education and development: an exploration of the linkages

Trade and Development Review Vol. 7, Issue 2, 2014, 51-71

http://www.tdrju.net

© Jadavpur University.

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Education for Development: An Exploration of the Linkages in the Indian context

Saumen Chattopadhyay1

This paper explores whether India’s poor educational attainment can explain low level of development despite achieving reasonably high growth. Role of knowledge and technology in this context are emphasised. Education being so fundamental to the concept of development as freedom and so characteristically different from other sectors, the advocacy for market based education reform needs to be critically assessed particularly in a developing country like India. While assessing the centrality of education in achieving economic development, the nature and composition of growth at the macro level and poor quality of education in general in a globalising knowledge economy are highlighted. Keywords: Education, human capital, growth and development. JEL Classification: I23, I25, J24 1. Introduction It is increasingly being felt world over, supported by both theoretical formulations and empirical evidences that education plays a significant role in stimulating economic growth and in achieving broad-based economic development. Education articulates through human embodiment of skill and training in the form of human capital and what human capital produces output and the knowledge. Human capital and knowledge have been found to be the crucial determinants in accounting for the growing divergences in economic growth among the nations.

1 Zakir Husain Centre for Educational Studies, School of Social Sciences, Jawaharlal Nehru University. E-mail: [email protected]

Chattopadhyay/ Education for Development

Trade and Development Review, Vol. 7, Issue 2, 2014 © Jadavpur University.

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However, when it comes to development, the improvement in the socio-economic development indicators, which capture the broader aspects of well-being, has not been concomitant with economic growth. The lack of correspondence is more pronounced in the context of the developing nations because what matters is not only the nature and composition of growth but socio-cultural and political factors along with the extent and spread of human capital and its quality. In India, it was felt even in the policy circle that inadequate manifestation of reasonably high growth rate in terms of tardy improvement in the human development index (HDI) could be attributed to an unsatisfactory attainment in the realm of education. Despite massive expansion of the education sector along with a steady rise in enrolment at all levels since Independence against the backdrop of a decent growth rate, India’s scorecard in terms of HDI continues to be a matter of great concern. Theoretical conceptualisation of development has witnessed shifting pattern reflecting shift in the yardstick to assess well-being of the people. The role and recognition of education have also changed from a minor or near neglect to a major, pivotal role in the developmental process. This paper seeks to critically examine the role and the potential of education in India’s development associated with exacerbating income inequality and social disorder. There has been a shift in the theoretical understanding of development and its purpose, in its attempt to grapple with the complex social phenomena, the market and the state, the structure of production and income distribution and relate it with the links between development and achievement of quality life (Comim, 2007). Development concepts broadly speaking could be classified into income centred approaches and human development approaches. This classification in a way reflects that growth and its impact on development has perennially remained a contested area. The growth theoretic approach to study the impact of education on growth belongs to the income centred approach and Sen’s capability approach captures the essence of the second approach. Section 2 seeks to juxtapose India’s attainment in the context of the other major regions of the world on the basis of the HDI as gleaned from the World Development Report (2014). In Section 3, we spell out the challenges being faced by India at all levels of education. Section 4 deals with the new growth theories and the centrality of human capital which could be viewed as an extension of the instrumental role of education in growth. We then proceed to discuss in Section 5 the comprehensive framework advanced by Sen (2000) which discusses the various ways in which education contributes to the process of development. Section 6 talks about role of education in the era of globalization. Section 7



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introduces to the approach being increasingly favoured by the policy makers’ world over to reform the education sector. Section 8 stresses the importance of macro factors and labour market mismatches in determining the role of education in growth and development. 2. Education in India in the global context To begin with we would like to compare and juxtapose India’s attainment in human development focusing particularly on education with that of the other regions of the world. India’s ranking in terms of HDI as per the latest Report is at 135 (UNDP 2014) and it has been hovering around that level for long. For life expectancy, mean years of schooling and expected years of schooling which determine the quality of life and schooling, India scores below all the major regions of the world other than Sub-Saharan Africa.

