Financing ElementaryEducation in IndiaJandhyala B. G. Tilak*

INTRODUCTION

Long before the formulation of the United Nations Edu-cational, Scientific and Cultural Organization (UNESCO)resolutions and the emergence of interest by internationalagencies like the World Bank, the United NationsChildren's Fund (UNICEF) and the United Nations De-velopment Programme (UNDP), the Government of Indiahad recognized the importance of elementary educationand had made a resolve in the Constitution of India aslong ago as in 1950: T h e State shall endeavour toprovide within a period of 10 years from the commence-ment of the Constitution for free and compulsory edu-cation for all children until they complete the age of 14years (Article 45).' By resolving to provide elementaryeducation 'free' to all, the Government of India has alsoimplicitly recognized the 'public good' and 'merit good'nature of elementary education. Elementary education is,in fact, recognized by many as a 'pure public good' asthe benefits from elementary education are immense;they are not confined to the individuals who go to theschool; and the rest of the society also benefits consid-erably. In fact, the neighbourhood or externality benefitsof elementary education are believed to outweigh thedirect private benefits. Besides, it is a 'merit good,' asthe state knows better than individuals availing the ben-efits of education. Hence, it is necessary that elementaryeducation is fully financed by the government. The Con-stitutional Directive received a further boost with thehuman investment revolution in economic thought (seeSchultz 1961) and the increasing research evidence thatestablished that the contribution of education to develop-ment—in all socio-economic development spheres—is

* The statistical assistance received from Dr Geetha Rani inupdating some of the tables presented here is gratefully acknowl-edged.

very significant (see Psacharopoulos and Woodhall 1985;Tilak 1989, 1994a). Not only are the economic returnsto primary education estimated to be positive and high,but they are also estimated to be higher than alternativerates of return. And returns to primary education arehigher than returns to secondary and higher education.Returns to primary education of weaker sections (e.g.,backward castes and girls) are also found to be sizeableand, in fact, higher than returns to their respective coun-terparts (viz., non-backward castes and boys), and re-turns to upper-primary level of education are higher inrural than in urban areas (see Tilak 1987).

The contribution of education is not restricted toeconomic returns only. Its significant effect on reduc-tion in poverty and improvement in income distribution,improvement in health and nutritional status of thepopulation, its negative relationship with fertility andpopulation growth and positive association with adoptionof family planning methods, and its positive relationshipwith general social, political and economic developmentand overall quality of life are well recognized. All thishas contributed to the rapid growth of education in India,though it is still not adequate.

The National Policy on Education (NPE) 1968 and theNPE 1986 have laid special emphasis on the fulfilmentof the Constitutional Directive of universalization of ele-mentary education (UEE). Five Year Plans have repeat-edly promised to take the nation towards achieving thisgoal. Elementary education was also included in the'National Programme of Minimum Needs' in the FiveYear Plans, and this inclusion has significant implica-tions for allocation of resources. This was expected toensure favourable treatment in the allocation of re-sources, and to protect it from reallocation of approvedoutlays away from elementary education. Educationwas also made an important component of the 'national

CED documentation is for educative purposes-for your reference and study only

Source:- India Education Report (book)Author:- Govinda R.pg.- 267-273, 283-286, 291-292CED code:- B.N21.G1

human development initiative' in the Union Budget of1999-2000 (see Tilak 1999a).

Thus, much before the Jomtien Conference (1990) andthe adoption of the World Declaration on education forall (EFA) at the same conference, the Government ofIndia had repeated its resolve to universalize elementaryeducation in the country as early as possible, and alsoto increase the public funding of education to at least 6per cent of national income, so that education, elemen-tary education in particular, does not suffer from paucityof financial resources.

But even after five decades of development planningand four decades after the deadline stipulated by theconstitution, and despite several strategies adopted, prog-rammes and schemes launched, this goal is still elusive.It is strongly felt that elementary education suffered inIndia due to, apart from several other factors, insufficientallocation of financial resources. At the same time, itshould be noted that while finances are an importantconstraint, they are however not the only constraint, butone among many. Financial resources provide a neces-sary but not a sufficient condition in achieving UEE.

