While the government\u2019s responsibility while drafting budget had to be a daunting task, it surely had most of us expecting more than mere acknowledgement of India having the largest working population in the world by 2030. The education budget was presented under the umbrella of an \u2018aspirational India\u2019 theme. The theme itself kept me wondering if it just meant a meagerly increased spending and a few \u2018new\u2019 schemes like always, or did it really mean a stronger emphasis on \u2018quality of education\u2019. <\/p>\n\n\n\n
I\nam restricting my article to highlight the theory of endogenous growth model as\ngiven by Romer(1986) and Arrow(1962), and what lessons could our government\nborrow from them. Firstly, a Solow-ian steady state is characterized by the\nstate in which the macroeconomic variables like consumption, capital stock and\nthe economic output, all grow at a constant rate. This implies that any changes\nin technology by say an increase in rate of capital accumulation i.e. savings,\nwould result in high temporary per capita growth rates in the short run but\nrender the long run per capita growth rates unchanged. Thereby implying that in\nthe long run, technological progress fails to increase productivity of other\nfactors of production, primarily labour.\nQuestioning the prevalence of a long run positive per capita growth in advanced\neconomies like the United States, the neoclassical growth theories assert that\nit is possible for an economy to grow at a long run positive growth rate if\ntechnology is allowed to improve over time. Indian production function in light\nof its expanding workforce population can be characterized by a labour\naugmenting technological progress, wherein its marginal productivity could be increased\nat the hands of an exogenous technology factor(say, savings rate) or an\nendogenous technology factor(say, policy decisions by the central planner). It\nis the latter factor which allows us to model a long run positive growth rate endogenously which\nshould be the present government\u2019s ultimate objective. For India, whose\nspending on education as a percentage of GDP has hovered around 4% for the past\ntwo decades, a slew of policy actions especially in light of current slowdown\ncould be as follows- increased spending on a purposeful activity like research\nand development carried out in universities and government or corporate\nentities, creating a stock of knowledge as a by-product of investment, hiring\nof more teachers especially at school level to enhance the student-teacher\nratio, teacher training programmes to build progressive teaching models, and\nbasically an education policy based on innovation, skilling and research.\nHowever new education policy should be at best in the look out for the\naforementioned decisions, it would have been interesting if budget laid out a\nconcrete outline on the same. All of these policy decisions can help an economy\nenhance its productivity thereby doing away with the diminishing returns to\nfactors and stepping into the long run positive growth rate characteised by\neven increasing returns at times. Hence, rather than a focus on sending our\nbrilliant brains abroad for work, it\u2019s time we emphasise on making the Indian\npopulation job ready to work \u2018in the home country\u2019. Additionally, as growth\ntheories argue, we can perceive capital stock as the broader form of capital\ninput comprising human capital too. This would imply that accumulation of this\nform of capital and knowledge sharing as a by product of its accumulation\n(learning by doing models and knowledge spillover by Arrow, 1962) can come only\nwhen educational institutes and corporates are incentivized to do so. This\ncould have been made achievable by increasing funding for research to not just STEM but STEAM\ninstitutions, reducing GST rates for online education\ncourses, relaxing GST on the inward services acquired by higher\neducation institutes and tax credits for corporates that spend on employee\ntraining programmes amongst others. Lastly, while long run positive economic growth\nis desirable, it can be made inclusive too by understanding India\u2019s demographic\nstructure and investing in our \u2018future generation\u2019 i.e. human capital today\nor we may make our demographic boat heavier with a huge dependent and\nindependent population waiting for the government to serve!<\/p>\n","protected":false},"excerpt":{"rendered":"
The education budget was presented under the umbrella of an \u2018aspirational India\u2019 theme. The theme itself kept me wondering if it just meant a meagerly increased spending and a few \u2018new\u2019 schemes like always, or did it really mean a stronger emphasis on \u2018quality of education\u2019.<\/p>\n","protected":false},"author":37,"featured_media":34159,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","footnotes":""},"categories":[272,3],"tags":[160,274,275,273],"class_list":["post-95842","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-education","category-indian-economy","tag-demographic-dividend","tag-education-budget-2020","tag-endogenous-growth-theory","tag-union-budget-2020"],"yoast_head":"\n