Middle-income trap biggest threat to growth: Niti CEO

New Delhi: India's ambition to become the third-largest economy by 2026-27 necessitates a cohesive grand strategy including prioritising the resolution of the middle-income trap as a critical challenge to our long-term aspirations, Niti Aayog CEO BVR Subrahmanyam said.

"The middle-income trap is the biggest threat to India's growth," Subrahmanyam said, adding that the government and its think tank NITI Aayog need to work together to formulate an economic growth strategy to avoid such a trap.

"Do nothing, no strategy, and you will fall into the middle-income trap," Subrahmanyam said while addressing the 11th annual meeting of the Forum of Public Affairs of India on Wednesday.


"In order to avoid the middle-income trap, India needs to be more open to free trade and align itself with global value chains," Subrahmanyam said, adding India needs to cut tariffs massively.

The middle-income trap occurs when countries fail to transition from middle to high-income status and get stuck due to stagnant growth, lack of innovation, and outdated economic models. As per the recent World Bank report, India along with 107 other countries, run the risk of falling into the middle-income trap.

According to Subrahmanyam, India stands at a pivotal moment in its journey toward becoming a global powerhouse, with projections indicating an economy of $38 trillion and a youthful population that strengthens its global position.

"Our economy should easily double by 2030. Urban development and infrastructure are crucial, with cities designed as economic hubs to drive growth," he said.

India will be a big dominant player with a much greater influence in global affairs by 2047, he said, adding that climate change is an opportunity for India to become a leader in climate technology.

"India will be a big dominant player, it already matters and it will matter much more in global affairs by 2047. 2030 is a halting point. Today is India's moment." he said.