Poor Human Capital: A Challenge for India

Author : CA A. K. Jain

-Chapter Headings-

* Preamble

* Understanding the Challenge
1. Education Disparities :
2. Skill Mismatch :
3. Low Employability :
4. Healthcare Challenges :

* Implications for Economic Development
1. Productivity Drag :
2. Innovation Stagnation :
3. Income Inequality :
4. Limited Global Competitiveness :

* Strategies for Improvement
1. Education Reform :
2. Skill Development Programs :
3. Healthcare Investments :
4. Policy Support :
5. Promotion of Lifelong Learning :

* Government Initiatives
1. Skill India Mission :
2. National Education Policy 2020 :
A. Implementation Challenges :
B. Financial Constraints :
C. Inclusivity Issues :
D. Structural and Administrative Issues :
E. Curriculum and Pedagogy Concerns :
3. Atal Innovation Mission :
4. Pradhan Mantri Kaushal Kendras :
5. Rashtriya Uchchatar Shiksha Abhiyan :
6. Digital India :
7. Pradhan Mantri Jan-Dhan Yojana :

* Reasons for High Labour Productivity in Developed Countries
1. Education and skill development :
2. Technological advancement :
3. Infrastructure :
4. Sectoral Employment Distribution :
5. Health and Well-being :

* Conclusion

Preamble

In the race towards economic progress, nations often gauge their advancement by various metrics like GDP growth, infrastructure development, and technological innovation. However, a fundamental yet frequently overlooked aspect that significantly influences a country's economic trajectory is the quality of its human capital. In the case of India, despite its remarkable strides in various sectors, the persistent issue of poor human capital quality poses a formidable obstacle to sustainable development.

Understanding the Challenge

Human capital refers to the knowledge, skills, competencies, and health embodied in individuals that enable them to perform labour and produce economic value. In essence, it encompasses the collective abilities and potential of a workforce. India, with its vast population and youthful demographic, possesses immense human capital potential. However, the quality of this resource is marred by several challenges:

1. Education Disparities : While India boasts a large pool of graduates, the quality of education remains a concern. Disparities exist in access to quality education between urban and rural areas, resulting in uneven skill development and employment opportunities.

 

2. Skill Mismatch : The rapid pace of technological advancement has widened the gap between the skills demanded by the market and those possessed by the workforce. Many graduates lack industry-relevant skills, leading to a mismatch between job seekers and available positions.

 

3. Low Employability : A significant portion of India's workforce is plagued by low employability due to deficiencies in critical areas such as communication, problem-solving, and adaptability. This not only hampers individual career growth but also undermines overall productivity and innovation.

4. Healthcare Challenges : Poor health and nutrition adversely impact human capital by impeding cognitive development and reducing workforce productivity. India continues to grapple with issues like malnutrition, inadequate healthcare infrastructure, and disease burden, which hinder human capital formation.

 

Implications for Economic Development

The ramifications of subpar human capital quality reverberate across all facets of the economy:

1. Productivity Drag : A workforce lacking in essential skills and competencies operates below its potential, leading to diminished productivity levels across industries. This drags down overall economic output and competitiveness on the global stage.

 

2. Innovation Stagnation : Innovation thrives on a skilled and creative workforce capable of pushing boundaries and adapting to evolving technologies. Inadequate human capital stifles innovation, stifling the emergence of new ideas and solutions crucial for economic growth.

3. Income Inequality : Income inequality refers to the uneven distribution of income among different groups within a society. Disparities in education and skill levels exacerbate income inequality by limiting access to high-paying jobs and perpetuating cycles of poverty. This social inequality not only hampers individual prosperity but also undermines social cohesion and stability. This issue is prevalent across various segments and has profound effects on human productivity. Addressing these disparities requires comprehensive policies aimed at improving education, healthcare, employment opportunities, and social mobility for all segments of society.

4. Limited Global Competitiveness : Global competitiveness refers to a country's ability to provide an environment that sustains growth in productivity, which in turn supports high levels of income and prosperity for its citizens. Indian labour, despite being a significant part of the global workforce, faces numerous challenges that hinder its competitiveness on the international stage.

In a knowledge-driven global economy, countries with superior human capital enjoy a competitive edge. India's inability to nurture high-quality human capital diminishes its ability to attract investment, innovate, and compete effectively in the international arena.

