The 3Rs and recession

It's obvious that a well-educated workforce will contribute more towards economic growth, but just how much does reading, 'riting and 'rithmetic matter?

The latest research from the McKinsey Quarterly looks at this in many ways. It looks at the increasing gap between the US and other countries -- in the 1960s, the US led the world on various education parameters, today it's 25th of 30 industrialised nations in maths.

McKinsey says addressing this gap will add $1.3- 2.3 trillion to the US GDP, or 9.2-15.8 per cent of total GDP.

Ensure that those of different ethnic origins have the same level of education as whites, the study says, and this will hike GDP by $310-525 billion, or 2.2-3.6 per cent of GDP; if education levels for students were similar for those from different income backgrounds, the hike would be 2.8-4.6 per cent of GDP.

Compare this with the loss in GDP due to major recessions and you see that closing the education gap will make the US recession-proof.

What of India?

There are few studies on this, but a forthcoming study based on NCAER data shows a huge income gap that is directly attributable to education levels.

While households headed by illiterates earned, on average, Rs 24,000 per annum in 2005-06, those headed by persons who had passed high school earned Rs 72,000 and those headed by graduates earned Rs 120,000.

So it's not just Finance Minister Pranab Mukherjee whose policies will affect India's growth, it is Human Resources Development Minister Kapil Sibal's policies that matter as well. Perhaps even more.