or Gross National Income forms the basis of classifying countries into various income categories. The World Bank using 2018 data of GNI per capita classified countries into four categories<\/p>\n\n\n\n