So, when national and global reassessments of EFAgoals are being made, it would be useful to assess variousdimensions relating to EFA in India. This chapter is anattempt to examine one particular aspect, viz., the patternof financing of elementary education in India, morespecifically focusing on the 1990s, i.e. after the JomtienConference. It attempts an examination of a few selectdimensions relating to financing of education, that toovery briefly.

ALLOCATION OF RESOURCES

There are three important aspects relating to allocationof resources to education: (i) allocation of resources toeducation vis-a-vis other sectors, i.e. inter-sectoral allo-cation, (ii) intra-sectoral allocation of resources withineducation, i.e. allocation to different levels, and (iii)inter-fimctional allocation of resources to different activi-ties such as teaching, administrative, and welfare. Yetanother important dimension of allocation of resourcesto education, that is important in a federal system likeIndia, is allocation by the Union government to the states.

These aspects are briefly discussed in the followingpages, surveying the existing scanty literature, and withthe help of some important indicators using the recentdata available. At the outset it may be noted that despiterecognizing the contribution of education to economicgrowth and development, the pattern of allocation ofresources to education is still far from satisfactory.

Inter-sectoral Allocation of Resources

First, what is the priority given to education in thenational development framework? This question is gen-erally answered in terms of a few select indicators such

as the share of education in gross national product(GNP), share of education in government expenditure,share of education in Five Year Plan outlays, etc, someof which are discussed below.

SHARE OF EDUCATION IN GNP

The share of education in GNP is the most standardindicator of national efforts on the development ofeducation in a given society. This reflects the relativepriority being accorded to education in the nationaleconomy. It is also found to be superior to several otherindicators. On the recommendation of the EducationCommission (1966), the Government of India (1968)quantitatively targeted investing 6 per cent of nationalincome in education from the public exchequer by 1986.As the goal has not been realized so far, it has repeatedlybeen reiterated that it will soon be fulfilled. Now the goalis set to be achieved by the end of the Ninth Five YearPlan, i.e. by 2002.

Presently 3.6 per cent of GNP is invested in educa-tion in India (1997-8). Compared to the very low levelof 1.2 per cent in 1950-1, this marks very significantprogress (see Table 20.1). However, it needs to beunderlined that this proportion is less than (i) therequirements of the education system to provide reason-able levels of quality education to all the studentspresently enrolled, (ii) the requirements of the system toprovide UEE for eight years to every child in the agegroup 6-14, and consequent growth in secondary andhigher education, as UEE in a comprehensive senseincludes universal provision of resources, universalenrolment, and universal retention, (iii) the recommen-dations of the Education Commission (1966), the resolvemade in the NPE 1968 (see DoE 1968), reiterated in theNPE 1986 (see DoE 1986), and the revised policy (1992)to invest 6 per cent of GNP in education,3 (iv) theproportion of GNP invested in education in many otherdeveloping, leave alone developed, countries of theworld, including Africa, and (v) finally the proportioninvested in India before the Jomtien conference. Forinstance, 4.9 per cent of Gross Domestic Product (GDP)was invested in education in India in 1990-1. But eversince, it has been consistently declining (see Figure20.2). It should be noted that it would be a stupendoustask to reach a level of 6 per cent of GNP by the endof the Ninth Five Year Plan, as promised by thegovernment, from the current level of 3.6 per cent.Among the countries of the world on which such dataare available, India ranked 115th with respect to this

3 It may, however, be noted that the Education Commission'srecommendation assumed a higher economic growth rate thanactually realized in the country, in which case, the requirementof education would be more than 6 per cent.

TABLE 20.1

Share of Education in GNP in India(per cent)

Year % of GNP Year of GNP

1950-11951-21952-31953-41954-51955-61956-71957-81958-91959-60Average1960-11961-21962-31963-41964-51965-61966-71967-81968-91969-70Average1970-11971-21972-31973-41974-51875-61976-71977-81978-91979-80Average

1.21.31.51.51.82.01.82.12.12.31.82.52.72.82.72.52.82.82.73.03.02.83.13.33.22.72.93.23.23.23.53.13.1

1980-11981-21982-31983-41984-51985-61986-71987-81988-9

1989-90Average1990-11991-21992-3

1993-4*1994-5*1995-6*

1996-7* (R)1997-8* (B)