Table 1: Human Development in India in the global context

HDI Value 2013

Female Male

Life Expectancy years 2013

Female Male

Mean years of schooling

Female Male

Expected Years of schooling

Female Male

GNI 2011PPP $

Female Male

India (HDI rank 135)

0.519 0.627

68.3 64.7 3.2 5.6 11.3 11.8 2277 7833

Arab States 0.626 0.722

72.2 68.4 4.9 6.7 12.1 12.8 6991 23169

East Asia & Pacific

0.682 0.724

75.8 72.3 6.8 7.9 12.8 12.6 8154 12488

Europe & Central Asia

0.705 0.752

75.4 67.3 8.8 9.8 13.4 .13.8 7287 17867

Latin America & Caribbean

0.716 0.744

78.0 71.8 7.7 8.0 13.6 13.0 8962 18732

South Asia 0.522 0.629

68.9 65.7 3.5 5.8 10.8 11.4 2384 7852

Sub-Saharan Africa

0.460 0.531

58.0 55.6 3.7 5.4 8.8 10.1 2492 3812

World 0.655 0.712

73.0 68.8 6.0 7.4 12.0 12.3 8956 18277

Source: Human Development Report 2014, UNDP.

India’s per capita income is one-third of the world average. After 67 years of Independence, it can be safely argued that India’s achievement in education is simply ordinary and hardly satisfactory.



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Table 2: Education Attainment in India in the global context

Adult literacy

rate (% for >= 15 yrs

With at least

Secondary Edu >=25

yrs

GER Secondary

GER Tertiary

Primary School

Drop out

India (HDI 135)

62.8 38.7 69.0 23 34.2*

Arab States 77.0 41.1 76 28 5.8 East Asia & Pacific

94.4 - 84 26.1* -

Europe & Central Asia

97.7 75.6 95 50 4.1

Latin America & Caribbean

91.5 54.7 85 44 14.6

South Asia 62.9 38.4 64 22 21.2 Sub-Saharan Africa

58.9 28.1 43 8 37.7

World 81.2 63.6 74 31 17.1 Source: Table 9: Human Development Report 2014, UNDP.

In terms of attainment in literacy and gross enrolment ratios, India’s performance falls well below the world average. Leaving aside the importance of low gross enrolment ratios, what is striking is the high dropout rate. If one-third of those who leave school by the time they complete primary schooling, and coupled with this is the phenomenon of low enrolment in higher education, the impact of education is expectedly feeble on the broader aspects of economic development. 3. Challenges before the Indian Education System Reform of the education sector has continued to be a big challenge for the successive governments. High dropout rates and poor quality of education are the major problems. For high dropout rates, both the push and pull factors play their respective roles. Poor socio-economic background raises the opportunity cost of attending school, apathetic school administration to cater to the needs of the students from poor and humble socio-economic backgrounds, teacher absenteeism, and poor quality of teaching all put together make attending school hardly exciting and meaningful for the students. Though the rise in the private participation has provided an alternative to the aspiring parents who can afford to pay, the improvement in the overall quality is disputable. Privatisation of education and commercialisation of professional higher education in particular, has the strong potential to accentuate disparities in access in terms of gender,



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regional and social categories. However, this is not to deny that there are good quality institutions of higher learning both in the domains of public and private sectors. In view of the fact that India has possibly the largest higher education sector in the world, the issue is whether India is well-equipped to participate in the global knowledge economy. India is already a part of the global knowledge economy in some sense if we go by the number of students who leave the country to study abroad, the contribution of the non-resident Indians in the realm of knowledge production abroad and the extent of engagement of some universities and research institutes in international collaborations. Even there are foreign institutions who offer programmes and degrees in India albeit without any formal recognition. However, in the realm of innovation, R and D and the reputation of the research institutions and universities as exemplified by the world ranking of the universities, there is little that India can take pride on even in the context of the Asia-Pacific nations. Employability of the graduates is low as claimed by some studies2. The Indian higher education institutions do not even feature in the ranking of the top 200 in the world despite the fact that IITs and IIMs are generally regarded as institutions par excellence3. It is an irony that India has the third or fourth largest skilled manpower of the world and has the largest number of institutions (Agarwal, 2009). With very few universities of excellence, the research base at the universities is rather limited. State universities somehow sustain the day to day functioning with many posts are lying vacant as the state governments are reluctant to raise the budgetary allocations adequately for the state funded universities. The quality of infrastructure for supporting the research activity is somewhat better in some of the central universities, Indian Institute of Technology (IITs) and Indian Institute of Management (IIMs) and some select government funded institutions. In the aggregate sense in a country with 400 plus universities, the production of knowledge is utterly inadequate by any international standard. Inadequate increase in the budgetary allocations in real

