Dodging a middle-income trap may take extra-economic efforts

While India must allocate resources better and innovate, public trust and originality matter too

- NITIN PAI

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 and 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.