Average

2.93.03.03.03.13.23.33.63.64.53.24.94.04.64.24.04.03.83.64.1

Notes: Government expenditure only 1984-5 onwards.* Quick estimatesR—Revised estimates; B—Budged estimatesSource: Up to 1983-4, MHRD (various years), Educationin India, after 1983-4.

indicator of national efforts on education, and amongstcountries with a population of 100 million or more, Indiafigures at the bottom, except Bangladesh. The need toraise this proportion considerably cannot be emphasizedenough.4 Almost all—from laymen to researchers—pleadfor the same, though there are no detailed estimates on

what should be the desirable and feasible proportion ofGNP.5

However, this proportion has increased considerablyin a few states (see Table 20.2) including in some of thebackward states. In fact, in some of the backward states

like Bihar the proportion was above 6 per cent. Thisfinding is not conclusive; in fact, it raises some questionsat the same time. For instance, if the income of the stateis low (or declines over the years), even a relatively smallamount (or stagnant level) of expenditure on education

TABLE 20.2

Share of Education in State Domestic Product (SDP) by States in India

State

Andhra PradeshAssamBiharGujaratHaryanaHimachal PradeshJammu & KashmirKarnatakaKeralaMadhya PradeshMaharashtraOrissaPunjabRajasthanTamil NaduTripuraUttar PradeshWest Bengal

1960-1

2.32.22.32.5+ +-

2.22.64.22.33.01.9

2.7*2.42.8 'NA2.22.6

1980-1

3.83.63.63.52.77.34.53.45.73.33.53.8

" 3.53.74.37.63.12.9

1983-4

3.73.54.33.12.76.04.43.34.33.23.32.93.42.84.18.33.03.4

1985-6

4.74.84.25.43.37.26.75.26.54.23.54.73.34.94.86.93.33.5

1990-1

4.66.06.34.33.18.86.7 +4.36.55.03.25.43.55.35.0

11.8 +4.65.4

1995-6

2.4#6.4#6.2#3.1#2.3#l.W4.93.8#6.3#3.2#2.8#5.1#2.1#4.1$3.7$

12.8#3.8#3.5#

Note: *Includes Haryana; ++ Included in Punjab; + 1989-90; 1985-6 onwards: government expenditure only.

# Quick estimates; $ Advance estimates.

Source: For 1990-1, 1995-6: DoE (relevant years), Analysis of Budget Expenditure on Education-, other years,DoE (relevant years) Education in India.

Norm-based estimates (based on cost functions and enrolmentprojections) by Tilak (1994b) suggest that it should be about 8 percent by AD 2000. Rao (1992) compared the cost of education inIndia with developed countries like Singapore, and estimated thatabout a quarter of our GNP needs to be allocated to education.Seth (1985) felt mat provision of appropriate education mightrequire about 10 per cent of GNP.

gives an impression of a high (or increased) proportionof state income being invested in education. Neverthelessthis is the best available indicator on the efforts of a statein the development of education.

The variations in the educational efforts of variousstates do not fall into any systematic pattern. The

coefficient of correlation between the SDP spent oneducation and SDP per capita is estimated to be small,negative, and statistically not significant.6 Based on simi-lar results on coefficients of correlation for earlier years,it was concluded that it is not necessarily true that a stateor nation invests more (or less) in education, particularlywhen measured as a proportion relative to total nationalor state income, than others because it is economicallyrich (or poor). For example, a state like Bihar which iseconomically a poor state invests as much as 6.2 per centof its income on education (1995-6) and Punjab whichhas the highest per capita income among Indian statesinvests 2.1 per cent, and Haryana 2.3 per cent. Evenstates like Rajasthan, Jammu and Kashmir, Assam, AndhraPradesh, and Orissa whose per capita incomes are abouthalf or less than half that of Punjab invest a higher pro-portion of their incomes on education than does Punjab.

This may mean that level of economic developmentis not an important determinant of public expenditureon education. It is, in fact, necessary to analyse thedeterminants of expenditure on education in detail, butit is rarely attempted, and it has been strongly felt thatallocation of resources to education is not based on anysound rational principles.