Strategies for Improvement

Addressing the challenge of poor human capital quality requires a multifaceted approach encompassing education reform, skill development initiatives, healthcare investments, and policy interventions:

1. Education Reform : Prioritize quality over quantity in education by revamping curriculum standards, enhancing teacher training programs, and promoting digital literacy to equip students with 21st-century skills.

2. Skill Development Programs : Foster industry-academia collaborations to bridge the skill gap through vocational training, apprenticeships, and internship programs tailored to industry requirements.

3. Healthcare Investments : Improve access to healthcare services, particularly in rural and underserved areas, while implementing preventive measures to tackle malnutrition and improve maternal and child health outcomes.

4. Policy Support : Enact policies that incentivize private sector involvement in human capital development, such as tax breaks for investments in employee training and education, and strengthen regulatory frameworks to ensure quality standards are upheld.

5. Promotion of Lifelong Learning : Encourage a culture of continuous learning and upskilling among the workforce through initiatives like adult education programs, online learning platforms, and employer-sponsored training schemes.

Government Initiatives

The Government of India has launched several initiatives to enhance the quality of human capital in the country, thereby fostering faster economic development. Here are some key schemes and efforts:

1. Skill India Mission : The Skill India Mission is a flagship program implemented by the Ministry of Skill Development and Entrepreneurship with the aim of empowering the youth by providing them with skills and training to enhance their employability. The Mission has a central body to oversee its objectives which consists of a Governing Council, a Steering Committee, and a Mission Directorate. The Mission Directorate is backed by three additional institutions. The National Skill Development Agency concentrates on ensuring quality and conducting policy research in the field of skills. The National Skill Development Corporation is a public-private partnership organisation responsible for enhancing capacity and providing support to private training partners. The Directorate General of Training is entrusted with the implementation of training and apprenticeship programs.

The Skill India Mission has made significant strides in promoting skill development and enhancing the employability of India's youth. However, there are areas that require continuous improvement, such as enhancing training quality, expanding infrastructure, and ensuring effective monitoring and evaluation. Addressing these challenges will be crucial in realizing the full potential of Skill India and facilitating India's transition towards a skilled and empowered workforce. The information tabulated below shows deficiencies and weaknesses in implementation of this ambitious government mission.

 

The Skill India Mission, despite its noble objectives, faces several challenges that hinder its effectiveness. Addressing issues such as alignment with industry needs, improving training quality, enhancing infrastructure, expanding reach to rural areas, and ensuring better placement support are crucial for the mission's success. Consistent data collection and monitoring mechanisms are also essential to evaluate and improve the program's outcomes.

2. National Education Policy 2020 : The National Education Policy 2020 of India was introduced with the aim to transform the Indian education system by making it more holistic, flexible, multidisciplinary, and aligned with the needs of the 21st century. Despite its progressive vision, the policy has several weaknesses and drawbacks:

A. Implementation Challenges : Infrastructure Deficits: Rural and government schools often lack basic infrastructure like classrooms, toilets, libraries, and laboratories. For instance, as per the Unified District Information System for Education (UDISE) 2019-20, only 58.03% of schools in rural areas had functional computer facilities.

Teacher Training: Effective implementation of NEP 2020 requires well- trained educators. However, the existing system lacks adequate professional development programs. The Annual Status of Education Report (ASER) 2020 highlighted that only 41.6% of teachers received in- service training in the past year.

B. Financial Constraints : Increased Funding Requirement: NEP 2020 recommends increasing public investment in education to 6% of GDP. However, current expenditure is around 3.1% (Economic Survey 2020-21). Mobilizing additional resources remains a significant challenge.

Digital Divide: With an emphasis on digital learning, the policy assumes widespread internet access and digital devices, which is not the case. National Sample Survey (NSS) 2017-18 data revealed that only 23.8% of Indian households have internet access.

C. Inclusivity Issues : Language Barriers: The policy promotes multilingual education, with the mother tongue/local language as the medium of instruction until at least Grade 5. This is challenging in linguistically diverse states. For instance, in Karnataka, schools cater to students speaking Kannada, Tulu, Konkani, and more.

Marginalized Communities: The NEP 2020's approach might not adequately address the educational needs of marginalized communities like Scheduled Castes (SC), Scheduled Tribes (ST), and Other Backward Classes (OBC). The dropout rates among these groups remain high. According to UDISE 2019-20, the dropout rate for SC students at the secondary level was 17.2%.

