Human Capital and Urbanization in India

This chapter analyses the human capital base of population, workers, and migrants and compares the human capital base of the population and workers in rural and urban areas. The nature and extent of the private sector’s role in human capital formation are also looked at. This chapter finds that earnings of workers increase substantially at each successive level of education and returns are far higher at the graduate-and-above level. The contribution of rural–urban migration in increasing the urban population has been around one-fifth. In that sense, urban growth has been exclusionary. It observes that urban areas are considerably better endowed with the quality of human capital and the average returns to education are higher in urban areas compared with rural areas, and rural–urban gaps in average return to education are increasing over time. It calls for active policy to promote rural–urban migration that will boost urban as well as national income. In this regard it argues for an active policy of promoting the labour-intensive manufacturing sector which is likely to promote more migration and reduce the selectivity bias in rural–urban migration.