India should invest more in education to maintain and deepen its niche in information technology and high-skilled labour, the World Bank said on Tuesday. The South Asian powerhouse is home to one-quarter of the world's 104 million children out of school, according to an estimate in a report called "India and the Knowledge Economy."
The development lender urged India to ease regulations on private schools and training centres to create more graduates, innovators and entrepreneurs.
Private institutions could also cater more directly to business needs, helping attract companies and add jobs, the World Bank said.
While India boasts many scientists, engineers, technicians and researchers, the country of more than 1 billion people struggles with persistent poverty and illiteracy.
The report, prepared by the World Bank Institute, an in-house think tank, urged the country to revamp its primary education system to align it more closely with skills required in the market. University-level training must also be tailored to India's economic needs, the bank said.
"India needs to make its education system more demand driven to meet the emerging needs of the economy and to keep its highly qualified people in the country," said Anuja Utz, a co-author of the report.
"This means raising the quality of all higher education institutions, not just a few world-class ones," Utz said.
The Washington-based lender also urged India to reinforce its communications infrastructure, particularly in rural areas, and improve technology use in agriculture and other industries.
"Great potential exists for increasing productivity by shifting labor from low productivity and subsistence activities in agriculture, informal industry, and informal service activities to more productive modern sectors," it said.
Attracting foreign investment will also be critical as India seeks to reverse a long-running "brain drain" of skilled workers moving abroad, the bank said, adding the country also needs to boost its burgeoning research and development sector.
About 100 multinational companies have set up research and development centres in India, the World Bank estimated, many attracted by India's well-skilled, English-speaking workforce earning lower wages than their European and US counterparts.
Companies that have outsourced work to India span the automotive, pharmaceutical, telecommunications and information technology sectors, the bank said, pointing to emergent hubs in cities like Bangalore and Hyderabad.
The global lender urged India to promote closer links between the private sector and schools and training centres.
"Linkages among local firms, universities and research institutes and the world-wide (research and development) network of multinationals further integrate India into global technology development," it said.