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by Manoj Bhatnagar (2006)






1. The relevance of literacy


2. A quantitative assessment: the cases of India, Korea, China, and USA


3. Improving literacy: a national imperative for an open economy



Author's contact information





The present paper is an attempt by the author to explore the relations of exports and the growth of the number of people capable to write. Such type of relation shall be crucial to the economies like India where population, as well as literacy rate, is increasing at an appreciable rate.

The importance of this relationship is highlightened by the fact that the Government of India is doing much to improve the literacy rate, e.g. through the imposition of Education Cess on income and corporate tax.

A qualitative discussion of the transmission channels and feedbacks between exports and literacy is provided. Then, the data of India's export over a period of 40 years have been collected and the literacy rate for the corresponding period has been put against for a study. A clear positive relationship is found. This has been confirmed using also data from several other countries.

Some policies are finally proposed to strengthen this relationship and its components: the education level and the openness to world economy.

This paper is dedicated to my family members and friends whose well wishes have been crucial for the development of it.


1. The relevance of literacy

Ten years ago, 1 billion adults in the world were illiterate, with 98% of all illiterates in the Third World (constituting the bulk of the poorest). 66% of all illiterates were women. 1 in 5 New Testaments were not used after translation due to illiteracy (Source: World Literacy Facts, Wycliff, 1996).

During the decade, each year some 30 to 50 million people were added to the ranks of the illiterate, giving rise to a wide-spread concern, leading to the so-called "Millenium Goals" of ensuring "universal primary education and gender parity in primary and secondary schooling by 2015". But the UN and the developed world is felling short of this promise and a renewed effort should be put into place.

In terms of geographic distribution, 50% of all illiterates were concentrated in two countries only: India and China. Now that these two countries are surprising the world with their growth, it is more and more important to draw lessons from their experience.

The efforts of increase knowledge and skill in the labour force have been an important ingredient for such growth, and they shall play an even more relevant for spreading it in rural areas and to majoritarian social groups.

The concept of the literacy is different for different group of persons when it comes to the categorization of the people involved in export and related activities.

The first group that comes to the mind is that of the workers who come into the category of unskilled labour.

In countries, like India, such workers are in plenty because literacy rate here is still very low i.e. around 50%. Such workers are in increasing number in developing countries and even more so in least developed countries.

Such people may prove to be an asset to the organization as they by providing suitable technical training, of higher skills, can be transformed to the people who could bring maximum results to the organization.

This aspect has been clearly demonstrated in the shoe-manufacturing units of Agra, lying in Western Uttar Pradesh of India. Shoe manufactured out of these units are being exported to every nook and corner of the world (Europe, America, etc.). The very success of this industrial district in terms of exports relies on the labour force.

This class of people is taught to learn to work in sophisticated machineries, producing shoes meant for exports. They are taught in simplified language and with regular practice they come out with flying colours.

Their lack of literacy, however, reduces the scope and the lenght of the operations they perform, creates rigidity in instruction, because culture allows for a conscious, deliberated, fluent learning of a vast array of situations. Lower productivity and the ease of substitution of one worker with another (or with an unemployed) makes their hourly wages extremely low.

It is worthwhile to emphasize here that these workers are very sincere and hard working and it only due to reasons beyond their own control that they are falling back.

The individual investment into literacy was too costly, they had to go working at early age to make a living, the low salary makes necessary very long hours of working, with holidays used for badly needed rest after the fatigue of many manual works. They are locked-in in a trap from which they can escape only through collective targeted action at them and their children.

Alone, the individual cannot afford his own education. Had they received at least the basics of reading and writing, their lives would be much better and the economic results as well.

Skilled labour finds much of its strength and productivity in a mix of work experience, intelligent adaptation to new tasks, formal knowledge. Literacy is a key, not the unique but a crucial one, for passing from unskilled to skilled status.

More fortunate of the lot can suitably support them. These fortunate can be categorized as managers, entrepreneurs and public officers. Let us see how literacy could help them out.

For managers, the ability of reading is a sine-qua-non condition in order to learn even basic facts regarding management through books, articles and courses. The more so, writing can lead to the spreading of experience to others, so that collective learning takes place much faster.This in turn is conducive to innovative ideas, often due to information coming from afar.

In particular, exports require a lot of knowledge about far markets, their tastes and financial conventions (e.g. terms of payments), often obtained only in a formalized forms (e.g. written contracts with a lot of legal language and possibility of misunderstanding). Catalogues of products with length technical characteristics are the base for negotiations leading to extensive changes in requirements, since the farther the market, the larger the differences in tastes.

All this requires literacy, not only in the mother tongue, but also a foreign language. India has the advantage of a large diffusion of English as a national language. Other countries might have different heritages from the colonial age. But all this has to become an active knowledge of basic and specialized terms for the export manager to be successful.