2As reported by the EXIM Bank of India (2007, page 21), a survey conducted by McKinsey Global Institute found that only 25% of the engineers, 15% of the finance professionals and 10% of the generalists are considered to be employable at the pass-out stage by the employers. 3 The IITs and the IIMs are not full-fledged universities and therefore in terms of the criteria for ranking, the IITs and the IIMs fail to qualify. Indian universities do not feature in the top 100 in the world ranking of the universities.



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terms has further aggravated the crisis. The existing ones are suffering from poor governance4. The root of many of these daunting challenges faced by the Indian education system could be attributable to the widespread corruption in India lies in the persistent corruption of the country though this issue deserves more space and importance than what it usually gets5. Drèze and Sen (2013) have brought to the fore the issue of corruption and lack of accountability in the context of school education6. Delivery of education and research can be subject to a variety of malpractices which are subtle and nuanced and not always apparent and realised by the stakeholders. This is indeed a typical problem with education where the quality depends a great deal on human elements like motivation and commitment. The government funded institutions, cutting across all the levels of education are essentially plagued by poor governance. Teacher absenteeism, mass copying, grade inflation, outdated curriculum, subversion of the recruitment process and promotion, biased setting up of panel of examiners for thesis examination are some of the examples of corrupt and unfair practices. The specificity of education from the perspective of economic theory could throw more light on why education is prone to unfair practices and marketization need not ensure quality education. 3.1 Educational production function: A questionable existence Privately funded institutions have failed to be a panacea for quality education because of their high propensities to resort to commercialisation which is in a way tantamount to corruption. It is possible because education delivery is unique in many ways and it is characterised by the very absence of a well-defined production function (Majumdar, 1983). It renders the delivery system susceptible to outright subversion by the private education providers if cost minimisation is resorted to particularly when there exists wide differentiation in the quality of inputs with varying costs (Chattopadhyay, 2012). Provision of poor infrastructure

4 Generally, it is argued that because of the principal agent problem, the quality of service delivery in the government sector is poor as self-interest dominates the conduct of the employees. The neo-liberals advocate for a public choice approach to reform the governance structure. 5 While tax evasion and the growth of the black economy has led to low tax-GDP ratio and the inevitable fiscal crisis, poor governance of the government funded institutions has aggravated the problem. Unethical commercialization in the privately funded institutions can also be construed as corruption. 6 Kumar (2013) discusses the broader issues of corruption in the context of knowledge generation and the university functioning.



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and deployment of teachers with utterly inadequate qualifications and competencies testify the absence of production function. 3.2 Can students really be the consumers? Despite poor quality, why is it the case that there has not been much of a protest by the stakeholders, primarily the students? Why is it that even the intended beneficiaries are readily co-opted into the system and become active parties to the sustenance of malpractices? Delivery of education is different in the sense that both the consumers and the providers, i.e., the students and the teachers collectively determine the quality of teaching-learning process and even research output. Students cannot purchase the quality education unless they themselves participate and dedicate themselves to the learning process. Teachers are also often inclined to join the process of delivery of low quality education. This is why education delivery is different which is not readily amenable to conventional economic analysis and therefore, application of market logic for improving quality of education has its own limitations (Chattopadhyay, 2012). 3.3 Failure of Education as a screening device! One of the important functions of education is that it is a screening device and the educational institutions generate information for the employers through credentials or certificates (Arrow, 1973; Stiglitz, 1975). In case of information asymmetry as it happens when the job applicants are assessed and recruited for jobs, certificates are supposed to reveal the quality of the students, skill embodied as well as traits like loyalty and smartness which are essential qualities valued by the employers. But if the teaching-learning process is subverted because of poor governance in the government funded institutions and sheer commercialisation in the privately funded institutions, the signalling effect of the certificates becomes less credible apart from rendering the graduates unemployable. This is evident in the craze for credentials as the students think that certificates can be acquired with ease and at a payment bypassing the rigour and strain associated with the learning process. This is a major reason behind poor employability as witnessed in the Indian job market (Chattopadhyay and Mukhopadhyay, 2013).

