Opinion | The middle income trap that India must avert
A top economic adviser has flagged the risk of stagnation that lack of inclusive growth could cause. We must reduce inequality and help everyone achieve upward mobility
The warning by Rathin Roy, a member of an economic panel advising Prime Minister Narendra Modi, that India could be headed for a “structural crisis" has sparked a debate on whether the economy’s days of high single-digit growth rates are a thing of the past. According to Roy, India’s growth has mostly been driven by demand generated by 100 million-odd people at the top of the country’s socio-economic pyramid. But that demand has begun to exhaust itself, and so India could slip into a “middle-income trap". This is a risk that emerging economies are said to be vulnerable to. As a country runs out of new sources of growth after an initial burst of rapid expansion, it finds itself unable to break into a higher-income league. In India right now, the relatively weak offtake of everything, from cars and apartments to suds and toothbrushes, points to a slowdown in consumption. But is this temporary, or a sign of early market saturation?