The Indian Economy Blog

May 28, 2007

The Indian Education System — Part 2

Filed under: Education — Atanu Dey @ 11:43 am

Education matters immensely when it comes to the health of an economy. There is a positive correlation between years of schooling and the GDP per capita. Let’s look at the numbers that are indicative of the generalization. In 2001, “school-life expectancy” and the ppp GDP per capita for Ethiopia were (4.3 years, and $675); for Indonesia (10, and $2,844), for China (12.4, and $4,065), for South Korea (14.6, and $17,048), Japan (14.3, and $25,559), and the US (15.2, and $32,764).

Moreover, there is a correlation between growth and educational attainment. Consider one measure of the educational level of an economy, the literacy rate of adults (defined as those above the age of 15 years). In 1970, adult literacy rate in China was 54 percent, compared to India’s 34 percent. The ppp GDP per capita income of India in 1970 was $1,034, nearly double that of China’s $571. Yet, twenty years later, China surpassed India’s annual per capita income: India $1,587, China $1,617. The adult literacy rates in 1990: China 78 percent, India 49 percent. By 2001, China had 86 percent adult literacy rate and a ppp GDP per capita of $4,065, and India languished at 58 percent and $2,319.

There are many reasons for modern China’s meteoritic rise from its humble beginnings. But one of the most important factors must be their youth literacy rate, which is defined for the population between 15 and 24 years of age. In 1970, China’s youth literacy rate was a whopping 83 percent, compared to India’s 46 percent. It is more than a little depressing to note that more than half of India’s youth were illiterate, leave alone educated, as late as 1970. By 2000, India was just at 73 percent, not even at the level at which China was 30 years before. Now China has achieved nearly universal youth literacy. The lesson is unavoidable: compared to China, India’s prospects are dim if education has anything to do with economic prosperity and potential.

It is important to note the sequence of development. Literacy preceded economic growth for China, as it does for every successful development story. Note that China was more literate than India in 1970 even though it was poorer than India. Thus poverty does not automatically condemn a population to illiteracy. It is a matter of choice: like individuals, countries can also choose to invest in education.

I deliberately chose China as a counterpoint to India in this narrative. I can tell the same story of how Singapore transformed itself from a mosquito infested swamp to a developed economy within a single generation. But then the usual objection is that Singapore is a tiny city-state and a behemoth like India cannot transform itself. It is a just-so argument, supposed to be compelling enough that no reason has to be advanced why Singapore’s tiny size in the context of development is relevant.

But another just-so argument is introduced when India and China are compared. It says that China cannot be compared to India because India is a democracy. Again, no reason is provided why democracy prevents policy makers from choosing to invest in education. However, one can argue that India’s political structure has something – naturally – to do with India’s dismal failure in educating its population. I describe India as a “pseudo-democracy,” something that has the superficial trappings of democracy but just below the surface it is anything but.

Democracy, if it means anything at all, is more than mere head-counting. It has something to do with informed choice of the population at large, which in turn depends on the population’s ability to understand the issues, which finally rests on the ability to read, write, and carefully consider the alternatives that confront them. As it happened, when India achieved political freedom from the British, the population was told that their emancipator knew best and all they had to do was vote for them, and the government so constituted would magically take care of their every wish. How that transformed India from being the darling candidate for becoming a developed economy in the 1950s to actually being a laggard in economic development we shall briefly note the next time.

[Previous post: Part 1. Continued in Part 3.]


  1. [...] [Next in this series: Part 2.] [...]

    Pingback by The Indian Economy Blog » The Indian Education System — Part 1 — May 28, 2007 @ 6:28 pm

  2. It really almost goes without saying that longer term high growth rates cannot be sustained in India without radical improvement in all levels of education. As an US institutional investor, when I compare India to China or other countries, I give India something of a haircut because of this, when looking out 3-5 years (which is also my time frame). The question I have is, what can be done about this? Are the institutional/political obstacles simply too great to allow for significant progress in the next few years? I must admit to being quite bearish on this issue because I have yet to hear any Indian make a convincing case that there can be and will be the sort of dramatic improvement that is required.

    Nonetheless, I must qualify my comments by saying that I remain a long term bull on India, I simply discount the potential growth rate (and I agree 100% with your comments that using the fact that India is a democracy as an excuse is stale, tired, overdone, unconvincing. If true then focus on reforming the democracy!). I am an adherent of the “two Indias” concept – that there will be one India which continues to thrive but another India (mostly in East and Northeast) which with some exceptions will continue to stagnate.

    Comment by Joseph Bohrer — May 28, 2007 @ 10:29 pm

  3. [...] May 29, 2007 « The Indian Education System — Part 2 [...]

