Working Paper: 557

Human Capital and Economic Growth in India: A Time Series
Analysis Using Educational Variables From 1982-2017

Surendra Kumar Naik
Indrajit Bairagyar

 

Abstract

Although a plethora of literature studies the relationship between human capital and economic growth in the Indian context, the empirical relationship between human capital and economic growth is observed as ambiguous in the existing studies. The present study attempts to combine both input and output measures of human capital across all levels of education from the Indian context during 1982-2017. Subsequently, it also examines the consistency of the results across all the educational measures of the human capital variable separately and compares them with various measures of human capital. The theoretical framework of the study is anchored in the Lucas growth model, which is empirically analysed using Johansen cointegration for examining the long-run relationship. Based on the Vector Error Correction Model (VECM), we investigate the short-run association between human capital and economic growth. From the analysis, we found that human capital variables like Gross Enrolment Ratios (GER), Average Years of Schooling (AYS) and public education expenditure influence economic growth in the country. Interestingly, an analysis of public spending across different levels of education indicates that the tertiary level influences economic growth in a positive and significant manner in both periods. However, secondary public education expenditure results found it positively influences economic growth in both periods. Therefore, a specific focus on those levels of education is desirable to give further impetus to economic growth for a developing country like India.

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