The middle income illusion | The Indian Express

The middle income illusion | The Indian Express

Written by Bibek Debroy |Published: June 11, 2019 11:35:45 pm

The writer is chairman, Economic Advisory Council to the PM. Views are personal.

The middle income illusion

There is no economic evidence to support the notion of middle-income trap.

The middle-income trap is sometimes defined not with respect to an absolute threshold level of per capita income, but with per capita income expressed as a share of US per capita income.

Is there a middle-income trap? Words have multiple meanings. The word “trap” has three major meanings — trap(1), a situation one can’t get out of (trap shooting comes from that); trap(2), mouth; and trap(3), a horse-drawn carriage. Outside of literature (often old), I have not come across trap(3) being used for a long time, certainly not in India. Trap(2), as in, “shut your trap” is colloquial and also rare in India. There certainly is a middle-income trap, interpreted as trap(2), though people who use the expression mean it in the sense of trap(1).