What is the middle-income trap?
- A situation where a country's economic growth slows down significantly after reaching middle-income levels, making it difficult to transition to high-income status
Key causes:
- Inability to shift from low-cost manufacturing to high-value industries
- Lack of innovation and technological advancement
- Insufficient human capital and skilled workforce
- Weak institutions and governance
Effects:
- Stagnating incomes and living standards
- Reduced competitiveness in global markets
- Social and political instability
India's situation:
- Currently a lower-middle income country
- Faces risk of getting stuck in the middle-income trap
- Has strengths in demographics and digital technology
- Challenges in education, skills development, and business environment
Potential remedies for India:
- Improve education quality and skills training
- Boost innovation and R&D investments
- Enhance ease of doing business
- Develop high-value manufacturing and services sectors
- Continue infrastructure and digital technology improvements
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