Interlinkages Between Economic Growth and Human Development in India: A State-Level Analysis

Abstract

This study explores the relationship between economic growth and non-income components (health and education) of the Human Development Index (HDI) for 26 Indian states during the period from 1990 to 2019. By applying the auto-regressive distributed lag (ARDL) model and Dumitrescu and Hurlin panel causality technique, the study identified a strong two-way relationship between economic growth and non-income components in the long run. Public expenditure on health and education did not impact human development outcomes, whereas total expenditure (public and private) did. However, public expenditure on health is crucial in ameliorating households’ financial burden and preventing impoverishment due to catastrophic health expenditure. Furthermore, the analysis of the relationship between different educational levels (primary, secondary, and tertiary education) and the gross state sectoral value added revealed that while education limited to the primary level had no discernible influence on economic activity, secondary and higher education played a pivotal role in determining sectoral economic activity. Secondary education positively influenced agriculture and manufacturing, while higher education significantly shaped the services sector. The impact of higher education on services was four times greater than that of secondary education on manufacturing.