Budget Today: “Out-of-school kids cost India up to 0.30% in GDP growth”

Ahmedabad | Updated on January 31, 2018

An economic analysis by DHL, the world’s leading logistics company, has found that out-of-school children in Asia have a negative impact on GDP growth: Asia could be losing nearly US $34 billion per annum. And that includes India’s annual loss of GDP up to 0.30 per cent, or worth US $6.79 billion.

The latest Economic Survey has predicted a 7-7.5 per cent growth in India’s GDP this year.

In India, 4.86 per cent of primary school students, 28.62 per cent of secondary schools and 42.8 per cent of upper secondary school students drop out before completing targeted education. Only Bangladesh and Vietnam beat India on this score. In India, the total number of out-of-school students is more than 56 million, the report said.

According to this analysis, some of Asia’s fastest-growing economies lose up to 2 per cent of their GDP due to children failing to complete secondary education. The report suggests that educating parents about the opportunities of continued schooling is the most effective way to retain students.

DHL recently commissioned a report, A Way Back to School, looking into out-of-school children in Asia and the effect this has had on those economies. Indonesia tops the list of GDP-losers on this count with a macro-estimated loss of up to 2per cent (US $17.05 billion), followed by India, Thailand (1.7 per cent, US $6.53 billion), Bangladesh (1.45 per cent, US $3.21 billion) and Vietnam (0.30 per cent, US $0.47 billion).

The GDP figures were compiled from World Bank data.

The report said some of Asia's fastest-growing economies may struggle to reach their full potential due to high rates of out-of-school children. Out-of-school rates in all seven countries surveyed (including Malaysia and the Philippines) rose exponentially as children grew older, with at least one in every three children dropping out of school by upper secondary-age.

Christof Ehrhart, Executive Vice President of Corporate Communications and Responsibility, Deutsche Post DHL Group, said the Asia Pacific region cannot rely on its rapid economic growth to automatically improve social outcomes like school retention. Although India's economy is growing at around 7 per cent per annum, nearly 20 per cent of its children exit school before secondary level, while Indonesia, where economic growth has helped halve poverty levels since 1999, still sees 1 in 5 students drop out of school by lower secondary age.

If Asia's public and private sectors do not take concerted action to reduce the rates of out-of-school children, the region's most promising economies may soon face a significant talent shortage that could limit the speed of their future growth and development, he said.

"History has proven that countries can only sustain their economic growth when it translates into greater education and innovation amongst the labor force," said Dr. Pumsaran Tongliemnak, Policy Analyst, Ministry of Education, Thailand, who authored the report. "Countries which fail to adequately tackle the issue of out-of-school children will either hit a ceiling to their GDP growth, or experience greater instability due to an increasing divide between out-of-school children and those who stay in school."

Poverty remains the most common cause of children exiting school before completion, typically to provide additional sources of income for their families. Improving parental awareness of the benefits of completing secondary education, which include wage premiums of up to nearly 45 percent in some countries, tend to result in higher rates of students staying in school than other traditional measures like grants and subsidies. According to the report, schools catering to the special needs of low-income or disadvantaged students also contribute significantly to reducing out-of-school levels.

"Our investigation confirms that most children who drop out of school in Asia Pacific do so out of economic necessity, whether to earn a wage or because of an inability to afford the high costs of staying in school," said Ehrhart. "We can address this in two ways: by demonstrating the long-term benefits of education to income levels, and by offering young people greater opportunities to develop employability and life skills in and around the classroom."

DHL's GoTeach program operates in all the seven countries examined in the report, delivering a range of educational and vocational opportunities to young people in disadvantaged communities. Working in partnership with global non-governmental organization (NGO), Teach for All, GoTeach educational activities benefited nearly 11,000 children in Bangladesh, India, Malaysia and the Philippines in 2017.

"Our latest report hammers home the sheer volume of out-of-school children in Asia, and the rising costs of doing nothing," said Ehrhart.

Published on January 31, 2018

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