Educating India’s 300 million Illiterates

Atanu Dey has a plan to make all of India literate in 3 years because “for India, the most important infrastructure project is the one that will build its human capital base.”

First, the government of India must credibly commit to paying every literate and numerate person Rs 5,000 (about US\$100). Second, ensure that every person who wants to learn basic literacy and numeracy can do so without having to pay a single penny. Third, provide testing centers around the country (especially in rural areas) where a person can be certified to have achieved basic literacy and numeracy. Finally, sit back and let the free market grind out the outcome which is total literacy within three years.

The details of this proposal follow from elementary logic and basic common sense. First, the cost-benefit analysis. There is long term cost of having about 300 million illiterate citizens. Each year, a literate person must be at least 10 percent more productive than an illiterate person. Assuming a per capita annual product of the illiterate population to be \$200 (which is about half the annual per capita GDP of India), a 10 percent increase in productivity would be an increase of \$20 per year per capita. Over a working life of about 40 years, that is an \$800 increase in productivity per capita. Assume that the average working life of the 300 million illiterates of India is a conservative 20 years. Then the increase in additional product due to the additional 300 million literates is a conservative \$120 billion (300 million times \$20 times 20 years) in net present value terms.

I am using very conservative estimates of the benefits to make the case that the cost of doing so is a very small compared to the benefits. Assume very liberal costs of delivering basic literacy, say, \$100 per capita. I will argue elsewhere that this is a very liberal estimate. Add to it \$100, the incentive amount paid to the person upon passing a standardized test, and you have a total cost of \$200 per capita. For the total population, it is amounts to \$60 billion. This is half the aggregate social benefit estimated above.

Now one may ask, how will the government, which is totally inept as evidenced by the fact that 300 million Indians are illiterate despite lofty goals of making education univerally available and has not been able to make a dent even after over 57 years of spending huge amounts, be able to do this? The answer is simple: the government must not be in the business of providing the means and method of primary education. The only job of the government should be to finance the education. Let the private sector do the actual provisioning of education.