Untapped Potential: India's Human Capital Development Problem

According to World Bank data, in 2017 India had a total labor force of 520,194,130, with more than half of its population under the age of 25. Given these numbers, by 2022, India will have the world’s largest workforce. This is at once a blessing and a curse: India has the opportunity to provide skilled manpower in a global marketplace where the workforce is steadily aging, but must at once mobilize this youthful workforce in order to keep it from the brink of unemployment, a fate which carries with it economic as well as social consequences. Impeding India’s realization of its labour force potential is the underdevelopment of the Indian workforce; in other words, India faces a severe human capital development problem.

Defined as “the knowledge and skills people possess that enable them to create value in the global economic system,” human capital is an important indicator of a country’s future economic success and can be measured by evaluating the education and training available to the country’s workforce. However, out of 130 countries ranked for their human capital development by the World Economic Forum in 2017, India placed a dismal 103rd—just behind Burundi and Honduras.

India’s poor performance on the index owes to several factors, including its low youth literacy rate which is only 89% as compared to nearly 100% in higher ranking countries. Low youth literacy translates to an adult workforce that is not able to read or write at an advanced level—not to mention one which is not skilled in areas such as English language or computer literacy, soft skills which are essential in order to provide valuable labor in the modern workplace. If India wants to be truly competitive with rivals such as China (which has a youth literacy rate of 99.7%), it must maximize the learning process of Indian students in their schools. Such investments in early education will prove to have higher payoffs than similar efforts exerted in remedial skill development programs.

In order to improve the youth literacy rate, it is essential to fix the education system. Owing in part to the implementation of the Right to Education Act—a piece of legislation which guarantees a basic education to every child between the ages of 6 and 14—India has exponentially increased student enrollment in schools: at the time of independence only 30% of Indian students were enrolled in primary school, as compared to 92% in 2013. However, once they are in school, students are not learning at the level that they should.

In 2017, the Annual Status of Education Report (ASER) found that nearly 75% of students in rural India could not solve a two digit subtraction problem and only 50% of Grade Five students could read fluently at Grade Two level. These are basic maths and reading skills which would prove beneficial to students in a future workplace environment, but schools are failing to provide suitable instruction to help cultivate them. Some of the causes of the gaps in students’ learning could be teacher absenteeism and general underpreparedness. In 2010, a UNESCO survey of 1,297 villages in India found that 24% percent of teachers were absent on unannounced visit days, costing an estimated US $1.5 billion per year. Furthermore, only 10.5% of public school teachers surveyed in Bihar state could solve a three-digit by one-digit division problem with the correct steps.

Here the problem is not that there are too few teachers or that they are making too little money—in fact, public school teachers in India often make up to 10 times the local median wage—but rather that the teachers are not being incentivized to undergo proper training or actually show up to their classes. There are several ways the Indian government could address these problems: first, instead of allowing teaching colleges to continue existing as mere “low-grade degree shops” where little quality instruction takes place, there should be a national standard required of teachers before they graduate so that they might come to class with the answers that students need. While this means that it might be a little harder to become a teacher, providing a potential barrier to entry for those interested in the profession, the financial benefits of becoming a teacher would still outweigh the costs associated with undertaking a thorough teacher training course.

Secondly, teachers are collecting paychecks with little to no oversight to keep them coming to class. Either the government must provide strict and consistent supervision of teachers—which would require a large effort on its part as there are more than 4.1 million public primary school teachers spread out across 29 Indian states and 7 union territories—or it can create financial incentives for teachers whose students perform better on standardized testing and other learning assessments. This does not necessarily require an increase in spending on education (though such spending could certainly be increased from the meager 2.7% of the GDP it currently consumes) but rather a re-ordering of the teachers’ pay schemes to base their compensation, in whole or in part, off their success in impacting students’ learning. This, however, would necessitate approval by the teachers’ unions and would surely be met with some dissent on this front.

While these are just a few suggestions for what the Indian government could do to address the current crisis in the education system, what really matters is that something is done that enhances the learning of Indian students. This is paramount if India is to maximize its human capital potential to compete as the global powerhouse it desires to be. Especially in recent days, as Turkey’s economy fails and emerging markets are once again vulnerable to foreign investor flight as they were in 2013, India can secure investors’ faith by proving to them that it is building up a skilled and sustainable workforce for the future. The only way to do this is through better education.