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Explain how investment in education stimulates economic growth.

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An increase in the level of production of goods and services (national income) of a country over a certain period of time is referred to as economic growth. Higher level of investment in education sector would lead to higher proportion of educated people working with higher participation in economic activities and, therefore, would lead to higher economic growth. The following are the various ways in which investment in education stimulates economic growth: 

(i) Imparts Quality Skills and Knowledge: Education endows people with quality skills and, thereby, enhances their productivity. Consequently, it enhances the income earning capacities of and opportunities for the people. Moreover, it also enables the human capital to utilize the available physical capital optimally. 

(ii) Develops Mental Abilities: Education develops the mental abilities of people and helps them to make their choice rationally and intellectually. Education churns out good citizens by inculcating values in them.  

(iii) Acceptability of Modernization: An educated public of a nation has greater acceptability of modernization and modern techniques. This not only helps the economy to grow but also facilitates a primitive economy to break the shackles of tradition and backwardness.  

(iv) Eradicates Skewed Income Distribution: Education not only increases the income  earning capacity but also reduces the skewed distribution of income, thereby, forms an egalitarian society.  

(v) Raises Standard and Quality of Living: Education enhances the income earning capacity of the people, thereby; it raises the standard of living and also improves the quality of living.  

(vi) Increases the Participation Rate: It fosters economic development by increasing the participation of people in the process of growth and development.  

(vii) One Solution for Other Economic Problems: The importance of education is not only limited to making people educated But also in facilitating an underdeveloped economy to solve different but interrelated macro economic problems like poverty, income inequality, population, investments, under utilization of resources.

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