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How India can escape the middle income trap

Money Control · 2m

- Middle-income countries may need to reconsider their growth strategies as investment-led and foreign capital-led approaches may no longer be effective. - The World Bank's latest World Development Report focuses on the idea of a middle-income trap, where countries stagnate after a period of rapid growth. - To escape this trap, middle-income countries should focus on the 3i approach: investment, infusion of new technologies and business models, and innovation. - For countries aiming to move up to the upper middle-income category, an infusion-led investment strategy is recommended, involving the adoption of global technologies and business models into the larger economy. - India, for example, has experienced fast growth but has not seen a significant increase in per capita incomes. Agriculture and industry have been underperforming, and there is a need for technology infusion to improve productivity and incomes in these sectors. - The labor force in middle-income countries often faces skills shortages and a high level of informality, which hampers technology adoption and job creation. Overcoming these challenges requires enhancing skill development and incentivizing the creation of the right jobs, especially for women.