Bidirectional relationship between economic growth and human development: Priority for human development

Source: The post bidirectional relationship between economic growth and human development has been created, based on the article “Priority for human development” published in “Business standard” on 16th April 2024.

UPSC Syllabus Topic: GS Paper 2-governance-Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.

News: The article discusses the need for significant changes in education, health, and technology policies for India to become a developed country by 2047. It highlights the bidirectional relationship between economic growth and human development, emphasizing the importance of government spending in these areas.

How much does the government spend on education and health?

In 2021, the Indian government allocated 14.7% of its total government expenditure to education.

Despite this allocation, education contributed only 4% to the gross value added by the economy in 2021-22.

Health spending was much lower, with only 3.5% of government expenditure going to health in 2018, significantly less than the 5.1% average in lower middle-income countries.

Health’s contribution to the gross value added in the economy was even smaller, at 1.6% in 2021-22.

Additionally, the inadequacy in public health provisions led to out-of-pocket expenses accounting for 52% of current health expenditure, placing significant financial strain on households.

What is the relationship between human development and economic growth?

Bidirectional Relationship: Research by Janak Raj, Vrinda Gupta, and Akanksha Shravan identifies a bidirectional relationship between the Human Development Index (HDI) and economic growth in India, highlighting that improvements in human development can drive economic growth and vice versa.

Specific Impacts of Education: The same study notes that improvements in primary education do not significantly impact inter-state growth variations, whereas enhanced secondary education positively influences growth in agriculture and manufacturing, and better higher education boosts the services sector.

Public Spending and HDI: The analysis did not find a clear impact of increased public spending on education and health on the HDI, suggesting that simply increasing funding without strategic improvements may not effectively enhance human development.

What should be done?

1.Significantly enhance government expenditure on education and health to match or exceed averages seen in other middle-income countries.

2.Develop comprehensive performance assessment systems for educational institutions to ensure better teaching quality from primary to higher education levels.

3.It is important to focus on improving people’s lives through better healthcare, rather than solely on economic impacts.

4.In education, enhancing teaching quality and implementing rigorous performance assessments are key priorities.

5.Encourage technological innovation, which is essential for human development.

Question for practice:

Examine the relationship between government spending on education and health in India and their contributions to both human development and economic growth.