4. Education and Growth However, contribution of education to growth has been well articulated, both theoretically and empirically. In the earlier version of the growth models, Harrod-Domar models, Solow (1956) and others, no explicit reference was made to education and knowledge. In Solow (1956), technology was assumed to be



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exogenously given and in a way, knowledge was assumed to be a public good available to all the nations. Growth which could not be explained by the growth in labour force and physical capital, was attributed to technology and therefore role of knowledge in the form of technological advancement in spurring growth was residually determined. It was argued that labour can no longer be treated as homogenous as it changes over time with skill formation and training. To explain growth and divergence in the growth pattern, it was an imperative to overcome the diminishing marginal productivity of capital under the constant returns to scale (CRS) type of aggregate production function and its inability to explain technological advancement. The new growth theory sought to overcome some of these deficiencies of the earlier growth models. The linkage between education and growth has been empirically investigated quite extensively in the literature within the overarching framework of new growth theory which seeks to incorporate human capital explicitly in the aggregate production function: technology is sought to be explained by the optimising decision making agents in terms investment in education and knowledge generation. Earlier Becker (1964/1975) and Schultz (1961) contributed immensely to the concept of human capital and its impact on income distribution and growth. It was argued that expenditure incurred on education and training should be construed as investment which is a counterpart to the notion of physical capital. Becker’s (1975) micro analysis argued that in future income would grow rather than decline with the appreciation of human capital. Income earned by an individual and its distribution in the economy was sought to be explained by the level of education attained by the individuals. This depends in turn on how an individual could finance her education at different stages and her abilities, physical and mental capacities which determined her success in pursuit of education. The ‘nature’ versus ‘nurture’ debate resurfaced as mode of financing education and the intrinsic abilities of the individual respectively7. The conceptualisation of technological advancement and role of education and knowledge in it has evolved over time and it varies across the different models. The new growth models (e.g., Lucas, 1989; Romer, 1990) treated technological

7 What is remarkable about the model is that ability of a person in the form of IQ was brought to the fore to determine propensity of investment in education as it would determine the extent of benefits a person can derive from skill and training along with economic factors like funding of education. Since a person with higher ability would tend to spend more on education and likely to be supported by scholarship and other sources of funds including that of parents, disparities in income distribution are likely to get accentuated.



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progress endogenous to the economic system as an outcome of investment decisions particularly in their formation of human capital are taken by the optimizing individuals and therefore it sought to explain why different nations witness different rates of technological progress. In Romer (1990), endogenization of the growth model was achieved by introducing the search for new ideas by the researchers who are interested in return from their investment in knowledge creation. He proposed three premises. First, idea or an improvement in the instructions for mixing together raw materials constitutes the core of technological change as raw materials used in the production remain unchanged over time. Secondly, intentional actions taken in response to market incentives to develop ideas: academic scientists funded by the government are also to be considered along with research and development expenditures incurred by the industry/corporate sector. Thirdly, instructions for working with raw materials are different from conventional economic goods. Instructions are essentially knowledge which could be classified as public good as far as its technical characteristic is concerned. Essentially what Romer (1990) argues that new ideas propel growth by way of reorganizing physical resources, natural, and human capital in a more efficient and productive manner (Peters and Besley, 2009). Ideas are non-rival which renders the production function to exhibit increasing returns to scale and funding of knowledge entails imperfect competition as under perfect competition, remunerations to labour and capital as per their respective marginal productivities would exhaust the total revenue leaving no resources for investment in knowledge generation. 4.1 Knowledge and its funding Non-rivalry in consumption and non-excludability are the two defining characteristics of a public good (Samuelson, 1954). But rivalry in consumption is purely a technological attribute which determines the extent of excludability. However, excludability is a function of both technology and the legal system8. Technology is classified as a non-rival input. Knowledge in its conceptual or immaterial forms is argued to be non-rivalries in consumption as an idea or a design or a formula which could be used again and again without there being a decline in its usefulness. In fact with the use, a piece of knowledge may become more valuable with refinement and modification. But, if consumption benefits accrue to all, pricing becomes difficult as technically, it may not be feasible to exclude those who are not willing to pay. Efficiency requires price to be zero as marginal cost of production of an idea is zero. This leads to a failure of the

