In a world of rapid economic transition, where global economic growth is increasingly dependent on technology, growth of human capital is crucial for stimulating local and national economies. Human capital as a measure of education and health level is a powerful factor in influencing aggregate economic outcomes; however, despite several initiatives taken, human capital growth in India has been disappointing.

In an international ranking of human capital compiled by the World Bank, India ranks 115 in a list of 157 countries and scores lower than the average score of South Asian Countries. In terms of both educational quality and functional health, Indian children is expected to be only 44% as productive as they could be if they enjoyed complete education and full health. Probability of survival to age 5 is 96 out of 100. Further, 38 out of 100 children are stunted and therefore at a risk of cognitive and physical limitations that can last lifetime. The index also shows total expected years of schooling at 10 years while almost 76 countries in the list exceeded 12 years of schooling.

The Human Capital Index was criticized by Govt. of India on various methodological aspects for not including qualitative aspects of governance in it. Nevertheless, the current statistics on the status of human capital -the key to achieving the Sustainable Development Goals (SDGs) are far from satisfactory. The two basic facets of human capital covered in the SDG -health and education highlights some of the alarming gaps in achieving the target by 2030. For instance, the SDG goal aims at reduction of under 5 mortality rates to 11 per ’000 live births by 2030 but we have reached   50 per ‘000 live births- a gap of 39 per ‘000 live births to be covered in the next 11 years. Further, SDG goal aims at 100% immunisation of children in the age group 12-23 months but we have achieved mere 62%. 

Similarly, only 76% of the eligible children are enrolled into schools at elementary and secondary level as against a target of 100% to be achieved by 2030. Again, to achieve the SDG goal, in the next 11 years another 7 percentage point reduction in drop -out is required to meet the target.

There have been several initiatives by the Govt. of India to strengthen education and health sector of the country. For instance, the National Health Mission has been structured to provide universal access to health care. Similarly, a comprehensive education programme- Samagra Shiksha, has been envisaged with the aim of improving effectiveness of schools and providing equal opportunities to all. Despite these efforts, we are yet to go a long way to achieve the sustainable development goals.

The effects of poor health and poor education on a work force and therefore overall economic growth is significant. World Bank estimates shows 1% loss in adult height due to childhood stunting is associated with 1.4% loss in economic productivity. Several studies found significant positive effects of human capital on income levels (Mankiw, Romer, and Weil, 1992, Benhabib and Spiegel,1994). However, economic growth may not necessarily lead to growth in human capital. Comparative analysis of per capita income growth in last 5 years with the relative performance of states in terms of education and health outcome shown below illustrates the gap in converting the state’s growth to education and health outcome. Point in case is Madhya Pradesh. The state with an annual growth of 14% per capita GDP in the last 5 years is also amongst the lowest in terms of sustainable goals. On the other hand, Karnataka, Gujarat and Telangana are examples of high growth leading to high relative performance of sustainability goals. Moreover, it is also noteworthy that Madhya Pradesh, despite high growth in per capita GDP is also low in terms of level of per capita income.  Whereas, Karnataka, Gujarat and Telangana along with high growth states are also high in terms of per capita income level.

Thus, one can see a stronger association with the level of economic development and relative performance of states in terms of education and health outcomes.

With a given level of economic development, a higher initial stock of human capital signifies higher ratio of human to physical capital. This higher ratio tends to generate higher economic growth.

However, economic growth unless associated with similar levels of growth in human capital will fail to achieve the desired and sustainable level of economic development.