    Pingback by The Indian Economy Blog » The Indian Education System — Part 3 — May 29, 2007 @ 8:51 am

  4. Nothing concrete, but few random thoughts on the points raised.
    1. The correlation is the other way than what you are trying to portray in the article. Better GDP means parents are going to make more effort to educate their children.
    2. There are hardly any non pseudo-democracy. In every place, you can find points to counter against pure, ideal or true democracy.
    3. You have to decide if end justifies the means. (Tiananmen Square and regarding Singapore, can you name a non-govt. affiliated company/organization which has made its name in the world.)
    4. Joseph, I agree with your conclusion of being bearish on the issue,long term bull on India and 2 or even more India. Any progress in India is going to be slow and steady. I hope it is steady and does not halt.
    5. Coming to general comment on Education, I have had this discussion with lots of people here and collective analysis is that system is in shambles. My prediction is private sector is going to pick up the slack for lack of employable skills (including companies training employees for requirements) while access of quality education to the poorer sections of society will continue to lack. Unless someone the size of Warren Buffet donates all his/her fortune for this singular purpose.

    Comment by Arun Puri — May 29, 2007 @ 11:21 am

  5. Arun:

    1. Correlation is not directional, just that two variables are linked perhaps causally. The direction of causation is directional. My point is that education is causally linked to economic growth, and that the direction is from education to growth. Economic growth is a necessary condition for development, but is not sufficient.

    2. I am not complaining that India is not a “pure or ideal or true” democracy, whatever that may mean. My point is that if anything, democracy has to be more than just head-counting. India’s democracy is a simple exercise in head-counting, never mind how cleverly the politicians work out astonishingly ingenius schemes for partitioning the population before the head-counting exercise. There are examples around the world where the population is actually educated about the issues and their participation in the process of electing their leaders actually has some content, not just form.

    3. Whether the ends justify the means or not depends on the ends and the means. One can make a blanket statement but it is generally meaningless. The end (a developed “first world” country, in the case of Singapore) justifies the means Lee Kuan Yew used. Yes, it is a dictatorial regime. But ask any of the nearly 800 million in India living on less than US$2 a day if they would like to live in a place where they would have $60 a day, I guess they would jump at the chance. Mind you, I would not bother asking an Indian blogger sitting in his comfortable home how important it is to have the freedom of expression he has in India. Freedom to complain about the empty stomach is all fine and well, but I would rather have a full stomach and forego the opportunity of not being able to complain of hunger.

    5. Concluding that the education system is in shambles is not analysis. It is a bald statement of fact. Analysis would consist of explaining why it is in shambles, and perhaps attempting to present a solution to the problem.


    Comment by Atanu Dey — May 29, 2007 @ 4:02 pm

  6. I agree with Joseph that there will be two Indias but not geographically but socially existing in same space.
    See when India became independent whatever mangement positions in Private enterprices were avialiable were given to owner’s kins or Doon, St Stephan , St xavier folks. There was hardly any scope for s poor man’s son to rise except say in a way of Marwari Businessmen. Simialrly ICS or top govt jobs required facilites which were only in big cities & in fact in fifties IFS were handpicked rather then slected through some exam.

    Socialist India introduced a kind of mediocrity in education sector on the one hand by decaying institutions like calcutta univarsity. ( If you read Neerad Choudhrya’s Autobiography of an unknown Indian , he mentions they used to have history journal & the articles written by students which he has reproduced I don’t think even professional so called historians of today can write to that level) & on the other hand by creating IITs, RECs & Medical colleges with nomianl fee & pretty good facilites where poors from even rural india or sub-urban had first realistic chance to join the adjoining stream of prosperity. My Mother’s native vilalge in central India produced 3 IAS officers when Civil services is not a craze in our part of India. Her teachers could give competition to most of their city counterparts if not all of them . But now that school is full of teacher who have come on the basis of quota. They come to classes drunk & beat tribal children mericlessly .( As most of upper class people of vilalge are now settled in nearby urban centres). Till 1995 IIT’s annual fee was Rs 300. I am not supporting a subsidised higher education but in those days even a fisherman’s son had a fair chance to make it to IIT or IAS but not any longer with advent of coaching classes .Some of them start tuotoring right form class 8th. Children as young as 10 years express theri interest in IT in newspaper interviews. Even worse is the situation of IIMs where apart from your talent your whole surrounding while you were growing comes in picture. CAT is inherently biased against a semi urban youth who graduates in some liberal subject from a college of low infrastructure but rewards handsomely an upper society girl from sri ram college of commererce. In fact in IIT I had at least a few people from god forsakencorners of Biihar but come IIMs & they are all left behind. Even those coming from Bihar were actually form aristocratic families in their town or villages.So even modern capitalistic eduucation system based on merit handpicks a few people form a pool of few lakhs people becuase the vast amjority is simply not equipped to compete.
    Now almost all these ways of going up in life on the basis of one’s talent are closed for someone form rural india .At msot they can hope to become software coolie if they are form South India or atm sot agent of some private bank or mobile company if in north India.
    In no way one can fault city children for all the facilites and exposure they have but our system has not been able to create similar facilites on rural or sub urban level. I remeber seeing many korean movies last year in which even poor children attended schools in far off corners of country with faciltites which will put our public schools to shame.
    just see the India today lsit of best colleges across country. Most of the palces are opccupied by colleges from 8-10 major cities. Then check profile of all students at PG medical , engineering or mangment courses in good instittues or for that matter IAS civil lsit. One of these big cities would be somewhere in the resume of all the people figuring out in those lists.

