India is projected to reach its demographic dividend in 2030, with about 68 per cent of its population expected to be of working age (Meredith, 2007). However, although the demographic transition is already under way, scholars have not reached consensus on whether India’s policy environment is conducive to realizing the full potential of this large labor force (Rodrik and Subramanian, 2004; Kelkar, 2004; Acharya, 2004). To what extent might India’s education policy, in particular, play a role in India’s preparedness for maximizing the benefits of its impending demographic dividend? This study aims at addressing this question using an empirical framework that combines not only growth accounting but also the political economy of human capital formation and education policy using newly developed datasets and borrowing methodological concepts from the trade policy literature.