Econometric analysis of Contribution of Education to Economic Growth of India and Odisha

Purpose: Human Capital Index Report ranked India 115 out of 157 countries (2019). Niti Aayog has acceptedthat about 35 percent of Indian graduates are not employable (Strategy for New India @ 75, 2018). Thecurrent study tries to study the contribution of education to economic growth in the post New EconomicPolicy (1991) era. Method: The study uses secondary data on Gross (State) Domestic Product, population and publicexpenditure on education. Johansen cointegration is used to study the long run relationship and VectorError Correction model is used to test the short run relations.Finding: Central and state governments, with increase in population over time, increased their publicspending on education. Both Fully Modified Ordinary Least Square method adopted for India and DynamicOrdinary Least Square method adopted for Odisha showed that public expenditure on education haspositive impact on economic growth of a nation.At India (country) level and at Odisha (state) level economic growth and education have long run relation(Johansen Cointegration Test) but no short run relationship (VECM). The findings hold up to the issue ofunemployability among Indian graduates and low HDI score of 0.44 in 2019.Policy Implication: Indian education is more outcome oriented than output oriented. The dichotomybetween vocational education and general education needs to be dissolved. Adding skill befitting toknowledge is the need of the hour.