The human capital imperative

Upgrading it with help from industry is crucial to bolster India’s manufacturing ambitions and become an advanced economy

- N CHANDRA MOHAN

BOOSTING THE SHARE of manufacturing to 25% of gross domestic product (GDP) is an important aspirational objective of India's policy establishment. So, too, is becoming an advanced economy by 2047 like the East Asian miracle economies. During the last 10 years, the ruling dispensation has adopted several measures in this regard like the Make in India programme, production-linked incentives, and generous tax reliefs. As preparations for the Union Budget for FY26 are underway, there are deliberations on revitalising manufacturing with assistance linked to employment generation and fresh investments. However, despite these efforts to raise the share of manufacturing, it has stubbornly hovered around 16% of GDP since FY15.

Instead of sops to bolster manufacturing, it might perhaps be more appropriate to learn from the experience of East Asian miracle economies, including China. They became global export-oriented manufacturing hubs and progressed to higher levels of development by addressing preconditions at the level of human development. India, too, must do so to realise its aspirational objectives.

Economies like South Korea, for instance, made huge investments in education that improved literacy and schooling of its population. This enabled it to grow rapidly for long periods of time and make a successful transition from a developing to a developed economy. All these East Asian economies had a high baseline of human development.