Dev 360: Boost human capital

The suspense is over. A Narendra Modi-led Bharatiya Janata Party has swept back to power in New Delhi with the biggest mandate any party has won in three decades. Of the 814.59 million registered to vote in the just-concluded general election, close to 100 million were first-time voters. Millions of these young Indians voted for 63-year-old Mr Modi because they believe that he has the magic wand to economic prosperity.

These youngsters are now impatiently awaiting an India where there are jobs for everyone and where all their hopes and aspirations are fulfilled.

What will Mr Modi do to tackle the myriad challenges confronting this diverse nation of 1.25 billion people running in multiple speeds? Clearly, the economy will be on top of the new government’s agenda. In the coming days, a slew of measures would seek to bolster a business-friendly image, to instil confidence in foreign investors and to reign in inflation.

The buzz among the commentariat is about India’s swing to the Right. Indeed, thorough his election campaign, Mr Modi himself has talked a lot about “minimum government, maximum governance”. There is much talk about India’s demographic dividend.

But is India in a position to reap the potential benefits of a demographic dividend? What can India learn from Asia’s successful market economies?

During the election campaign, the BJP emphasised the need for a trajectory that would yield benefits from the demographic dividend of a youthful population. If manifesto-speak is to be taken seriously, a BJP government would “take up skill development on a mission mode, at an unprecedented scale”. The BJP’s manifesto also spoke of transforming employment exchanges into career centres and starting industrial training institutes for women.

All this is good. But can skill development on a mass scale be meaningful if millions remain without basic and quality education?
Amid all the heady talk of a new era, few want to hear the stark truth — India is home to the world’s largest population of illiterate adults. India’s literacy rate has growth from 12 per cent at the time of Indepen-dence to 74.04 per cent in 2011, but this is way below the global average literacy rate of 84 per cent.

Disconcertingly, there is also a huge gender disparity in India’s literacy rate: 82.14 per cent of India’s males are literate. The corresponding figure for women is 65.46 per cent. India’s low female literacy rate has adversely impacted the country in many ways including in its efforts to stabilise its population. The magnitude of the challenges ahead can be understood if we also recognise that national statistics don’t tell the full story and there are big differences between states.

The bald fact is that a country that simply has so many young people will not automatically gain from the potential economic benefits of the demographic dividend.

India can take a leaf out of the successful market economies of Asia. Each and every country that has become an economic power in the region has invested in boosting the human capital of its people. Take Japan, a country with which Mr Modi has had excellent relations. As has been pointed out by scholars, soon after the Meiji Restoration in 1868, there was a concerted effort to make Japan into a modern society. One of the radical challenges was universal elementary education for boys and girls. The aim was to make Japan into a fully literate society within a few decades. In successive years, Japan improved its living standards and labour productivity through investments in education and healthcare.

Or turn to East Asia. The region’s market economies realised that public investments in healthcare and education were crucial for the creation of a healthy, productive workforce and improvements in overall economic output.What about China? Can India ever overtake China? It may seem like an impossible dream at this point, but nothing is impossible as the Modi story itself has proved. Alongside measures to boost India’s business-friendly image and ramping up infrastructure, the Modi government also needs to look at what China has done to provide essential public services to its people. Both countries suffer from huge disparities but China has shown much greater political will to expand general education and secure healthcare for its people. India has some of the best schools and institutions of higher education, but the education that is available for the vast majority is of low quality.

This has to change if India wants to take on China. If India wants to compete with China as a manufacturing power, it must work hard at producing a better-educated and healthier labour force at all levels of society.

The bottomline: human capital is just as important as infrastructure and business-friendly policies when it comes to a country’s competitive edge. The late Gary Becker, Nobel laureate and world-renowned American economist once summed up the critical role of human capital thus. “Human capital,” he said, “refers to the skills, education, health and training of individuals. It is capital because these skills or education are an integral part of us that is long-lasting, in the way a machine, plant, or factory lasts. If you look at Korea, for example, all the coal is in North, not South Korea. Prior to the Korean War, the north was the richer part of Korea. Today North Korea is an economic disaster while South Korea is a very prosperous, democratic nation. South Korea prospered, I believe, mainly because it was able to utilise and promote the talents of its population effectively…”

Will India under Mr Modi be able to utilise the talents of its population? The jury is out. Asia’s successful market economies show what is possible. Once these countries too wrestled with challenges that confront India. But political will and national resolve helped them reconfigure themselves as economic success stories where the vast majority had access to the basics.

Legislation alone will not do the trick. For example: India has a Right to Education but various evaluation reports tells us that for millions of children, the classroom is not offering education. Alongside the illiterates, we have a large number of semi-literates.

The government alone cannot do every thing. But it needs to take the lead in critical areas like health and education. Historically that is the proven method. There are no short cuts to real development. Mr Modi has the mandate to do whatever he wishes to. It is a rare chance. Here is hoping he will live up to the promises he made and the promise that India’s youth bulge offers.

The writer focuses on development issues in India and emerging economies. She can be reached at patralekha.chatterjee
@gmail.com