Middle income trap

Why in news?

• Many economists have pointed out that India might get stuck in the middle income trap if it does not accelerate its growth engine by addressing issues in Economy.

About middle income trap:

• The middle income trap is a theoretical economic development situation in which a country that attains a certain income (due to given advantages) gets stuck at that level.
• The World Bank defines as the 'middle-income range' countries with gross national product per capita that has remained between $1,000 to $12,000 at constant (2011) prices.
• According to the idea, a country in the middle income trap has lost its competitive edge in the export of manufactured goods because of rising wages.
• However, it is unable to keep up with more developed economies in the high-value-added market.
• 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.
• As a result, newly industrialized economies such as South Africa and Brazil have not, for decades, left what the World Bank defines as the 'middle-income range' since their per capita gross national product has remained between $1,000 to $12,000 at constant (2011) prices.

PRELIMS QUESTION

Consider the following statements: 
1.Sri Lanka has the highest gross national income per capita among south Asian Countries.
2.Among BRICS Nations, South Africa has the lowest GNI per Capita.
Which of the statements given above is/are correct?
(a)1 only
(b)2 only
(c)Both 1 and 2
(d)Neither 1 nor 2

Answer to prelims question