THE EDUCATION BUDGET

Perhaps a more important gauge of what is actuallyhappening is the priority accorded to education in thegovernment budget. Unfortunately there is no 'educationbudget' per se in India. To arrive at an education budget,one has to look at the education components in the unionbudget, and more importantly in the budgets of all thestates and union territories (UTs). Only then can acomplete picture of the education budget in the countrybe presented. We do not have such an 'integrated budgetpresentation' in our country.7 The Union Budget fails toprovide any significant idea, as its contribution is relativeto the state budgets for education is very small.

Further, in the budget framework, resources flow fromthe government in two forms—in the revenue account ofthe budget and in the capital account. While in the rev-enue budget the share of the education sector is reason-ably large, in the capital budget the share of educationis infinitesimally small, the net result being the pushingdown of the share of education in the total budget. Ifcentral and state budgets are considered, in terms ofboth revenue and capital accounts, the total budget re-sources available for education formed around 11 per centin 1995-6 (see Table 20.3). Further, we also notice that

TABLE 20.3

Budget Expenditure on Education in India (Education and other Departments)

Centre

Revenue

Capital

Loans and advances

Total

States and UTs

Revenue

Capital

Loans and

Advances

Total

Total

Revenue

Capital

Loans and Advances

Total

1995-6

Expenditure Rsin 10 million

5550.5

0.0

0.5

5551.0

32,627.6

379.1

211.0

33,217.7

38,178.1

379.1

211.5

38,768.7

(Actuals)

% in totalbudget

4.0-

-

3.1

22.3

2.0

2.6

19.2

13.4

1.04

0.6

10.9

1996-7

Expenditure Rsin 10 million

6050.6

0.0

0.5

6051.1

38,644.9

426.5

211.3

39,282.6

44,695.4

426.5

211.8

45,333.7

(Revised)

% in totalbudget

3.8

0.0

-

2.6

22.2

2.2

2.1

19.2

13.4

1.2

0.5

11.1

1997-8

expenditure Rsin 10 million

7862.5

0.0

0.0

7863.3

43,820.7

507.9

272.7

44,601.3

51,683.3

508.7

272.7

52,464.6

(Budget)

% in totalbudget

4.3

-

-

3.4

22.7

2.2

2.7

19.7

13.7

1.2

0.7

11.4

Source: DoE (1995-6 to 1997-8) Analysis of Budgeted Expenditure on Education.

6 The coefficient estimated on the basis of the 1990-1 data is(-)0.3739. See also Tilak (1987b) for similar results on an earlierset of data.

7 In this context, the Analysis of the Budgeted Expenditure onEducation (Department of Education, MHRD) -is a very valuabledocument, though it is published with a gap of 2-3 years.

while in the central budget the share of the educationsector is 3.1 per cent (4.0 per cent in the revenue budget,and nil in the capital budget), it is approximately one-fifth of the budgets of states and UTs (22 per cent inthe revenue budgets and 2 per cent in capital budgets)in 1995-6. It may also be noted that even though theshare of education in the (revenue) budget oscillatedfrequently over the years, on the whole, the share inthe central budget has increased from 1.6 percent in1967-8 to 3.1 per cent in 1995-6, and in the state budgets,it has remained around 20 per cent (see Table 20.4).

TABLE 20.4Percentage of Education Expenditure on

Year

1967-81968-91969-701970-11971-21972-31973-41974-51975-61976-71977-81978-91979-801980-11981-21982-31983-41984-51985-6(R)1986-7(B)1987-81988-91989-901990-11991-21992-31993-41994-51995-61996-7(R)1997-8(B)

Education to

Stategovernment*

19.820.220.521.420.319.820.623.222.922.721.421.821.620.920.821.320.823.324.023.8

--

21.320.818.918.919.318.419.519.219.7

Total Budget

Uniongovernment

1.62.02.32.82.52.42.02.12.02.32.12.22.02.01.91.31.52.72.83.0--

2.12.22.22.32.62.43.12.63.4

All India

11.912.513.014.113.412.613.014.113.713.812.713.113.112.812.510.811.413.113.413.4

--

9.810.610.210.510.510.310.911.111.4

Note: * includes UTs; R—Revised estimates; B—Budget estimates.Source: DoE (various years), Analysis of Budget Expenditure onEducation.