D. Structural and Administrative Issues : Autonomy of Higher Education Institutions: While promoting autonomy, the policy may create disparities between well-established and newer institutions. The established institutions might thrive, whereas newer or lesser-known ones could struggle.

Centralized Control: The policy suggests centralized regulatory bodies like the Higher Education Commission of India (HECI), which may undermine the autonomy of state educational institutions.

E. Curriculum and Pedagogy Concerns : Focus on Holistic Development: While holistic education is a positive step, there are concerns about its practical implementation given the current teacher-student ratio and teacher preparedness.

Assessment Reforms: The shift to competency-based assessments requires a significant overhaul of current examination systems, which is a daunting task.

 

While the NEP 2020 has the potential to significantly reform Indian education, its weaknesses and drawbacks cannot be overlooked. Addressing these issues requires concerted efforts from the government, educators, and the community. Proper planning, increased funding, focused teacher training, and infrastructure development are crucial for the successful implementation of the policy.

3. Atal Innovation Mission : The Atal Innovation Mission (AIM) was launched by the Government of India under the NITI Aayog in 2016. AIM aims to foster innovation and entrepreneurship across India through various initiatives. The mission seeks to create an ecosystem that promotes the growth of start-ups and innovative ideas, primarily focusing on technology-driven solutions to socio-economic problems. It provides a platform for collaboration among various stakeholders including academia, industry, and government.

Key Initiatives Under AIM
1. Atal Tinkering Labs (ATLs): Aimed at fostering curiosity, creativity, and imagination in young minds.
2. Atal Incubation Centres (AICs): To support and promote entrepreneurial endeavours.
3. Atal New India Challenges (ANICs): To incentivize innovation in areas critical for India’s development.
4. Mentor India Campaign: To engage leaders to mentor students and start-ups.

 

The Atal Innovation Mission has significantly contributed to fostering a culture of innovation and entrepreneurship in India. However, to achieve its full potential, it is crucial to address challenges related to uneven distribution, sustainability, industry collaboration, and awareness. With continued efforts and strategic improvements, AIM can further strengthen India's innovation ecosystem and contribute to the nation's socio-economic development.

4. Pradhan Mantri Kaushal Kendras : Pradhan Mantri Kaushal Kendras (PMKK) are state-of-the-art model training centres, established under the Ministry of Skill Development and Entrepreneurship (MSDE) in India. Launched in 2015, PMKK aims to provide quality training to youth across the country, enhancing their employability and bridging the gap between industry requirements and skill sets.

 

The PMKK centre in Delhi has successfully partnered with IT companies to train youth in software development and IT services, as a result over 80% of trainees have secured jobs in reputable IT firms or have started their own tech start-ups. Whereas in rural centre of Jharkhand PMKK centre faces challenges in attracting qualified trainers and maintaining quality training equipment. Therefore employment rates are below 40%, and many trainees struggle to find relevant job opportunities.

While Pradhan Mantri Kaushal Kendras have made significant strides in enhancing skill development across India, several challenges remain. Addressing regional disparities, improving quality and consistency of training, enhancing industry engagement, and ensuring effective follow-up and tracking are crucial for the continued success and impact of PMKK. The initiative's long-term success will depend on its ability to adapt and respond to these challenges, ensuring that all regions and demographics benefit equally from the skill development programs.

5. Rashtriya Uchchatar Shiksha Abhiyan : Rashtriya Uchchatar Shiksha Abhiyan (RUSA) is a centrally sponsored scheme launched in 2013 by the Government of India to provide strategic funding to eligible state higher educational institutions. The primary objectives of RUSA are to improve the quality of state institutions, ensure academic autonomy, promote research, and facilitate better teaching-learning environments.

 

While RUSA has made significant strides in enhancing higher education infrastructure, quality, and faculty development across India, it has faced challenges related to fund utilization, administrative efficiency, equitable distribution of resources, and implementation quality.

6. Digital India : The Digital India initiative, launched by the Government of India in 2015, aims to transform India into a digitally empowered society and knowledge economy. This ambitious program seeks to enhance the country's IT infrastructure and increase internet connectivity, thereby improving the delivery of government services, creating jobs, and fostering inclusive growth. Below is a detailed analysis of its successes and failures, supplemented with examples, statistics, and tabulated information.

