Since economic reforms were initiated in 1991, India�s economic growth rate has averaged at 6 per cent, accelerated to over 8 per cent since 2005. There is optimism among most economists and organizations that India will do better in the coming decades. One of the reasons for this is the �demographic dividend�. The labour force in the next few decades is expected to grow at a faster rate than its competitors and is expected to generate surplus resources for the purpose of investment. This argument of course, assumes that labour is employable. It is therefore of interest to know what is the quality of workforce in India.
Average years of schooling have commonly been used as a proxy for educational attainment. While this may not exactly reflect the quality of human capital, it is a better measure than the enrollment ratio which measures growth in the stock of human capital. The average years of education have been estimated for the economically active population (those in the age group 15-64 years), using the data from the 61st Round of all India household survey conducted by NSSO. The survey, which covers over one lakh households from 28 states and 7 Union Territories, provides information mainly on the consumption patterns however it also includes demographic and socio-economic characteristics like age and education level. The average years of schooling for India as a whole is 6.2 years. Sixteen of the twenty seven states have an average that is lower than the national average. As is expected, poorer states have a population with low educational attainment. Among the southern states Andhra Pradesh is doing very poorly. The states in the North Eastern region are the relatively better performers. The graph shows five of the best and worst performers.
The estimates presented above tell us that we have been moderately successful in providing only the basic education. However a number of studies have consistently demonstrated that returns on secondary education are much higher than on primary education. Therefore the surplus required for investment purposes may be difficult to generate. It also seems that India has decided to take a path where its economic growth will be dependent upon the services sector, technology and skill levels. Given the quality of existing human capital stock, unless drastic measures are taken to enhance the education levels, economic growth will not be sustained as skill shortage will become a severe constraint. And the demographic dividend we are so happily talking about may become a liability.