Once taken the bounded-rationality perspective, which has an overwhelming empirical support, in contrast to the idealized neoclassical views, export is clearly a "difficult" activity which requires more knowledge than selling in the domestic market. Thus, illiteracy is a real barrier to exports, since export mangers will not cope with the reality of world markets, even in their basic elements. The same self-judgement of lacking literacy will push small and medium-sized entreprises out of the attempt to export. If they are so courageous to try to exports, earlier or later, they will have painful experience with untrustworthy foreign partners (no payments, contested product features, legal problems, etc.).

This explains the well-known stylized fact that the majority of firms does not export, even if in many cases their product could be profitably sold abroad.

In this context, the most successful developing countries see the mushrooming at a rapid pace of various institutions, both private and public, that are coming out with various programs for management in the field of marketing, human resources, production, information technology, insurance and banking, etc. But it not uncommon that these institutions are charging exorbitant fees from students.

Banking sector is coming forward to provide loan to the needy with payback when the incumbent is on the job. The result is that in countries, like India, there are managers, who are waiting to get job and remuneration.

Any delay in growth and employment would make this private-based system unsustainable and ineffective, with cohorts of people condemned by the economic conditions prevailing in the crucial 14-21 years of age. Temporary fluctuations would provoke long lasting hysteresis on the labour market.

In many developing countries, there are no sufficient skilled workers at ground level who could provide base to such managerial work. Thus, the literacy in developing countries, like India, should be broad and of sufficiently high quality. More stress should be on the development of the educational infrastructure that could provide primary and secondary education, supplemented with suitable technical skills.

In another perspective, when you are a child, it is not clear whether you shall have a work which requires or not certain degree of formal knowledge, then education for all is extremely important so that there is no early discrimination and loss of natural talents.

Passing now to the the class of entrepreneurs who provide the leading figures of the business with the wealth and knowledge they possess. For them, literacy is beneficial not only for the same reasons as export managers but also because it provides mind discipline and the necessary flexibility in coping with an extremely vast array of mental activities (e.g. coordination of all departments, introduction of transversal innovations, etc.).

Exports is an emergent higher-order result of sound firms that are lead and controlled in a excellent way.

The entrepreneur class is affluent and it has generally recognized the importance of being literate of a very high order. They should lead a societal movement towards larger and larger layers of literate people and use their influence on the lives of others at least not to deter people from having time and study.

Then comes the category of public officers who are responsible for executing rules and laws for promoting exports. These officers are also literate and should be taught to be disciplined enough to execute their work whereby the export activities are promoted rather hindered or curbed with litigations between government and exporters. Yes, I am talking about corruption which is rampant in various developing countries i.e. India.

Literacy in a common par lance means to be educated. The definition of this term is different for different categories of peoples i.e. workers, managers, entrepreneurs and public officers.

Of course, such categories are not rigid and they are classified only by the extent of education that one has received in one's course of life. Given opportunities, person, by upgrading himself with desired qualification, can transit from one category to another.

The problem of transition, however, becomes acute when persons in one category are in large numbers and there is shortage of "educational infrastructure" available for them. For example, in developing countries, like India, the number of skilled/unskilled workers are dominant due to the lack of availability of educational infrastructure.

People generally get themselves limited to primary and early secondary education without resorting to the higher education. People are in plenty, their means are meager and the result is that the people prefer to find ways and means to earn more, from their existing work, and as a result of which they end up being as workers.

Such thing is not only common in India but is also rampant in other under-developed / developing countries of the world. So the common theme of literacy for such countries of the world is to provide necessary infrastructure to help such category of persons to transit to higher levels. As number of illiterate people i.e. not even possessing primary/secondary level of education, is larger in developing countries, the scope of improvement is wider and the more work is required to be done in this field.

The improvement of literacy enhances the transition from one category to another, interpreted as different stage of a stylized "cursus honorum":


The transition from workers to managers is difficult in under developing/developing countries and is fairly easy in developed countries. This is because the number of workers is more in under-developing/developing countries and less in developed countries.

However, the infrastructures required for transition from workers to managers are in reverse order i.e. large for developed countries and less for underdeveloped/developing countries. As far as the transition from managers to entrepreneurs/public officers is concerned, the task is difficult in under developing / developing countries because opportunities are less.

People once engaged in a kind of a job do not prefer to change it due to risk involved. This is due to the fact that such people have taken long time to reach this stage and at the ripe time, of their life, they do not want to take the risk. Here the literacy as mind discipline comes into play. This scenario is different for developed countries as the opportunities are largely available to the people.

In developed countries, the number of officially illiterate people are negligible and hence the scope of improvement is narrower. However, the minimal skill that are required to be enough productive so that the (world-relatively) high wages can be afforded are in those countries much higher than in developing countries. Computer illiteracy or foreign-language illiteracy is not uncommon there, so that there is an on-going effort of increasing the education levels.