A. Successes of Digital India
a. Improved Internet Penetration and Connectivity : BharatNet project aimed at providing high-speed broadband to all gram panchayats. As of 2023, internet penetration in India stands at 60%, up from 27% in 2015.

b. Expansion of E-Governance Services : The UMANG (Unified Mobile Application for New-age Governance) app integrates over 1,200 government services on a single platform. Over 3 crore citizens have registered on the UMANG app as of 2023.

c. Digital Payments and Financial Inclusion : UPI (Unified Payments Interface) revolutionized digital payments, with major apps like BHIM, Google Pay, and PhonePe. UPI transactions crossed 10 billion in June 2023 alone, with a total transaction value of over Rs. 12 lakh crore.

d. Digital Literacy and Skills Development : The Pradhan Mantri Gramin Digital Saksharta Abhiyan (PMGDISHA) aims to make six crore rural households digitally literate. Over 3 crore people have been trained under PMGDISHA as of 2023.

e. Start-up Ecosystem and Job Creation : Start-up India initiative and establishment of incubation centers. Over 50,000 start-ups have been recognized under the Start-up India initiative, creating approximately 5.5 lakh jobs.

B. Failures and Challenges
a. Digital Divide : Significant disparities in internet access between urban and rural areas. Urban internet penetration stands at 70%, whereas rural penetration is only at 34% as of 2023.

b. Cyber Security Concerns : Rising number of cyber-attacks and data breaches.

c. India witnessed over 1.16 million cyber incidents in 2020, with a year-on-year increase in cybercrime rates.

d. Infrastructure Bottlenecks : Slow progress in the implementation of BharatNet Phase II. As of 2023, only 1.5 lakh out of the targeted 2.5 lakh gram panchayats are connected under BharatNet.

e. Digital Literacy Gap : Despite efforts, a large portion of the population remains digitally illiterate. Around 30% of the rural population lacks basic digital skills.

f. Dependence on Foreign Technology : Heavy reliance on foreign hardware and software. Over 70% of India’s electronics are imported, posing a risk to digital sovereignty.

 

The Digital India initiative has made significant strides in improving digital infrastructure, promoting digital literacy, and expanding e-governance services. However, challenges such as the digital divide, cyber security issues, and infrastructure bottlenecks persist. Addressing these issues is crucial for the initiative to achieve its full potential and ensure inclusive growth in the digital era.

7. Pradhan Mantri Jan-Dhan Yojana : The Pradhan Mantri Jan-Dhan Yojana (PMJDY) is a national mission for financial inclusion launched by the Government of India on August 28, 2014. The program aims to provide universal access to banking facilities, especially for the poor and the underprivileged. It seeks to ensure that every household has at least one bank account. This initiative promotes financial literacy and inclusion, which are crucial for economic empowerment.

 

A. Successes of PMJDY
1. Financial Inclusion
* Account Openings: Over 48 crore (480 million) bank accounts have been opened under PMJDY as of July 2023.
* Zero-Balance Accounts: The percentage of zero-balance accounts has decreased from 76% in September 2014 to about 20% in 2023.

2. Direct Benefit Transfers (DBT)
* Subsidy Distribution: The program has enabled efficient distribution of subsidies and welfare benefits directly into the beneficiaries' bank accounts.

* Leakage Reduction: DBT has significantly reduced leakages and ensured that benefits reach the intended recipients.

3. Insurance and Pension Schemes
* Insurance Coverage: Accidental insurance cover of ₹2 lakh is provided with each PMJDY account.

* Pension Scheme: The Atal Pension Yojana (APY) has been linked with PMJDY, offering pension benefits to account holders.

4. Increased Savings and Financial Literacy
* Savings Mobilization: The program has encouraged a culture of savings among the rural and urban poor.

* Financial Literacy Programs: Awareness and literacy campaigns have improved financial literacy and digital banking habits.

5. Rural Penetration
* Banking Infrastructure: Expansion of banking infrastructure in rural areas with the establishment of Bank Mitras (Banking Correspondents) for doorstep banking services.

B. Failures and Challenges
1. Dormant Accounts:
*  Inactive Accounts: Despite a decrease in zero-balance accounts, a significant number of accounts remain dormant or inactive.

2. Accessibility and Infrastructure
* Banking Infrastructure: Inadequate banking infrastructure in remote and rural areas affects the program's reach and effectiveness.

* Bank Mitra Shortcomings: Issues such as inadequate training, low remuneration, and high attrition rates among Bank Mitras hinder service delivery.

3. Digital Divide :
* Technology Barriers: Limited access to smart phones and internet connectivity in rural areas restricts the adoption of digital banking.

