WORLD DEVELOPMENT REPORT 2024 (Syllabus: GS Paper 3 – Economy)
Context: The World Bank has expressed concerns regarding the potential challenges faced by 108 countries, notably including India and China, in their journey toward becoming high-income developed economies in its World Development Report 2024.
World Development Report 2024
- About: It identifies what developing economies can do to avoid the “middle-income trap.” Lower-middle-income countries must go beyond investment-driven strategies.
- Focus: On advancing technological innovation and reconfigure economic structures to enhance economic freedom, social mobility, and political contestability.
- Key Highlights of Report
o Wealth Trap Threshold: The World Bank report identifies a “trap” occurring at about 10% of annual US GDP per person, roughly $8,000 today, for countries growing wealthier.
o Middle-Income Classification: This wealth trap is situated within the range that defines “middle-income” countries according to the World Bank.
o Progress to High-Income Status: Since 1990, only 34 middle-income economies have transitioned to high-income status, with over a third benefiting from EU integration or previously undiscovered oil.
o Challenges for Emerging Economies: Without changing their economic models, the report forecasts that China will take over 10 years to reach a quarter of US income per capita, Indonesia 70 years, and India 75 years.
o India's Development Goal: The report acknowledges India's target to become a developed nation by 2047 as a commendable objective.
Recommendations
- 31 Strategy: Prioritize initial investment, integrate new technologies, and balance efforts across all three components of the 31 strategy for comprehensive growth.
- Stimulate Business Dynamism: Reward firms that add value to stimulate business innovation and deepen capital markets.
- Promote Social Mobility: Ensure equal opportunities for women, minorities, and disadvantaged groups, with initiatives like removing barriers for women entrepreneurs potentially increasing real income by 40%.
- Reflect Environmental Costs: Improve economic efficiency by incorporating environmental costs into energy pricing.