8 TV transmission could be a public good but it is made to be private because technology allows to exclude those who do not subscribe in contrast to radio transmission. Patent or copy right is a policy decision taken by the government backed up by the legal system.



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market if exclusion is not feasible as people would prefer either to free ride (use knowledge for free) or would undervalue the benefit of knowledge deliberately to pay less for the product. However, if exclusion were feasible, exclusion of the user of the knowledge who is not willing to pay would not be an efficient outcome as transmission of knowledge would be virtually costless with marginal cost of provision to a consumer (MC) being negligible or zero. Given non-rivalry of knowledge, often it is a matter of policy to make exclusion possible through codification and/or material embodiment and sell knowledge at a price. It requires some form of legal protection or patenting to recover the cost of production but at the same time it would seriously damage research and hinder the pace of innovation and generation of extensive externalities paving the way for more innovations in other fields. This brings the role a government can play for funding education and knowledge generation to ensure access and to promote research in basic sciences and its wider use for the developmental purpose. Private funding of research as compared to public funding has the potential to move away from long-term fundamental research to short term market oriented research, Mode I to Mode II type knowledge generation (Chattopadhyay, 2013). Human capital and knowledge contributes to growth in myriad ways in the new growth theoretic model starting from learning by doing (Arrow, 1962), to expenditure on R and D, and even enrolment in secondary schooling as a proxy (Mankiw, Romer and Weil, 1992) for knowledge absorption and dissemination. Essentially the endogenous growth theoretic models seek to capture how education and expenditure on knowledge generation (R and D) and its dissemination could impact on growth.

5. Education and Economic Development: Understanding the Linkages 5.1 Development as Freedom: A New Concept of Development When a nation grows, the expectation that trickle down would work also grows because for development, trickle down is an imperative. However, trickledown effect depends on many factors inclusive of socio-cultural and geographical factors. But the new concept of development goes beyond the conventional distinction between growth and development. Drèze and Sen (1996) defined the concept of economic development from a long term broader perspective9 as follows:

9 It was originally Amartya Sen (1985) who introduced the new approach to view development in the form of expansion of capabilities.



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“One way of seeing development is in terms of the expansion of the real freedoms that the citizens enjoy to pursue the objectives they have reason to value, and in this sense the expansion of human capability can be, broadly, seen as the central feature of the process of development.”

There are issues which deter and inhibit an individual to realise the full potential of opportunities and earn income like gender discrimination or discrimination based on social categories, poor quality of public utilities and/or absence of rights and liberties. One needs to gain access to other basic amenities of life and availability of basic goods and services so as to convert them to achieve a state of being. Mere availability of a consumption basket does not guarantee improvement in material well-being and that by itself is no guarantee for development. 5.2 Human Capability and Human Capital In the context of his new approach to ‘development as freedom’, Drèze and Sen (1996) deliberate on the concept of human capability in contrast to the traditional concept of human capital. Though human agency is common to both the approaches, human capital focuses on skill formation and its influence on productivity and human earnings, whereas human capability focuses on the ability of the people to live life they have reason to value and to expand real choices they face in life. Sen lists three roles of human capabilities [Sen (2000)] as (i) the direct role in terms of well-being and freedom of people; (ii) indirect role through influencing social change and (iii) indirect role through economic production. Human capital concentrates more on the indirect effects as in (iii) mentioned above and it is in this sense that the approach is narrow. It is however true that an increasing income would also help a person to achieve freedom to an extent possible in other spheres of life. As Sen (2000, p. 296) puts it,

“We must go beyond the notion of human capital, after acknowledging its relevance and reach. The broadening that is needed is additional and inclusive, rather than in any sense, an alternative to the “human capital” perspective”.

