Understanding India's Growth

Everyone agrees that India has a long-term growth potential. The recent government data reveals an interesting insight. It shows that despite global melt down India can even grow by 7.1 per cent per annum. The problem is that the major contribution of India’s growth story is due to high labour productivity. That implies skilled workers immense contribution to this growth. The structure of imports also points to a very capital intensive production structure in India. But India urgently needs to create more jobs.
One such option would be to increase the supply of skilled workers and a prerequisite for this would be to raise the general educational standard. In general, the level is below the performance required to integrate entrants to the labour force. The fact that the poor have low levels of education in India highlights the need to address educational issues. Let us not forget that primary education generates the highest rates of return; secondary level has lower returns while the tertiary level has returns higher than that of the secondary level.
Experts argue that skill-biased technological change is responsible for increasing inequality within the top portions of the income distribution. Evidently, most of the growth in inequality between the highest and lowest earners is due to poor educational performance of the unskilled and their quality available in the market. At the household level, ample evidence reveals that the poor face credit constraints which prevent them from investing optimally in their children's education. But this is only part of the story.
On the supply side, the government is equally to be blamed. In the Indian context mostly the government educational institutions are responsible for providing quality education from basic to higher educational level. In general terms they are abysmally poor. At the school level, the difference between the government schools and the private ones is too glaring to be emphasised. Similarly, although there are private institutions offering tertiary education, the regulating bodies are all government controlled. Research and publications wise, the performance of the teachers are abysmally poor even in the leading engineering and management institutes. One will have to struggle hard to find an Indian educational institute among the top 250 in the world. In future the country must compete through the quality of her human capital, her innovation and her research and development. Sound educational institutions will be a basic premise for meeting the challenges of skill-biased technologies. If it is possible, India will definitely be a different place.