The Impact of Education Policy on India’s Economic Growth

It took India a decade to recognise that education is one of the key sectors directly connected to the country’s economic growth. In contrast, developed nations prioritised education early on, understanding its crucial role in shaping progress. While India focused on advancements in various sectors, education lagged behind.

Education is a fundamental catalyst for development in all aspects. For sustainable economic progress, a country must invest significantly in human capital. Country Education enhances individuals’ productivity, and creativity and fosters entrepreneurship and technological advancements. It also plays a pivotal role in driving economic and social advancements as well as improving income distribution.

What Is the Role of Education in A Country’s Economic Growth?

There is a growing movement to enhance the basic education of the population, fuelled by the belief that everyone has the right to education. Countries worldwide are increasingly prioritising the development of education systems that can equip individuals with the skills needed in emerging industries, particularly in science and technology.

The productivity of a country’s economy is closely linked to the proportion of educated workers, as they are better equipped to perform tasks requiring literacy and critical thinking. However, pursuing a higher level of education also comes with its costs. A country doesn’t have to establish an extensive network of colleges and universities to reap the benefits of education, even basic literacy programs can contribute to economic improvements (Hanushek  and Woessmann, 2007). 

In the business realm, intellectual ability is considered an asset. This asset can be leveraged to develop and sell products and services. The more skilled and knowledgeable employees a firm employs, the greater its production potential. Economies that recognise education as an asset are often referred to as knowledge-based economies, (Kenton and Catalano 2024). Countries prioritising widespread access to education and ensuring that their population completes school, tend to experience faster economic growth than countries with a lower-educated workforce for example like China,South Korea, Japan, New Zealand etc. (World Population Review, 2024) education rankings by country. Recognising this correlation, many nations allocate funding to enhance primary and secondary education to boost economic performance. In this context, education is viewed as an investment in human capital, akin to investing in improved equipment or infrastructure.

According to the 2019 Skill India Report (India Skills Report finds 46.21% of students employable Updated 2019, New Delhi) a significant percentage of Indian graduates were employable, however, there existed a wide gap between industry requirements and the education system, in contrast with the previous education policy which did not put a lot of emphasis on skill building. This policy especially focuses on 21st century skills, that’s critical thinking and problem solving, creativity and innovation,collaboration and communication, digital literacy, adaptability and feasibility, and experiential learning. 

How Does the National Education Policy (NEP) of 2020 Aim to Contribute to India’s Economic Growth?

The National Education Policy (NEP 2020) aims to reshape India’s education system to better prepare the workforce for the demands of the modern economy. Unlike previous policies that focused primarily on traditional learning methods, the NEP 2020 introduces a more dynamic, interdisciplinary approach that focuses on skills development and critical thinking. The policy places a strong emphasis on industry readiness by incorporating internships and vocational training across disciplines, ensuring that students not only learn academic concepts but also gain hands-on experience in real-world settings. This policy promotes interdisciplinary education by encouraging integration across diverse fields of study. It aims to break traditional disciplinary boundaries, fostering creativity, critical thinking, and real-world problem-solving. Students will engage in collaborative, flexible learning, enhancing their ability to innovate and approach challenges from multiple perspectives. This practical exposure is vital in aligning education with industry needs and improving employability.

A key goal of NEP 2020 is to bridge the growing skills gap. As industries like technology, healthcare, and renewable energy continue to expand, there is an increasing demand for a workforce equipped with both technical and soft skills. NEP 2020 addresses this by encouraging multidisciplinary learning that allows students to pursue knowledge in multiple fields, making them adaptable to diverse roles in the workforce.

Moreover, the policy aims to make education more accessible to marginalized groups, with a focus on increasing the Gross Enrolment Ratio (GER) in higher education to 56.5% by 2035 (NEP 2020, p.10). By improving access to quality education for women, people with disabilities, and students from low-income or rural backgrounds, NEP 2020 fosters greater social mobility and economic inclusivity.