An increase in female literacy would not only reduce gender disparities in the society, it may reduce fertility, and ensure larger participation in the operation of local rural bodies. Basic education would also improve the functioning of the institutions, and informed public debates.



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What people can do or can become is a process of emancipation from the enforced necessity to ‘live less or be less’, i.e., whether they can live long, be well nourished, be able to read and write communicate, be able to take part in literary and scientific pursuits. Capabilities reflect freedom which is necessary for being happy. This entails command that people have over their lives. Deprivations are not captured in metric of utilities. Happiness is one of many capabilities but happiness by itself cannot be the sole indicator of all capabilities. For example, one may get good food but at the same time, feels constrained at every step to realise her potential and to choose the life style she desires. Therefore, concepts of capabilities and freedom, equity and social justice, and skill formation assume salience in our persistent striving for an improvement in our well-being. Traditional welfare economics is narrow and fundamentally inadequate for the study of holistic development and structural change. Deprivations and exploitation which are the defining features of a developing economy are not reflected in the per capita income based approach to development. For example, giving food to somebody in prison or giving book to somebody illiterate would do little for their sense of freedom and attainment of a state they desire to be. 5.3 Role of Education in Human Development Approach If development is defined as an expansion of other capabilities and freedom, education ought to occupy a central place in the developmental process. Education is central to the capability approach and basic to all other capabilities. Absence of opportunities or lack of it can put an individual in a disadvantageous position irreversibly and forever. Further, this basic capability contributes towards expansion of all other capabilities including the future ones (Terzi, 2007). For this notion of capability as implied, education has a much larger role to play for an individual and social development. Individual ‘functioning’ are influenced by a person’s relative advantages in society and enabling public and policy environments (e.g., good teachers, productive peer relationships). Regarding the role of education, Sen (ibid.) lists the following. First is intrinsic importance, which is valuable achievement in themselves. It can affect effective freedom directly. Second are instrumental personal roles and seizing economic opportunities. Getting a job and earning which will affect achievement of other ‘functioning’. After all, purchasing power is important. Education gives skill and it is easier for the person to sell in the job market. Third are instrumental social roles, or: participation in public discussion of social needs, informed collective demands, improvement in public delivery of



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services and its better utilization. Fourth is instrumental process role such as process of schooling can reduce child labour, social connectivity improves horizon, e.g., ‘Campus life’. Fifth are empowerment and distributive roles. These include resisting exploitation, organizing politically to get a fairer deal, both within groups as well as within family. Female education is effective for tackling gender based inequalities. As Terzi (2007) argues, empirical research supports the role of education to the flourishing of individuals and their quality of life (ibid.: 32). Terzi quotes Schuller et al (2004) that the important function of education is to enable people to have a sense of future for themselves, for their families and communities. It also provides a kind of choice, opens up new vistas of life, extends the horizons of life hitherto unimagined. Sen along with Freire and Nussbam restores the humanistic view of education as opposed to the dominant modernist theories of education such as human capital theory, manpower planning or an idea of knowledge based economies (Flores-Crespo, 2007). Human beings are conceived of as responsible agents who can carve out their own destinies. Investment in primary education is a necessary condition but not a sufficient condition for ‘human flourishing’, to realise the full potential of ‘functioning’ and ‘capabilities’. Further pursuit of higher education becomes an imperative (Comim, 2007) to live and survive in the emerging knowledge societies. 5.4 Education and Externalities Education generates benefits which spill over to the society called externalities in the parlance of economic theory and these externalities notionally raise social demand over and above private demand which entails subsidization of education to attain social optimum. It is in fact the most important defining characteristic of education from the perspective of economic theory which, to a large extent assume central place in many of the debatable issues while subjecting education to an economic analysis. It can range from ensuring democratic functioning of the institutions, deepening of democracy, respect for human rights, and increase in happiness and longevity, lowering of crime and corruption, and building up of social capital (McMahon, 2010)10. The indirect external benefits of education are over and above these

10 Sen’s Capability Approach emphasizes on the agency aspect and human being’s ability to usher

in societal development through their own actions.



