Role of social development initiatives in improving productivity and breaking out of the middle income trap

Since Gill and Kharas (2007) introduced the concept of the middle-income trap, many researchers, policymakers and journalists have come to agree that this concept exists and have explored why so many middle-income countries do not have not been able to fully become high-income countries. -highly industrialized high-income countries over the past half-decade. J

The trap mainly refers to sustained growth that becomes increasingly difficult once a country reaches a GDP per capita of around $10,000. Evidence suggests that countries in Latin America and the Middle East have suffered from middle-income traps for four or five decades, but the situation appears to be improving.

Developing countries like India are also trying to improve the living comfort of their citizens through initiatives such as the Jal Jeevan Mission.

AFP/Representative image

With the aim of improving the standard of living of rural communities, the Jal Jeevan mission has been changing the socio-economic landscape of India through water since August 2019. Access to drinking water, sanitation and hygiene (WASH) can improve living conditions by increasing health standards, life expectancy, education, gender parity and employment opportunities.

Women's social development
AFP/Representative image

However, with the current pace of globalization, it has become increasingly difficult for middle-income countries to close the capability gap, as they have fewer resources to innovate and upgrade with current technologies. . Upgrading along global value chains (GVCs) is fundamental to reversing economic decline.

In my view, therefore, we must give a boost to social development initiatives centered on productivity gains and the development of professional capacities. Existing production systems need to be redesigned, elements of innovation ecosystems need to be reassessed, and the creation of a strong advocacy framework for skills development needs to be put in place.

The skills will particularly help people in poverty and young people looking for work.

Women Empowerment Program
AFP/Representative image

According to Smile Foundation, a leading NGO in India, integrating women into India’s growth story through education and skills will unlock better socio-economic opportunities for the country. Since 2005, Smile Foundation has run a women’s empowerment program called “Swabhiman” specifically for marginalized and socially excluded women and adolescent girls.

Women’s entrepreneurship training is a key part of the program, where women producers learn to take ownership of their businesses and manage their own profits while working for better social connectedness.

Skills development
AFP/Representative image

Another way to enable India to improve its productivity and escape the middle-income trap is to train people in digital services that can be transported around the world – such as in the sectors of education, health, insurance and call centers. With the end of the commodity boom, modern services that can be traded are growing.

For example, under the Madhya Pradesh Skills Development Project, the state government is seeking to establish an advanced TVET institute that meets international standards to introduce high-quality technology-based training for priority sectors of the State. The project also aims to modernize 10 major industrial training institutes (ITIs).

Skills development
AFP/Representative image

Additionally, another crucial way for the country to escape the middle income trap is through policy advocacy – working with and inspiring policy makers to promote societal transformation, entrepreneurship and innovation to start reaping the rewards. the benefits of information networks and skilled labor instead of cheap labor. labor and knowledge spillovers.

Furthermore, the macroeconomic, trade and industrial policies required for successful participation in GVCs may play an important role in the factors that have contributed to economic stagnation in middle-income countries today.

Rural development
AFP/Representative image

In conclusion, a rapid expansion of modern sectors will have to be seen in countries facing the conundrum of middle incomes. This would be useful in practice when traditional low-productivity sectors shed labor and new era sectors expand by hiring more labor.

This process of structural reform may be difficult for a subcontinent as large as India to digest, but with the right ownership, development of implementation capacity and macroeconomic posture – we will be well on our way to ridding ourselves of of the definition of being a middle-income country.

The next few decades will undoubtedly be crucial for India’s growth.

The author is Dean and Principal of Central University of South Bihar. The opinions expressed are those of the author.

Joel C. Hicks