Dynamics of Economic Growth and Education in India: The ARDL Approach

Abstract

To attain maximum benefits of the demographic dividend which India can enjoy due to its huge working-age pollution, it is crucial to have a highly educated and skilled labour force. In this context, the current analysis focuses on understanding the potential impact of education on the nation's economic well-being. The study attempts to examine the relationship between education and economic growth of India using time-series data from the period 1980-81 to 2019-20. The dependent variable is Real GDP per capita, while the independent variables include total labour force, gross capital formation and gross enrollment ratios at the primary, secondary, and higher education levels, with labour force and gross capital formation as control variables. The study employs the Autoregressive Distributed Lag (ARDL) methodology to explore the dynamics of the association among the concerned variables in short and long run. In the short run, gross capital formation and primary education show a positive and significant relationship with India's economic growth. ARDL Bounds test confirms the existence of a long run relationship existing between economic growth and the independent variables. Secondary and higher education are found to have statistically significant impact on economic growth of India in the long run which discloses the relevance of education for economic well-being of the nation. Consequently, it is recommended that the government focuses on promoting post-elementary education.