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direct benefits. The indirect benefits work through other variables and feedback over time to contribute towards private market and non-market benefits. The indirect benefits set the stage for higher growth in the present and for the future generations. This entire dynamics means past levels of educational attainments contribute to the present growth process and present levels of education would also raise the future growth profile. 6. Role of Education in the Era of Globalization Role of education in development needs closer scrutiny in the context of globalization. One way of conceptualising education in the context of globalization is to invoke the concept of global public goods which can be defined as being characterised by non-rivalry and non-excludability and additionally, goods that are made broadly available on a global scale. Broadly available within countries, they are inter-generational, with no possible trade-off across the generations. Global externalities arise from cross-border relationships and flows between the nations. Higher education is extensively and intensively networked through research collaborations primarily being facilitated by internet facilities. Examples are knowledge in different fields, cross-border facilitations of cross-border recognition of universities, qualifications and individuals (Marginson, 2004). Global public ‘bads’ are brain drain and the downside of cultural homogenization. Two way flows of personnel in the global higher education environment may be unequal as it leads to brain circulation. It can be global public ‘bads’ for some nations as it subtracts from the capacity to create as indicated by the prevailing stock of human capital at the national level. In an open global sphere, some nations lose out as they suffer flight of brains, other nations gain precious capital without dedicating resources for the production of the same. The same can be true for networks as some nations get excluded and some nations, generally the advanced ones, get included. Further, it is culturally asymmetrical as English language gains domination. Developed countries are well placed to retain skill and infrastructure to access knowledge and the underdeveloped and the developing countries are not (Marginson, ibid.). As such there is no global policy space for dealing with higher education unlike a national economy as nations are autarkic and competing. The overarching framework of WTO/GATS provides a negotiating framework for the participating nations. In this framework, higher education is treated as a tradable good as it is believed that nations would gain from trading of higher education as it is argued to be true for any other tradable good or service. As per the prevailing practice, there is hardly any consideration for free flow of knowledge across the borders and there is no need to align national recognition protocols. Also, there is



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no consideration for public ‘bads’ and gross unevenness between the national educational systems. A democratic state is constituted by citizens with social and civic values and higher education offers a gateway to knowledge, learning, information and technical competence in the emerging global division of labour (Brown and Lauder, 1996). These are crucial to the creation of wealth and prosperity. 7. Education policy making and development If education plays a key role in development, the major challenge for the policy makers is how to reform the sector and accelerate the process of development. Education reform in major parts of the world is being guided by the economic logic of competition and market for construction of a quasi-market for education to uphold the principles efficiency in resource use both technical at the institutional level and allocative at the economy level (Jongbloed, 2004). The policy makers seek to foster competitive individualism within a competitive set up to ensure delivery of quality in education and research. But an education market is very different in terms of structure and behavioural responses of the students as the consumers and the education providers as the producers in view of the role we envisage for education to play in building up a society (Jongbloed, 2004; Chattopadhyay, 2012). An education market is far not only from the ideal perfectly competitive market type as most markets are, but it is a market where concern for merit and those who are in the margins of the society are assigned priority over the power of money. The institutional stratification is intrinsic to the education market because of the quality differences in the inputs, the students and the teachers, which changes the nature of competition in the market from efficiency based competition to selection based competition (Glennerster, 1991; Winston, 1999). Reform measures mooted for encouraging private participation to operate within a competitive set up are likely to have serious adverse implications for the society. A differentiated market is likely to reproduce the privileges through selective mechanisms as private sector raises the cost of education (Whitty, 1997). Best of the students and the teachers prefer to be associated with the best of the institutions if the principle of sovereignty is granted accentuating thereby the hierarchies which are unlikely to be mitigated by a competitive market mechanism, no matter how hard the policy makers try. Market is essentially an unequal space and it is more so for the education as students enter the market with wide differences in capacities in terms of social, cultural capitals apart from material capitals (Hogan, 1997). This entails taming the market with regulations.



