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India is on a mission to become a developed nation by 2047, the 100th anniversary of its independence. This journey started back in 2006 when the World Bank upgraded India from a low-income to a lower-middle-income country, thanks to consistent economic growth averaging 6-7% annually. But now, the goal is much bigger.
NITI Aayog’s “Vision for Viksit Bharat @ 2047” outlines a roadmap to transform India into a tech-savvy, economically robust, and inclusive society. The aim is to boost the GDP from the current $3 trillion to $27 trillion and raise the per capita income from about $2,400 to $19,000 per year. To achieve this, India must avoid the ‘middle-income trap,’ a situation where a country’s growth stagnates after reaching a certain GDP per capita.
Despite climbing to the 5th largest economy globally, India’s per capita income growth has lagged due to income inequality. According to an Oxfam India report, between 2012 and 2021, over 40% of wealth went to just 1% of the population, while only 3% trickled down to the bottom 50%.
Thomas Piketty’s ideas in “Capital in the 21st Century” help explain this disparity. Piketty suggests that when the rate of return on capital (r) exceeds the rate of economic growth (g), the rich get richer faster than the economy grows. In many developed countries, this leads to increasing wealth gaps. In developing economies like India, where growth could outpace returns on investments, income inequality still rises, contributing to the middle-income trap.
Brazil’s experience serves as a cautionary tale. In the early 2000s, Brazil appeared ready to leap to high-income status, but income inequality and structural problems stalled its progress. Today, Brazil remains stuck with a solid per capita income but persistent inequality.
To avoid a similar fate, Dr. Rathin Roy, a former economic advisor, suggests practical steps. He argues that India’s current growth primarily benefits a small wealthy segment, emphasizing the need for inclusive growth. Essential goods like nutritious food, decent housing, clothing, healthcare, and education must become affordable without relying heavily on subsidies.
Dr. Roy points to the textile industry as an example. India competes less effectively with countries like Bangladesh and Vietnam due to higher wages. By shifting production to states like Bihar, UP, West Bengal, Chhattisgarh, and Orissa—regions with lower wages and a skilled labor force—India could reduce costs and boost local economies. This strategy could address unemployment and regional inequalities, spreading economic opportunities more evenly.
India’s growth needs to focus on producing essentials for the majority rather than catering to a wealthy few. With initiatives like the PLI (Production Linked Incentives) schemes and a push for local manufacturing, India aims for inclusive growth, hoping to sidestep the middle-income trap and achieve high-income status.