One should't forger, moreover, that immigration to developed countries of people who do not read and write currently the language of their new country provokes a lot of dis-adaptation, misunderstanding, lack of integration, which in turn can contribute to social tensions and protectionist views in the local population. This would lead to a closure of frontiers, a closer world, with less exports, among other negative phenomena.

Concluding, more literacy rate means more export and certainly the development of the particular country, which shows such improvement, is on cards.

2. A quantitative assessment

The case of India

When considering India, the first thing that comes to the mind is its size both in terms of its area and, of course, the ever increasing population. There are two sides of looking at the problem of the population in India as the challenge of assuring at least a basic literacy level to all or as the opportunity of such a large potential of human capital.

Being optimistic, the attempt here is to paint the positive picture of the solution of the problem of population in India. More population means more hands to work for and there India has an upper hand. Even if the element of the education is taken into consideration, India can still boost off having the high percentage of the unskilled labour in the entire Asian Gamut of the countries.

When the percentage of the unskilled labour is high, the element of the cheapness comes into play and this means low cost of production and with some amount of money is invested on training these unskilled labour a new class of skilled labour could be resulted which could be safely utilized at the higher levels of the production/management etc.

This aspect has been very well deciphered in Agra, Uttar Pradesh, India where large amount of un-skilled labour have been utilized, to the core, to produce the finest quality of shoes that are being exported to every nook and corner of the world. So what is true of Agra can be true of other parts of India and world in general.

Thus, it is clear that the basic need is that of the education and therefore the author has made an attempt to relate Export with the literacy rate of the country.

India: Exports (crores) and Literacy (%)
from the Year 1950-51 to 2001-2002

Year Exports (crs) Literacy (Percentage)
1950-51 606 18.33
1960-61 642 28.3
1970-71 1535 34.45
1980-81 6711 43.57
1990-91 32553 52.2
1991-92 44041 n.a.
1995-96 106353 58
1997-97 130100 62
1998-99 139752 63.1
1999-00 159561 n.a.
2000-01 203571 65.38
2001-02 209018 n.a.

Source: Data compiled from (Economic Survey 2002-2003).

A clear positive relation is evident from the data. Karl Pearson's Coefficient calculated for this table No 6.11 is .865, which is significant at .01 degree level of the confidence (2- tailed test).

Thus, it is clear that there is a definite relation between Export and literacy of the particular country. But the effect is different for different countries as the population factor comes into play.

In India there is an urgent need for the Country to spend more on the people to get into the mould of the education, as the number of the illiterate people is particurarly high. It is only then the effect of the education shall be noticeable.

Now let us examine other countries of the world. The next study is of the Republic of Korea.

The case of South Korea

Republic of Korea: Exports (billion $) and Literacy (%)
from the Year 1975 to 2003

Year Exports (billion $) Literacy (Percentage)
1975 5.08 90.2
1980 18.10 92.9
1985 30.2 94.5
1990 65.01 95.9
1995 125.05 96.9
2000 172.26 97.8
2003 193.81 98.4


Source: Unesco.

A positive relationship is present in the data. Karl Pearson's Coefficient is .908, which is significant at .01 degree level of the confidence (2- tailed test).

One should not expect temporary business cycle fluctuations be strictly linked to the structural data of literacy. However, it's clearly the same development dynamics that involves both time series.

The case of China

Mainland China: Exports (billion $) and Literacy (%)
from the Year 1985 to 2003

Year Exports (billion $) Literacy (Percentage)
1985 25.6 73.4
1990 62 78.3
1995 148.7 81.9
2000 249.2 85.2
2003 438.2 88.2


Source: Unesco.

The relationship is positive, with Pearson's Coefficient at .936, which is significant at .01-degree level of the confidence (2- tailed test).

More evident for countries starting from low levels of literacy, this relationship is present also in developed countries, as the example of USA shows.

The case of the United States of America

USA: Exports (billion $) and Literacy (%)
from the Year 1980 to 2003

Year Exports (billion $) Literacy (Percentage)
1980 216 88.4
1990 392.8 91
1995 582.9 92.1
2000 780.3 93.1
2003 723.6 94

Source: Unesco.

A positive relationship is overall valid, with Pearson's Coefficient at .958, which is significant at .01 degree level of the confidence (2- tailed test).

3. Improving literacy: a national imperative for an open economy

Exports, active internationalization, and openness to the global human community require a society-wide participation in culture, necessarily rooted in education and literacy. Thus, if we want a vibrant economy and a proper path of development, adequate policies must be put in practice. Here we tried to highlight a few key statements.