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For education to play a lead role to achieve a balanced development and reining in social fragmentation and deteriorating social order, education has to be considered largely as a public good not only to maximise the ‘publicness’ of education but also for ‘human flourishing’. Though private participation in education can be encouraged but the market should be a regulated one to pre-empt possible abuse of the autonomy even though the private sector is agitated about regulatory interventions. An enhanced role of the government entails an increased budgetary allocation for education for all levels. Of course, overcoming government failure will never be an easy job as corruption is deeply entrenched in the Indian economy, society and the polity. But corruption should not be an argument against government participation but the challenge instead would be to arrest the rampant malpractices and commercialisation of education, particularly professional higher education. The marginal sections need to participate in the economic activities to reap the benefits of productivity gains and participate in the decision-making process of the society in a democratic way to raise their voices against all attempts which seek to subdue their voices and curtail their rights and entitlements. Instead of positing a trade-off between efficiency and equity, education should be instrumental in pursuing both the goals of efficiency and equity together. It is the creation of a level playing field to cater to the different sections of the society through positive discrimination and public provisioning which would ensure both efficiency and social justice. 8. Education, Skill formation and Development Human capital theory and the new growth theory ignore the salience of aggregate demand in establishing the linkage between education and income growth and therefore development. The causality of investment in education and research to higher productivity assume that the demand does exist to ensure fuller utilisation of the skilled labour force as the grim reality of underemployment and unemployment are assumed away. The nature and composition of growth would determine the extent of labour demand, skilled and unskilled. In India, unemployment and underemployment has always been high. Though rising capital intensity and skill intensity of manufacturing is common world over, such trends observed in India have seriously circumscribed the manufacturing sector to absorb labour (Mehrotra et al, 2014)11. Nearly 11 million would be the new job seekers every year along with a stock of around 10 million educated unemployed. In addition, 5 million is leaving agriculture every year for job in the urban areas

11 The labour to capital ratio has declined from 0.179 in 2001-02 to 0.0789 in 2011-12 in organised manufacturing along with a rise in the capital to output ratio (Mehrotra et al, 2014).



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(ibid.). Creation of adequate job opportunities, therefore, is a major challenge for the government. India has limited capacity to absorb even the PhD holders in science who often prefer to go abroad after their completion of PhDs. Though employability is mainly attributable to the poor quality of education, the mismatch between supply of and demand for specific skills is a major challenge for the policy makers and an impediment for education and development linkages. The neo-classicals may argue that labour market rigidities and regulations prevent attainment of equilibrium in the respective skill segments. Vocational education and reskilling of the labour force and training may strengthen the relationship between education and growth with a limited impact on development broadly defined. In the emerging global scenario, higher education is a ‘positional good’ and the stakes are indeed high for life time income, life chances and social status which entail state’s intervention to ensure equal opportunities to all.

9. Concluding Remarks The linkage between growth and development has always been tenuous. Education in the form of human capital and knowledge contribute to growth and at the same time it is central to the process of human development. An exploration of the possible linkages between growth and development requires an examination of the role played by education in the economy and the society, in human flourishing and citizenship. In this paper, an attempt has been made to understand and assess the role of education in growth and development followed by the challenges faced and policy options being explored in the context of education in India. Corruption in education can possibly throw light on some of the challenges being faced by the policy makers to reform the sector: low levels of educational attainment and high drop outs at primarily level. Despite recording reasonably high growth rates, India’s poor performance in social development indicators could be attributable to the nature of growth and low quality of education. Ostensibly to create a quasi-market for education, and in particular higher education, is not really the solution for a developing country because market based approach can cause social disorder through fragmentation of the society and exacerbation of income inequalities. The government has a crucial role to play but a mere increase in the budgetary provisions without governance reform will be of little help. Market based private sector participation may not be the best way to achieve development as the very participation of the private sector will compromise with



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inclusiveness of the growth process and would weaken the linkages between economic growth and the societal development. Aggregate level of demand and the drivers of growth are the important determinants of employment level and the inclusiveness of growth process. By policy design the ‘publicness’ of education has to be enhanced. The government has to play a larger role. It is not easy as the public sector has not been able to deliver quality education. The stress has to be more on cooperation at the global level which is to be presented as an alternative to the neo-liberal framework and strengthening of the entire education system to improve quality. Education should not only play a crucial role in stimulating growth but also in strengthening the linkage between growth and social development.

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