Patralekha Chatterjee | Human Capital India’s Real Arsenal As Tensions Simmer

Amidst the continuing tensions between India and Pakistan, despite the ceasefire agreement which went into effect on Saturday evening, we must face up to a stark reality: in war and in peace, India’s real arsenal is its human capital. There is no all-weather friend. There is no permanent external support system. We are surrounded by adversaries, rivals, and shifting global alliances and priorities. There is no option but to be aware, alert and equipped. All this boils down to human capital.

India’s strategic discourse is predictably focused on diplomacy, defence modernisation, border security and military preparedness. But amid this justifiable focus on foreign policy and conventional deterrence, a quieter yet critical pillar of national security is being overlooked: human capital development. This must be a top priority once the fog of war lifts.

For a country surrounded by hostile neighbours and looming war clouds in the region, investing in education, healthcare and skills may sound secondary. But this is a grave strategic oversight. In the 21st century, security is as much about capabilities of the mind as it is about firepower on the ground. A heightened focus on human development is not just a domestic necessity but a strategic imperative to bolster resilience, foster innovation, and secure the nation’s future.

The 2025 UNDP Human Development Report (A Matter of Choice: People and Possibilities in the Age of AI), released earlier this month, underscores India’s progress but also flags the unequal nature of progress on many fronts. India climbed three spots on the Human Development Index (HDI), from 133 to 130 on the HDI between 2022 and 2023. But its HDI score was reduced by a staggering 30.7 per cent due to inequality, one of the highest losses in Asia. While some Indians are doing very well, millions are not. Life expectancy is at an all-time high, and multidimensional poverty has plummeted, with 415 million lifted out of deprivation in 15 years, thanks to schemes like Ayushman Bharat and Jal Jeevan Mission.

Yet, relatively low spending on health (under three per cent of GDP) and education (below five per cent of GDP) exacerbates disparities, leaving India’s youth – 65 per cent of its 1.4 billion people -- underprepared for a knowledge-driven world.

India’s demographic dividend is a ticking clock. Without urgent investment in quality education, healthcare and skills for every Indian, the country risks squandering this dividend and weakening its strategic edge. India’s working-age citizens can potentially propel the nation to global leadership, but millions lack skills necessary for a modern economy. An unskilled, frustrated youth cohort is vulnerable to unrest or external manipulation, especially in a region where disinformation campaigns thrive.

The UNDP report highlights AI’s transformative potential, noting that 70 per cent of people in medium-HDI countries like India expect AI to boost productivity in education, health, and work within a year. But access gaps electricity, Internet and digital literacy -- threaten exclusion. India’s digital literacy rate -- which goes beyond basic usage to include cybersecurity awareness, online etiquette, and skills -- stands at around 37 per cent, with a stark urban-rural divide.

“No impactful work in STEM (Science, Technology, Engineering, and Mathematics) can occur without adequate investment in the pure sciences.

This investment is essential for training students to be broadly capable and for building expertise that will prove valuable in the long term. China made these investments, which is why it leads the world in both basic sciences and their applications. We must not mistakenly believe we can bypass this step. Nor should we assume that our current leadership in IT and related services grants us a permanent advantage. The future will be dominated by AI, which will automate many mechanical tasks. What remains will highlight what makes us uniquely human. Perhaps the jobs of the future will focus on skills outside STEM, such as those in the social sciences and humanities,” says Prof. Gautam Menon, who teaches Physics and Biology at Ashoka University. Critical thinking is just as crucial.

While speaking to reporters at the beginning of the Asian Development Bank’s annual board of governors’ meeting in Milan recently, ADB president Masato Kanda said something that resonated: “Developing countries like India can close the gap with advanced economies by continuing reforms, boosting domestic demand, enhancing competitiveness, and improving human capital.” He added that while private sector growth will add jobs and facilitate innovation, governments must continue reforms and boost domestic demand by reducing income inequality while opening their economies. “Human capital development is very much more important than ever in catching up with the global economy undergoing a technological transformation.”

Human capital is the lynchpin of modern warfare and economic resilience.

China’s edge in AI, cybersecurity, and semiconductors flows from decades of STEM education and R&D, with $723 billion spent in 2023 compared to India’s $71 billion. A skilled Indian workforce could bolster “Make in India”, reducing reliance on imports in critical sectors like pharmaceuticals or renewable energy. Healthy citizens ensure a robust defence force, while education fosters civic awareness, countering divisive disinformation. Yet, India’s primary and secondary education suffers from chronic underfunding, rural-urban digital divides persist, and cultural norms sideline women. While official data shows workforce participation by women has improved, a significant gender gap remains. Compared with just 42 per cent of women, nearly 79 per cent of men contributed to the workforce in 2023-24. In China, the labour force participation rate among females is 59.6% per cent; the corresponding figure for males is 71.1 per cent (2024) according to the World Bank.

India’s paradox is stark: a surplus of tertiary graduates coexists with persistent illiteracy and low-skill labour in agriculture. While IITs shine, foundational education still falters in many parts of the country, trapping millions in low-productivity work. Inequities along entrenched fault lines further erode cohesion.

India stands at a crossroads. Its people -- young, diverse and dynamic -- are its greatest asset in a world of rising tensions. But potential alone will not suffice. Without bold reforms, the dividend becomes a deficit, weakening India against assertive adversaries. In a turbulent and uncertain world, India’s response must be clear: empower its people to outthink, outbuild, and outlast its rivals.

The time to act is now. India’s security, economy, and global stature depend on it. In the age of knowledge warfare, a country’s strength lies not just in its soldiers and armaments but also in the capabilities and maturity of its citizens. By investing in human capital, India can transform challenges into triumphs, securing its place as a resilient, innovative global power.