Primary education as primary goal

As the most acute observers have underlined, the problem of literacy in the developing countries is mainly confined to the education at the grass root i.e. primary education.

Especially in developing countries, like India, the primary education is often ignored so much so that only nowadays politics has started coming into it. Basic training centres must be increased where the teachers have to be taught the values of Education in villages because teaching the children of villagers are different from that of city. People, residing in villages of the developing countries, like India, generally prefer to stick to their existing profession rather switching to the more profitable one. In doing so, they do not encourage their children to go for higher studies as that would require their children to go to cities and higher education, in such countries, is a costly affair that they cannot afford. They have inherited illiteracy from their forefathers and which they now unwillingly forward it to their children. The problem becomes more compounded when the teachers, employed for teaching village children, do not turn up for their work. The reason is that such teachers are generally city based and they do not prefer to earn their livelihood in village. There is lot of difference in the economic structure of village from that of city of the developing/under-developing countries of the world.

Such problem may not occur in developed countries as their countryside are as economically developed as their city side. Their educational standards are so high and uniform that such difference, of countryside and city side, does not dare to exist. Only those teachers has to be employed who have the inclination of getting employment in villages. Their salary has to be increased to cope up with the growing inflation. Salaries of Primary Teachers are very low in developing countries.


Science from the very beginning

There is a tendence to teach strictly practical subjects to people "deemed" to exit early from school. Instead, the basic value and knowledge of the Science be given right from the grass root level to everybody.

It is an undoubted fact that there is no up gradation of the knowledge of education without being aware of the advancement in the field of education. When there is dearth of knowledge of primary and secondary education in grass root level, such deficiency of the knowledge of science could prove fatal. The people have to be taught about the basic values of knowledge of science right from the grass root level. Otherwise, people will not be attracted by the higher education and shall end up, willing or unwilling, working in the category of "workers".

After the necessary period of time, people who could not get into the Higher education should be provided further technical education, always guaranteeing that they develop an original and critical point of view on subjects.

Burst the restrictions to education, irrespective of income and status

Higher education should be made less restrictive and more competitive. Good people, accessing higher education, shall be a boon for the research programme of the country.

The problem of financing the Higher education could be solved by lessening the magnitude of the Income Tax for the cause of the education. This tax is of a very high order in various developing countries of the world. Owing to which there is a lot of evasion. Government of such countries, especially that of India, is coming forward for programmes for unearthing black money.

As regards education, government may for every Rs. 100 charged can give 1 Rs is to the Education Department of India, then huge amount of the money could be collected for education and related research/ development work. This money should be directly given to the education department of India, which in turn could be utilized for R & D work.

Underpaid researchers discourage the young to study

Research work should be made more lucrative so that scholar could make a carrier out of it. The fellowship granted should be high enough to cover the cost of the research and his cost of living. This would create more interest in the minds of student.

Instead of looking for immediate job, they shall come to the research work and God Knows we can have lots of the Einsteins and Newtons.

Today's generation, being more of the money-minded, will definitely be attracted by this policy.

Building the future together: the tax--based financing of education

The concept of Education Cess employed in India is a very appreciative attempt by the govt. of India. It is a tax on tax which is imposed for a cause i.e. education. In India it is imposed on Income Tax and Central Exise i.e. tax levied on the production.

This may sound inflationary but people are allowed to take credit of this kind of tax which could be utilised for further payment.

Calculation of the cess is done in this way i.e. if income tax of a person is assessed to be Rs. 2000/- then cess comes out to be Rs. 40/-. Such cess of a very low amount i.e. .5% to 2.5% could be safely imposed in other countries of the world where VAT is existing. The money thus collected could be utilsed for the improvement of Basic education and Higher education.

Not only the State: the role of NGOs, new institutions, and the media

More NGOs should come forward for the cause of the education. The giants of the Business world can fund them and others who can afford to do so. Tax exemption under some section of the Income Tax could boost such investment.

Investment in education could also be made lucrative by launching an organization who would be entrusted for developing infrastructural facilities for education. That is that such an organization shall open Basic training Centers and open various schools of the grass root level in villages and cities. Promotion of the education could also be done by such an organization.
Such organization could raise money by throwing its shares and bonds in the market. Money could also be supplemented by the government.

Media should play a major role in improving the cause of the education. If Media can promote the polio vaccine, why cannot they ask people to send their kids to schools? The writer is of the firm opinion that people shall always listen to such voices.

All this requires a honest and thorough involvement of politicians who should guarantee the leadership and a system of proper monitoring of activities and results.

Author's contact information

I am lecturer and HOD of Commerce in B.S.A College, Mathura, Uttar Pradesh, India.

I can be contacted at 6/58, Opposite Employees Club, Mathura Refinery Nagar, Mathura,Uttar Pradesh, India, Pin Code 281006. Phone No 915652431587.



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