Necessary to improve competitiveness

Bharat Jhunjhunwala
The Switzerland-based Institute of Management Development (IMD) makes a World Competitiveness Ranking of major economies. India has been ranked at 43rd rank among 64 countries. Among the five BRICS economies that are comparable to India, China is placed at the 16th rank, Russia at 45th rank, Brazil at 57th rank, and South Africa at the 62nd rank. More importantly India was placed at the 41st rank in 2016. We then slipped to 47th rank in 2017, it climbed back to 43rd rank in 2018 and has remained there in the last two years. Another Global Competitiveness Index of 141 countries is made by the World Economic Forum (WEF). They have placed China on 28th, Russia on 43rd, South Africa on 60th, India on 68th and Brazil at the 71st rank. Here too India has been slipping. India was placed at the 58th rank in 2018 and slipped to 68th rank in 2019. This slippage is even more alarming because this has happened despite India having got a high rank in “size.” The WEF has placed India at the 3rd rank on size of the economy. Our rank would be lower if we look at the qualitative parameters only and ignore the size of the economy. Overall, India has been slipping in the last few years and is presently at nearly the lowest rank among the five BRICS countries.
The main cause of this slippage is our education system. India was placed at 59th rank among 64 countries in education. They have also said that youth unemployment increased from 10.4 percent to 23.0 percent in the last year. It is clear that our education system is not providing skills to the youth that may enable them to earn a living. This unfortunate situation exists despite considerable expenditures being made by the Union and State Governments. According to Reserve Bank of India, the Governments spend 3.3 percent of GDP on education in 2019-20.
The GDP in this year was 197.4 lakh crore. This works out to an expenditure of 6,51,618 crore. The school-going age population is 45.9 cores. The per student expenditure being made is Rs 14196 rupees per year per student. This money is being spent in paying hefty salaries to Government teachers. The Government is giving attractions like no fee, free books and mid-day meals to encourage the students to enroll in Government schools where they get sub-standard education. The government teachers fundamentally have no interest in teaching the students because their salaries are secure irrespective of the results of their students. The curriculum is also “backward” looking with focus on regional languages against English; and on languages instead of mathematics and sciences. Time has come to undertake surgery of the government education system. The Governments must give this huge money directly to the students in the form of “education vouchers” with which they may pay the fees in a school or university of their choice. My estimate is that about 1/3rd students will not use these vouchers. The 2/3rd students who see these vouchers can be given vouchers of Rs 24,000 per year which would be more than sufficient for them to pay the fees of the good English medium schools in most of the small towns and rural areas who are charging about Rs 1,000 per month as per my assessment.
The Government also make teaching of computers compulsory from Class 6 so that the students can be prepared for the future challenges and opportunities. In this background the New Education Policy is entirely a failure. It fails to introduce English at the primary level, and technical education at the secondary level and fails to create a carrot-and-stick policy for the teachers. Unfortunately, the education policy is being made by the same education bureaucracy that is the problem.
The second weakness in our competitiveness rank is in the area of environment and health. The IMD has ranked India at 64th rank or the lowest among 64 countries. We are at the 64th rank in both components—pollution and Human Development—of this component. As far as pollution is concerned, the policy of the Union Government is to look the other way on environment in order to attain economic growth. For example, in the recent past the Government has relaxed the requirements of air pollution for thermal power plants; it has promoted pollution of our rivers by converting them into waterways; and it has proposed amendments to the Environment Impact Assessment that would take a number of activities out of the requirement to obtain an Environment Clearance. The Government’ policy is counterproductive. The Government is promoting pollution to jumpstart economic growth but it is having the opposite effect. The pollution is leading to a decline in our competitiveness and hitting at growth. Therefore, Union Government must reconsider its policy of pollution-led economic growth and adopt pollution control-led economic growth. We must remember that large numbers of our rich are migrating out of India due to pollution.
The situation in the second component of the health is similar to that of education. The Union and State Government are spending Rs 1,900 per year per person. The two components of this expenditure are public- and curative health. Public health constitutes of vaccination, health education, epidemiology and like activities that can only be undertaken by the Government. The expenditures on curative health are substantially made to provide free health cure to government employees though, of course, numbers of private patients are also treated. The Government must dismantle the curative health system and provide “health vouchers” to every citizen with which she can buy health cure from either private or government hospital. Abut Rs 1500 per year can be provided from the present expenditures, including to the government servants.
The situation is serious. It is necessary to improve our competitiveness ranking in the community of nations if we have to stand global competition. That, in turn, requires that we repair our education, environment and health policies that are pulling our competitiveness rank down. We are slipping and countue to slip as the GDP growth rate will continue to fall as has been happening in the last seven years.