Empirical Analysis of the effect of Human Capital Generation on Economic Growth in India - a Panel Data approach

Last decade of 20th century faced a strong quest for the determinants of the rate of long run economic growth. Post World War II, human capital has emerged as an important and inevitable factor apart from the other general factors that affect the rate of growth. According to economists and existing theories of growth, a nation that invests in human capital generation should contribute positively in the process of economic growth. Human capital embodies qualities that are inherited as well as acquired through education and training. The returns to investment in human capital not only help individuals to enjoy personal growth but in addition affect the growth of the nation as an aggregate. This paper observes the relationship that prevails between human capital and economic growth in the Indian economy based on NSSO unit level household data. With the help of panel data econometric analysis, the study finds out that human capital generation as an aggregate of average general educational level, literacy rate, per capita educational expenditure and primary enrolment rate, positively impact the per capita net state domestic product, taken as a representative for economic growth.