Economic growth in India
India is classified as a lower middle income country, and since 2011 is no longer regarded as a developing country (World Bank Database, 2012) due to recent high economic growth (Kohli, 2006). In 2010, the country had a real GDP growth of 8.8 percent and a nominal GDP per capita of
1410.3 dollars (World Bank Database, 2012). According to AT Kearney, an International consulting group (Rao & Varghese, 2009), India is ranked as one of the best countries to start a new business in. The foreign investment rate, might be a proof of that. The ministry of finance in India believes it will reach almost 40 percent of the GDP by 2013. Not only the foreign investments have increased but the domestic savings and investments has also gone up and were about 30 percent of the GDP in 2009 (Rao & Varghese, 2009). The ratio of poor people6 has decreased from 45.3 percent to 29.8
percent between year 2000 and 2010 (World Bank Database, 2012).
Even if poverty has decreased one third of the population is still thought to be poor (World Bank Database, 2012). Poverty negatively affects the opportunity for many to be able to enroll in school negatively. The state has a major role to mass educate the population and increase human capital (Duraisamy, 2001). One of the most important ways to do that is to reduce the fertility rate. It is one of the major components to long-term economic growth in India (Dreze & Murthi, 2001; Tilak, 2006; World Bank, 1997; Yadava & Chadney, 1994). A lower fertility rate means a higher GDP per capita (Weil, 2009), and more money to invest in the country and its inhabitants (World Bank, 1997).
Education in India
The 1.2 billion people (World Bank Database, 2012) of India's 28 states, together with its seven union territories, do not speak the same language, do not share the same culture and do not have the same religious beliefs. Educational system differs in the respective states due to the fact that it is partly regulated by the state and partly by the local government (Kajisa & Palanichamy, 2009; World Bank, 1997; World Bank, 2004). In 1999 India spent 4.5 percent of its total GDP on education, but spending on education has declined since then. In 2006, spending dropped to 3.1 percent (World Bank Database, 2012).
Article 45 in the Indian Constitution states: "… for free and compulsory education for all children until they reach the age of 14" (in Andreosso-O'Callaghan, 2003).7 As can be seen in article 45, ambitions have been high since 1960s. In year 2000 approximately 18.5 million children were out of school. In 2007 the number was 4.9 million. Primary completion rate also increased and in 2008 it was around 95 percent, for both males and females8 (World Bank, 2012).
The quality of governmental schools has been questioned in India (Duraisamy, 2001). Even if the completion rate in primary schooling is high, literacy rate is not reflecting that. Between year 2000 and 2006 there has been little change in the literacy rates, which was just under 50 percent for females and approximately 75 percent for males (2006) (World Bank, 2012). Some argue that good quality schooling is only available for the rich and higher middle class in private schools, especially for boys (Andreosso-O'Callaghan, 2003). According to Easterly (Andreosso-O'Callaghan, 2003) elite education does not lead to economic growth. If ability is seen as innate, it means that the majority of the people who are not included in the elite will not be able to use their full potential. This is a great social loss, and might slow down India's future long-term economic growth (Esteve- Volart, 2004; Klasen, 2002; Rao & Varghese, 2009). For example, in China, mass education has been the key to a fast growing economy (Andreosso-O'Callaghan, 2003).
Chatterji (2008) claims that primary education has the highest...