In addition, the NEP 2020 stresses the importance of strengthening Early Childhood Care and Education (ECCE) to lay a strong foundation for lifelong learning. By focusing on the early years of education, the policy aims to ensure that children are better prepared for formal schooling, reducing the risk of dropouts later in their academic journey.The GER for Grades 6-8 was 90.9%, while for Grades 9-10 and 11-12 it was only 79.3% and 56.5%, respectively indicating that a significant proportion of enrolled students drop out after Grade 5 and especially after Grade 8 (NEP 2020, p.10). A strong foundation in the early stages can significantly improve literacy and numeracy skills, which are critical for students to succeed in later education.While the NEP focuses on broad educational reforms and principles of inclusion, the RPwD Act offers the legal foundation and mandates specific rights for students with disabilities. Both frameworks emphasise the importance of providing equal opportunities for all students, fostering inclusive, supportive, and accessible learning environments to ensure that children with disabilities, including neurodiverse learners, are given every chance to succeed in the educational system. 

Digital Learning Platforms and the Importance of Technology

A crucial aspect of NEP 2020 is the emphasis on expanding digital education platforms, which have become even more important in today’s increasingly tech-driven world. The rapid advancement of technology, particularly in fields like artificial intelligence (AI), machine learning, and automation, is reshaping the global job market. To remain competitive, India’s education system must prepare students not just with basic skills, but with technological literacy, and a foundational understanding of how AI, data science, and digital tools are transforming industries across the board.

As AI-powered tools increasingly automate tasks in fields ranging from healthcare to finance, the demand for a workforce skilled in technology will only continue to grow. The NEP 2020’s focus on digital learning platforms is critical in ensuring that students, regardless of geographic location or socioeconomic background, can gain access to cutting-edge educational resources. This helps bridge the urban-rural divide and ensures that students are well-prepared for careers in the AI generation. The ability to understand and work with technology is no longer a luxury but a necessity for success in the modern workforce. Currently, government programs like Digital India and PMGDISHA (Pradhan Mantri Gramin Digital Saksharta Abhiyan) aim to provide computer labs and digital teaching-learning materials in Indian schools. However, the distribution remains unequal, with challenges such as network issues especially in remote areas, and difficulties in maintaining the infrastructure. 

For example, platforms like SWAYAM and DIKSHA are already providing online courses from India’s top universities, while international platforms like Coursera enable students to learn AI, coding, and data analytics. Such platforms democratise access to high-quality education, ensuring that even students in rural or underserved regions can learn skills that will be crucial in tomorrow’s workforce.In conclusion, the NEP 2020 is a strategic policy designed to align India’s education system with the needs of a rapidly evolving global economy. By focusing on skills development, industry collaboration, inclusive access, early foundational learning, and technological education, the policy lays the foundation for sustainable economic growth and prepares India’s youth to become leaders in an increasingly knowledge-driven world.

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REFERENCES:

• Government of India, (n.d) SWAYAM
  https://swayam.gov.in/
• Hanushek, Eric A. and Woessmann, Ludger. (2007). The Role of Education Quality for Economic Growth. World Bank Policy Research Working Paper No. 4122, Available at SSRN.
  https://papers.ssrn.com/sol3/papers.cfm?abstract_id=960379
• India Skills Report finds 46.21% of students employable Updated. (2019). New Delhi.
  https://www.thehindubusinessline.com/news/education/india-skills-report-finds-4621-of-students-employable/article30269722.ece
• Kenton W. reviewed by Catalano Th. (2024). Human capital Investopedia. 
  https://www.investopedia.com/terms/h/humancapital.asp
• Minister of Education, NEP 2020, page.no 10.
  https://www.education.gov.in/sites/upload_files/mhrd/files/NEP_Final_English_0.pdf
• P. Glewwe, K. Muralidharan,Chapter 10 – Improving Education Outcomes in Developing Countries: Evidence, Knowledge Gaps, and Policy Implications, Editor(s): Eric A. Hanushek, Stephen Machin, Ludger Woessmann, Handbook of the Economics of Education, Elsevier, Volume 5, 2016. https://www.sciencedirect.com/science/article/abs/pii/B9780444634597000105
• PM Vidya education. (n.d). DIKSHA
  https://pmevidya.education.gov.in/diksha.html
• World Population Review. (n.d.). Education rankings by country.
  https://worldpopulationreview.com/country-rankings/education-rankings-by-country

Ginzen Dolma
PDM Scholar, Class of 2025

Ginzen Dolma completed her schooling in Ladakh and her graduation in Jammu. She is from Ladakh and is currently working with the 17000ft Foundation. Her academic and internship experiences have equipped her with strong analytical and research skills. She is particularly interested in addressing challenges in education and healthcare policy. She is excited about ISPP’s curriculum and hopes to learn a lot.
LinkedIn: https://www.linkedin.com/in/ginzen-dolma-5b7b1231b/