Health and its impact on economic growth in India – An explanation
Original author: L. Nieland et al. (2022) (DOI: 10.1016/j.omto.2022.04.001)
Jr. Economist intern
July 22, 2022
The role of ‘human capital’ in economic growth is vital. An economy depends on human capital is now widely accepted. A higher level of human capital is the result of a higher level of health status, better health education, and new learning and training procedures with a good healthy mental and physical condition. Healthier people are more active and enthusiastic, making them more productive as compared to those who are ill. This paper aims to answer the question “Whether the notion of health status affecting economic growth is valid for India or not?”
The data for the study has been obtained from the official website of 'The World Bank' and contains 55 samples. It uses ‘gross national income per capita’ or ‘GNI per capita as a proxy for economic growth. The health indicators are the life expectancy rate, infant mortality rate, under-five mortality rate, and total fertility rate.
A linear regression method is used to examine the effect of health variables on gross domestic product per capita growth. However, to get an unbiased estimate of coefficients the two-stage least square method’ (2SLS) was applied using the instrumental variable approach.
Results & discussion
The results from OLS regression showed that GNI per capita is positively correlated with life expectancy and negatively correlated with all other indicators namely infant mortality rate, under-five mortality rate, and total fertility rate.
Moreover, the OLS results reported that -
The health indicators do not have a significant effect on gross national income per capita i.e., a simple linear regression showed that health has little or no impact on economic growth in India.
The correlation between the health indicators does not show a high correlation between different health indicators and gross national income per capita.
Hence, there is the problem of endogeneity. To overcome this, the 2SLS method was used by introducing other explanatory variables like the total fertility rate and the population growth rate. It was found that there were highly significant estimates for the effect of health variables such as life expectancy, infant mortality, and under-five mortality rate.
Thus, “Health does have a significant impact on Economic Growth in India.”
Impact of the research
To sum up, overall health affects the total factor productivity as healthy people are highly productive than their unhealthy counterparts. This paper provides that this fact is true for India also. Therefore, further steps need to be taken to improve the provision of health services as well as physical infrastructure to lift people out of poverty and provide them with a better standard of living.