
Historically, investment in nurturing human capital and capabilities, through building and strengthening research and development or the overall education sector; has been the most powerful weapon to combat over the uncertainties of any kinds irrespective of varying magnitude and intensity.
Over the time the Government of India (GoI) is also moving on the same lines, but the steps taken so far is not enough. Parallelly, we need to develop an ecosystem where an investor can make an equity investment in an individual’s future earnings.
In today’s technological driven VUCA world, instant and impactful skilling/upskilling and reskilling of the labour force has become the necessity and the only weapon to prevent creating a global useless society. Thus, scaling up investment in research and development, nurturing human capital & capabilities and in the overall education sector to the maximum possible level is a very pertinent subject matter of the third decade of the 21st century. But India’s efforts in this direction are not satisfactory.
Since the year 2000, India’s expenditure on research and development to GDP has virtually remained stagnant in the range of 0.73%-0.87%, which is lower than all countries in the BRICS group and less than one-third of the US (2.74%) and Europe (1.85%). Even the spending on education has remained stagnant over the last many years. The economic survey 2020-21 reported that spending on education remained 2.8% of GDP during 2014-19 and increased to 3-3.5% in the 2019-21 period. Ideally, this ratio must be 6% of GDP. Total government expenditure on the education sector Since 1950 to till date has increased from 0.64 percent of GDP to 4.6 percent and at the same time, the size of the economy has increased from around $35 billion to $2087 billion. Growth in the expenditure on education has not been the same as in the case of growth in the size of the economy. On the economic front, we have witnessed an impressive growth rate in terms of size, but with respect to it, spending on education has been less than expected.
As a result of it, the GER in higher education in India is 26.3 percent, which is slightly lower than the world average of 27 percent and around 55 percent less than the US (85%) and 20 percent less than China. Around 74 percent of India’s young population between the age of 18-23 years old have not yet enrolled in higher education. In the latest Human Capital Index (HCI), we stand at 116 out of 174 countries in the human capital index; 131st out of 189 countries in human development index (HDI) and 48th in the list of top 50 innovating counties in The Global innovation index. HCI index score is even less than the average score of South Asia and the HDI index score is marginally higher than the average score of South Asia but far less than the world average. The performance on these indicators need to be improved in times to come.
GoI is taking corrective actions via making the balance between inclusion and excellence. Contrary to this year’s budget, fund allocation to the education sector has been increased year on year basis in the absolute term. Skill development has been the subject of special attention over time. Allowing FDI and ECB (External commercial borrowings) in higher education; constituting Higher Education Commission (HEC) for accreditation and regular funding of colleges and universities; allocating Rs.50,000 crore to National Research Foundation (NRF) to boost quality and quantity of research; implementing New Education Policy (NEP); collaborating with foreign countries and many more are such initiatives taken in this direction in the recent years.
GoI has its own limitations as far as allocation of funds are considered. Government has to maintain the balance between the fiscal arithmetic and necessary distribution and allocation of funds ranging across various schemes. But this cannot be the rational logic when we are competing with the rest of the world to combat over volatilities, uncertainties, complexities and ambiguities via imparting skilling, upskilling and reskilling among the workforce. Hence, we need to look beyond the budget allocation and government expenditure if we want to win the race.
GoI should focus on some parallel self-interlocking mechanism where an investor can invest in an individual’s future earnings, unlike an education loan. Therefore the government should incentivise such startups and design policies for an inductive ecosystem where such business entity can make profits at the benefits of skilling, upskilling and reskilling of the world’s largest young minds.
We have been witnessing the dissatisfactory outcomes of efforts made by GoI past many years. Since long we have been exclusively depends on government’s expenditure for the betterment of education sector. I think it’s high time to look beyond this and it warrants for an urgent shift in the policies. GoI should design such polices where private entity can explore the possibilities of rational investment in this sector as well. Seeing the present condition, Income Sharing Agreement (ISA) seems to be considerable sources of equity investment in the education system of our country.