History has shown that as an economy grows, first incomes and then wages rise, and it then loses competitiveness in labour intensive industries forcing it to seek new sources of growth through innovation. Or else, it gets locked into what has now come to be called the “middle income trap”.
For example, in India we enjoyed a comparative advantage in the IT industry because of our superior technical manpower and knowledge of English. But that advantage is now threatened as other countries are fast catching up. In order to continue to benefit from globalization, we need to move up the value chain and the only way that can happen is through innovation. 53.