* Digital Literacy: Low levels of digital literacy among the rural population remain a barrier to effective utilization of banking services.

4. Overcrowding and Operational Challenges
* Bank Overcrowding: High volumes of new account holders have led to overcrowding in banks, resulting in long wait times and operational inefficiencies.

* Service Quality: The rapid influx of new customers has sometimes compromised the quality of banking services provided.

5. Financial Sustainability
* Cost of Maintenance: Maintaining a large number of low-balance or zero-balance accounts is financially burdensome for banks.

The Pradhan Mantri Jan-Dhan Yojana has made significant strides in promoting financial inclusion in India. However, challenges remain in ensuring account activity, improving banking infrastructure, and bridging the digital divide. Continuous efforts are needed to address these issues and fully realize the potential of the program.

Reasons for High Labour Productivity in Developed Countries

Labour productivity is a crucial metric for assessing economic performance. It indicates the amount of goods and services produced per hour of labour. Developed and prosperous countries generally exhibit higher labour productivity than developing countries like India. The reasons for this disparity are Education, Skills, Technological Innovation ,Infrastructure.

1. Education and skill development : These are fundamental drivers of labour productivity. Developed Countries typically have advanced education systems that provide high-quality, relevant education and training. Vocational and higher education are closely aligned with industry needs, ensuring a skilled workforce. While education levels have been improving, there are still significant challenges in terms of quality, access, and alignment with industry needs.

 

2. Technological advancement : It is a critical factor in enhancing productivity. In developed Countries high investment in research and development (R&D) and helpsin widespread adoption of advanced technologies and a strong culture of innovation. In India overall technological penetration and R&D investment are still lower compared to developed nations.

 

* Automation Index: Composite measure of automation and robotics usage in industry.

3. Infrastructure : Infrastructure supports efficient business operations and boosts productivity. In developed countries well-developed transportation, energy, and digital infrastructure exists. In India significant improvements in recent years, but still lags behind developed countries in terms of quality and coverage.

 

* Transport Infrastructure Index: Composite measure of the quality of roads, railways, and airports. **Energy Reliability Index: Measure of the stability and reliability of the energy supply. ***Digital Infrastructure Index: Measure of the quality and coverage of digital networks.

4. Sectoral Employment Distribution : Employment distribution across sectors affects overall productivity. In developed countries larger proportion of the workforce in high-productivity sectors such as technology, finance, and advanced manufacturing. In India a substantial portion of the workforce is employed in agriculture, which has lower productivity compared to other sectors.

 

5. Health and Well-being : A healthy workforce is more productive. In developed Countries higher healthcare spending and better health outcomes. In India healthcare access and quality are improving, but there are disparities across regions.

 

The disparity in labour productivity between India and developed countries is attributable to various factors including education, technological innovation, infrastructure, sectoral employment distribution, institutional frameworks, and health. While India has made significant strides in many areas, sustained efforts are needed to further improve these factors and close the productivity gap. By focusing on enhancing education, boosting technological adoption, improving infrastructure, and shifting the workforce to higher productivity sectors, India can achieve higher labour productivity, leading to greater economic growth and improved living standards.

Conclusion

India faces a significant challenge in developing its human capital, which refers to the skills, knowledge, and health of its population. The World Bank's Human Capital Index scores India at 0.44, meaning a child born today can only expect to be 44% as productive as they could be with perfect health and education. This is much lower than neighbouring countries like Bangladesh (0.46) and ( 0.8) in Japan, Canada, USA and Europe.

The quality of human capital is not just a matter of individual prosperity but a determinant of a nation's economic destiny. In India's quest for sustained economic development and global competitiveness, addressing the pervasive issue of poor human capital quality is paramount. By prioritizing investments in education, skills, and healthcare, coupled with supportive policy measures, India can unlock the full potential of its human capital and pave the way for a more prosperous future. Only through concerted efforts to nurture and empower its workforce can India surmount the obstacles hindering its path to economic greatness.

 

Author : CA A. K. Jain
Email: caindia@hotmail.com
Cell: +91 9810046108

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**********Disclaimer: The information and statistics presented in this article have been compiled from various sources deemed reliable. However, readers are advised to independently verify the accuracy and relevance of the data before making any decisions or taking action based on the information provided herein. The author and publisher do not assume any responsibility or liability or any consequences resulting from reliance on the information presented in this article.

2024/06/22