India: A Nation Of Dropouts

While the rest of the world frets about the economic effects of an aging population, one country that will grow increasingly younger is India. By 2050, its 1 billion population will hit 1.57 billion. According to India's census bureau, 40% of the populace is below the age of 18, and by 2015, 55% will be under 20. That sounds like plenty of worker bees to fulfill the promise of making India a services and manufacturing power over the next two decades.

The bad news is that India could easily squander its demographic edge. Despite the success of a few world-class schools such as the Indian Institutes of Technology, India's education system is in a dismal state overall. India spends just 3.5% of its gross domestic product on education, way below China's 8%. Of its 1 million schools, most are state-run and substandard. "The teachers just sit around talking, and my child has learned nothing," says Sasikala Nadar, wife of a Bombay fisherman, who wants to transfer her 4-year-old daughter to a private school, whatever the cost. While 96% of India's children enroll in primary school, by the age of 10 about 40% have dropped out, says the education department. Just over a third of high school students graduate.

Without a much deeper reservoir of educated youth, India may see its gains in software and manufacturing evaporate. "No country can survive if its young lose hope about their future," says Vivek Paul, vice-chairman of Wipro Ltd. (WIT ), India's premier software company. According to a 2004 study on India's manufacturing exports by McKinsey and the Confederation of Indian Industry, the nation will need 1.5 million trained technicians every year for the next decade -- twice the number it currently produces -- to be able to boost its manufactured exports from $40 billion a year to $300 billion, the amount exported by China.

The government is slowly responding. Last year, New Delhi made schooling compulsory for all children under 14 and pledged to double spending on education, to 6% of GDP. In 2004 the Azim Premji Foundation implemented an incentive scheme, whereby state schools with the best student and teacher attendance and the biggest improvement in scores, win $500. Others, such as Madhav Chavan, co-founder of an educational nonprofit, Pratham, are developing village parent-teacher associations to improve state schools. "We are trying to change a huge, entrenched system," says Chavan. Unless he and others succeed in making radical changes, that system may squander India's greatest asset.

By Manjeet Kripalani in Bombay

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