    This is where we have lost. Not able to give a chance to people from geographically & economically disadvantaged groups.And situation does not seem to improve in near future.

    Comment by Anshul — May 29, 2007 @ 4:15 pm

  7. 2 & 5. The problem for both is status-quo. The current set of politicians know how to work in current situation and are unsure, like anyone else, what would happen in a different kind of world. Same problem with education policy. A policy was initiated and set up in early years of independence and it failed. No one really had any incentive to change it till now when there is requirement of skilled individuals and hence I think private sector will pick up the slack.

    3. In the end, end justifies the means, if things turn out good or bad for a particular individual. i.e. for all the 800m poor cited, there are other 500m not so poor. I do not think any further debate is required for this statement.

    Also, considering the fact that I did not mention anything about freedom of speech in Singapore, and you jumped on it, shows how acute you think the problem is. My point was purely on economics and what kind of country you want, one sustained by govt. or by the people of the country.

    These are all side conversations, your point is about education. My parents have told similar stories as mentioned by Anshul above. The basic flaw in policy, whether education or any other field, in India’s government is provider of services in fields which it has no point being in. The govt. should be acting as facilitator not the provider. Telephone and Aviation sector are good a good examples. Govt should get out of education. Definitely. But see again status quo. There has been steady improvement in education related standards. Hence, no one really is complaining. (Private sector now is complaining for lack of employable individuals, hence theory of them picking the slack.) So, do not expect anything to change radically. I hope a slow pullout of education by government starting with IHL’s. Considering people like Arjun Singh, surely not in current govt’s term.

    Also, putting together an ideal scenario is not an analysis. Everyone of us knows the ideal condition. A solution is something which is mired in realism (yes I read the 100% literacy in 3 years article). If situations were ideal, we already would have achieved that. And I am not even sure anyone has any idea how it would be like to be living in a place where everyone is literate. I stay in SG (92.5% literacy) and it has probably hundred thousands of immigrants from PH/ID/MS/IN/SL/BD working at what can be mentioned as lowly jobs. This blog entry ( contains the bold-ed sentence of what L-K-Y thinks of these people.

    Comment by Arun Puri — June 1, 2007 @ 3:15 pm

  8. I agree to some of the points. But stats are misleading lot of times and they depend upon how you calculate them.

    Do your same kind of research for luxemburg, macau, and countries in south pacific. You will get a different answer i am sure they will have something higher than the China.

    What is more importaant is what level of education is required for the optimum output.
    Do you want to say that a farmer with 15 yr education will be more successful then 5 yr education?

    Only big change i have seen in society both in America as well as in INdia is that for the same job requirement they are looking for higher education only for hygiene factor.

    Comment by Vivek Gupta — July 10, 2007 @ 7:55 pm

  9. I would firstly like to congratulate you all for putting forth such wonderful insights and ideas.

    I would like to add to the discussion that one way for India to increase its GDP and earn long term foreign exchange is by getting as many patents on products as possible, since a patent gives all rights over a product for a minimum of 15 years and ensures steady cash flow from the sale of those products.

    The patent base of India is absymally low as compared to other developed and developing countries. The only way to increase it is to inculcate research mindedness among students.

    The facilities given to students is mediocre in educational institutions and the mentoring is nearly non existent, due to which students turn to private organisations, which take the IPR (Intellectual Property Rights) for themselves. The revenue generated from this ventures is mostly funneled out into other countries, since most of them are foreign MNCs. India gets only a meagre fraction of the actual revenue.

    Thus it is very important for India to inclucate research mindedness among students,give state of the art and latest technological equipments, provide better research grants to deserving candiadtes.

    Also India has to change its business strategies from being more service-oriented to more product oriented. This can only be achieved through more focus on R&D, in which it is definitely lagging behind.
    Consider this report from PTI:
    12 Feb 2007, 1216 hrs IST,PTINEW DELHI:
    “India will take 163 years to match the scientific workforce of China if it continues to add researchers at the current rate, a mathematician has claimed. According to the 2002-03 figures, China had 8.5 lakh workers in the research and development sector as against 1.15 lakh in India. “Just to catch up with what China is today: 7,35,000 scientists to be added at 4,500 per year, it will take us 163 years,” Gangan Prathap, scientist-in-charge of the Centre for Mathematical Modelling and Computer Simulation, Bangalore said in the latest issue of journal Current Science . The statistics state that India annually produces some 4,500 doctorates as against 40,000 PhDs in China every year. Prathap said his calculations were on the assumption that China does not add any scientists to its R&D workforce and India continues to add at the rate of 4,500 a year. India spent $3.7 billion on science as against China’s $15.5 billion R&D budget for 2002-03. Chinese scientists produced 50,000 research papers that were cited by peers in their studies as against 19,500 by India. The Ministry of Science and Technology is seeking a five-fold increase in budget allocation in the 11th Five Year Plan. It has also unveiled a Rs 1,350-crore plan to attract students to science.”

    It is clear from the above report that even though we have an immense talent pool, India is not taking enough steps to ensure their maximum and optimum usage.

    Comment by Arijit Chatterjee — December 24, 2007 @ 1:20 pm

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