India’s Human Capital: The Biggest Deficit of All?

Dr. Anand Kulkarni

Much is made of India’s vast and deep pool of talent, especially its “demographic dividend” i.e. the young, aspirational, skilled and mobile labour force.

However, the recent release by the World Economic Forum of its Human Capital Index 2016 brings India’s relatively weak performance on education, skills formation and labour market outcomes into sharp focus. Unleashing and leveraging India’s latent talent pool will require major reforms, investment and commitment on the part of Government, industry and individuals. According to the World Economic Forum, “A nation’s human capital endowment—the knowledge and skills embodied in individuals, that enable them to create economic value—can be a more important determinant of long term success, than virtually every other resource.” (World Economic Forum 2016, page 1).

India’s Standing over Human Capital

So, how does India fare on a global scale of human capital performance?

Overall, across all age cohorts, India ranks a miserly 105th out of 130 countries with a score of 57.73 percent. This means that, India is utilizing only 57.73 percent of its human capital potential.

India is placed behind most of its comparators, according to the table shown below. This includes the BRICS countries, other up and coming Asian countries, and those in its neighbourhood—Sri Lanka (a very creditable 50th place), Bangladesh and Bhutan. India only fares better overall than Nepal (108th) and Pakistan (118th).

The Human Capital Index breaks down figures by specific age cohorts (ages 0-14, 15-24, 25-54, 55-64 and greater than 65). It also segments data according to education and labour market performance (not shown in the table).

HUMAN CAPITAL INDEX: OVERALL RANKINGS AND BY AGE COHORT (130 countries)

Source: World Economic Forum

Reforms in Early Age Schooling

While India’s relative performance is mediocre overall, it is only in the early age groups that its performance is reasonable. WEF ranks India 62nd in the Human Capital Index for the 0-14 age bracket. This is on the back of overall quality of primary schools—where India is ranked 46th. Also, India ranks 31st on basic education survival rate and first in the world on secondary enrollment gender gap. Thus, reforms aimed at reducing the gender gap in earlier years of schooling have proved fruitful.

Free and compulsory education is provided as a fundamental right to children between the ages of 6 and 14. | Photo Courtesy: Flickr

However, India’s relative performance declines at the older age cohorts. For the 15-24 age bracket, India is ranked 106th, declining to 119^th and 120th in later age groups. Key weaknesses in the 15-24 age group are vocational enrollment (111th), youth literacy (103rd), attainment rates of primary education (112th) and secondary education (79th).

In this critical cohort—where formal education predominates—India has a real problem in terms of tertiary and especially vocational enrollment. The vocational sector still continues to be under-developed in capacity, quality and prestige.

These are issues which the National Skills Development Council and Sector Skills Councils need to address urgently. These Councils should equip both the tertiary and vocational sectors to provide the industry-specific skills at the right time.

The Gender Gap in Labour Sector

On the labour market side, in the 15-24 age group, India is ranked a poor 103rd on the labour force participation rate. This rank has declined to 117th for labour participation in the 25-54 age group. Interestingly, India’s labour force participation rate ranking improves in the 55-64 (88th) and above 65 (49th) age cohorts. This suggests that, relative to other countries, India is drawing on the skills and experience of older workers. A number of factors may be at play here: possibly lack of a strong safety net for older people in India; traditional respect for older people’s knowledge; or that other countries rely less on their older age cohorts in their labour markets, thus improving India’s relative ranking.

India is ranked 121st in the world on the gender employment gap in the 25-54 age bracket, which is of great concern. Simply put, females in India are not participating in the labour force nor obtaining employment.

At the heart of this are still significant social, economic and educational constraints and lack of empowerment that Indian women face.

Lack of Skills Diversity

What is also noticeable in the 15-24 age bracket, is that India ranks poorly on skills diversity. This metric is measured by the degree of diversity of subjects studied in a country’s higher education system and breadth of skills as determined by LinkedIN profiles. India’s education system when compared to other nations does not produce the breadth of skills that a modern economy requires.

Overall the Human Capital Index points to still major problems in the development of India’s people capabilities. India has its work cut out if it is to leverage and harness its most abundant resource.

Dr. Anand Kulkarni is the Senior Manager, Planning and Research RMIT University in Melbourne Australia. He oversees planning, analysis and strategic projects for the University. Anand has previously held Senior Management and Executive roles in the State and Federal Governments of Australia leading large scale policy development. Anand has particular research interests in the Indian Economy, innovation and industry development. Anand is also a Fellow at the Centre For Policy Development in Australia. Anand holds Honors, Masters and Ph.D in Economics.

References:

1. World Economic Forum 2016 The Human Capital Report

Featured Image Credits: Eric Patnoudes via Unsplash