Unsurprisingly, Budget 2021 has called for a big infrastructure push to bring the economy back on track. Better roads, improved power supply, and digital connectivity should help improve the economy. However, what the Budget totally disregards is that sustained neglect of education and skills are stifling economic growth.
The centrality of education for an economy to progress has been well explained by economics Nobel Laureate Amartya Sen. In his writings he has observed that economies in East Asia “firmly focused on general expansion of education. Widespread participation in a global economy would have been hard to accomplish if people could not read or write, or produce according to specifications or instructions, or to have quality control.”
Indeed the four Asian Tiger countries—Hong Kong, Singapore, Taiwan, and South Korea—that transformed from underdeveloped to developed countries in less than half a century, made heavy investments in education. While China’s remarkable physical infrastructure is widely commented upon, China’s early and large investments in providing education to masses escapes attention. The western world also invested heavily in education early on. Today the average global spending on education is 5% of GDP, Switzerland known for the best public education system in the world spends 5.4% ($38.9 billion) for a tiny population of just 8.57 million people.
Contrarily, in India there has been a mysterious reluctance to spend more than 3% on education. Disappointingly this year too the finance minister has reduced the education budget to ₹93,224 crore ($12.47 billion), 6.13% lower than the amount budgeted for 2020 . Even though allocation of at least 6% of GDP to upgrade public education has been recommended in every policy document from 1967 to NEP 2020 it continues to be ignored.
As a result, the painful truth is that India hosts the world's largest number of adult illiterates (300 million) and industry and agricultural productivity is among the lowest worldwide. A highly skilled workforce can raise economic growth by about two-thirds of a percentage point every year, write Ludger Woessmann, professor of economics at the University of Munich and Eric A. Hanushek, senior fellow at the Hoover Institution of Stanford University.
Thus, the pandemic budget was a critical juncture to make education a top priority in order to bring the economy back on track.
First, after a pandemic that has kept India’s most vulnerable 500 million children out of school, huge investments will be needed to bring them back to school. The World Bank’s Beaten or Broken? Informality and Covid-19 in South Asia report estimates that prolonged closure of schools in India may cause a loss of over $400 billion in the country’s future earnings. Many economists and development scientists believe that investment in education should have been a top priority in Budget 2021.
Second, girl children have been severely hit during school closures and special task forces and funds will be required to bring girls back into school. According to a survey conducted by Centre for Budget and Policy Studies only 26% of girls were able to get a smartphone for studies as compared to 37 per cent of the boys who got priority from their families when it came to accessing mobile phones and Internet facilities. As many as 71% of girls disclosed that they were expected to do domestic chores even during the time of their online studies. Only 38% of the boys confirmed that they were asked to do any domestic work.
Third, we need vital reforms to liberalize the education space and invite private investment. With the central and state governments unwilling to invest the necessary amount in education, they must smooth the way for private investors. Instead, the education sector is an over-regulated web of bureaucratic red-tape. Moreover the law mandates that all education institutions must necessarily be not-for-profit. These are major disincentives for reputed foreign and Indian investors willing to infuse capital in education. In this context it’s important to note that the United States (U.S.), the United Kingdom (U.K.), and even socialist Scandinavian countries allow for-profit private initiatives in education.
In sum, investment in human capital development is a prerequisite for job creation, growth and productivity. The level of cognitive skills of a nation’s students has a large effect on its subsequent economic growth rate. Nobel Laureate-economist Theodore Shultz has also conclusively proved that increased national output is a result of investment in human capital in the form of knowledge and skills. The rich-world connected the dots early and that’s why today they are far ahead of India on all counts. Industries, commerce, national development can only succeed with an educated workforce. Education is the master key that can unlock this country’s potential and needs to be top priority on the economic agenda. The national interest demands it.
Views are personal. The author is founder and CEO at New Millennium Education Partners and India Head, College du Leman International Boarding School, Geneva, Switzerland.