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Arvind Singhal: Education - economy's growth engine

Beyond just the demographic dividend, India now needs to think of generating a very strong financial dividend from investing in education

Arvind Singhal  |  New Delhi 

It is very heartening to see the education sector getting its due attention at least in the mainstream media, even if the governments at the centre and the state continue to pay little more than just lip service to the same. A lot has been made out of the increase of 24 per cent in the budgetary outlay for Ministry of Human Resource Development (MHRD) this year, taking the budget to about Rs 52,000 crore or about US$ 11 billion, to take care of the educational needs of 25 million newly born per year from K-12 to higher education and vocational training. Of course, the overall spending on education is much more on account of private spending simply because the government has — for decades — neglected this vital social sector. Annual spending by Indians going for studies abroad is now estimated to be in the region of Rs 15,000-20,000 crore. Annual spending on private tuitions and coaching is estimated to be in the range of Rs 35,000-40,000 crore.

Despite such huge deficit in supply versus demand for education at all levels, exacerbated even more if quality is also added as one of the parameters in the equation, should have prompted any government to take up structural reforms in the education sector on priority. Yet, some of the most important bills relating to education sector continue to languish in the parliament. Since the government does not have the financial resources, anymore, to establish or subsidise fresh capacity in education sector to make it universally accessible, accountable, and affordable for all Indians, at the very least it must enable the right framework to attract private capital and global body-of-knowledge to at least partially make up for the increasing deficit.

However, this particular piece is not about reforming the education sector per se or to highlight the current failings since these are very well known now. Instead, it is to draw attention to the potential of education sector itself as one of the growth drivers for the Indian economy (and not only because a more educated population will make all the sectors of the economy more efficient and productive). The potential has to be seen in the context of a few key global trends including aging of population in almost all the major developed countries, and the potential of India to deliver, beyond IT and BPO, a number of attractive on-site/ off-shore “outsourced” services to these developed countries.

A recent story in Forbes Asia magazine highlights the emergence of Jaipur as a dentistry centre, attracting visitors from many parts of the world and creating new business (and employment) opportunities in Jaipur and in Rajasthan as most of these visitors explore tourism as well. The potential of medical tourism has been widely spoken and written about a lot but to fully realise the same, the government needs to provide policy and fiscal support to such an “industry” on the same philosophy as it did for the IT sector decades ago, allowing that sector to take off. In addition, the human resource estimates in the healthcare sector from MCI and other institutions have to, therefore, be upped very substantially. Further, as the populations outside India age, there would be an increased global demand for healthcare-givers including doctors, nurses, and technicians. It is very likely that such governments overseas will have no option but to liberalise visa regimes to allow for a more liberal entry of such workers even if they do not get permanent residency in those countries.

Almost a similar case can be made out for many other professional programmes (other than, perhaps, MBA) such as law, industrial design and architecture, high-quality engineers, and others. The case for creating education capacity specifically for “export” of such talent/services is even stronger in vocational skills need beyond just the construction and transport sector. There will be an increasing global demand for skilled workers in other sectors such as hospitality, food services, beauty and grooming, travel and leisure, etc. India can and must plan to “capture” such market segments too, which have the potential to increase the flow of inward remittances well beyond the estimated US$ 55 billion received in 2010.

Beyond just the demographic dividend, India now needs to think of generating a very strong financial dividend from investing in education, and to this extent, must encourage and attract investment in education sector in the same way as it seeks investment in any other sector.  

First Published: Thu, March 24 2011. 00:07 IST