Budgetary resources flow into education from theDepartments of Education, and also from other depart-ments (ministries), both at central and state levels. Whilethe share of the Department of Education is substantial,

other departments also contribute significant amountsto the education budget. Over the years, the latter hasincreased in relative proportion from 8.5 per cent in1971-2 to about 20 per cent of the total education budgetin 1997-8.

The share of education in the revenue budget hasremained more or less stagnant, around 20-5 per cent,over the years in several states (see Table 20.5). Moststates devote roughly one-fifth to a quarter of theirrevenue budgets to education. According to the latestavailable statistics, only Kerala and West Bengal devoteabout 30 per cent of their respective revenue budgets toeducation (1995-6). In case of Kerala it has been almostconsistent though it has marginally declined, while inquite a few states the trends are rather erratic.

If we look at education expenditure levels in variousstates, in terms of Rs per capita, in Figure 20.3, we notethat interstate variations in per capita expenditure oneducation are indeed very high, though they seem to bedeclining over the years.

RESOURCE REQUIREMENTS FOR UEE

Finding resources to finance UEE is an urgent as wellas, contrary to popular fears, an entirely achievable task.On the basis of the recommendation of the high powered"Saikia Committee, a group of experts was constituted toestimate the financial requirement for making elementaryeducation a fundamental right in the Constitution. Basedon a detailed estimation of costs of each item/programmethe group of experts has estimated that UEE requiresadditionally Rs 136.9 thousand crore during the nextten years (see Table 20.15). While this figure may seemawesome, certainly being much higher than the Rs 40thousand crore for a five-year period estimated by theSaikia Committee, it has to be noted that additionally itmeans only Rs 14 thousand crore a year on average, oradditionally 0.7 per cent of GDP (if the GDP grows ata modest rate of growth of 5 per cent per annum). Thisshould easily be achievable.

According to the Committee's estimates, this wouldprovide for a reasonably good pupil-teacher ratio of1:30, improved physical access to schools, provision ofinstructional material, other necessary incentives, and onthe whole a tolerable minimum level of quality ofeducation to every child in India, by the end of the firstdecade of the twenty-first century. The expert group alsofelt that if the government is serious about the allocationof 6 per cent of GDP to education, the task becomesmuch easier 6 per cent of GDP would not only providethe needed resources for UEE, but it also allowsprovision of additional resources for growth of secondaryand higher education. Further, the group showed that

TABLE 20.15

Additional Expenditure Required for UEE in India(Rs in crores)

1998-9

1999-2000

2000-1

2001-2

2002-3

2003-4

2004-5

2005-6

2006-7

2007-8

Total

Recurring

100

1500

4000

6000

8500

10,000

13,000

16,000

20,000

27,250

106,350

Non-recurring

0

2000

3000

4000

4000

4000

4000

4000

4000

1572

30,572

Total

100

3500

7000

10,000

12,500

14,000

17,000

20,000

24,000

28,822

136,922

Total as % of GDP

0.007

0.24

0.46

0.62

0.73

0.78

0.90

1.01

1.16

1.32

0.72*

Note: * Average.Source: Based on DoE (1999).

increasing of total allocation to education to reach 6per cent of GDP is not at all difficult, given (i) the eco-nomy is likely to grow at a rate of growth of above5 per cent, (ii) the likely increase of tax/GDP ratio from16 per cent to 18 per cent, and (iii) the likely increaseof the non-tax-revenue/GDP ratio from about 3 per centto 5 per cent during the next ten years. The group alsoattempted to clear two absurd propositions that are incirculation: (i) that we cannot achieve UEE because itis too costly; and (ii) that the only way to achieve it isto divert funds to it from higher education.

Mobilization of Resources for Elementary Education

In the process of review of NPE 1986, the Governmentof India (1990) for the first time referred in detail to someof the methods that are nowadays being discussed togenerate additional resources for education. These meth-ods largely refer to the higher education sector.

Prominent among the several measures that are dis-cussed presently include: (i) raising fees discriminately,(ii) revitalization of the national loan programme for stu-dents, (iii) special taxes such as graduate taxes, (iv) cor-porate donations through liberal tax concessions, and (v)self-financing by the education sector. Most of them arerelevant only in the case of higher education and to someextent secondary education, but not in the case of elemen-tary education, and they are thus not discussed here.

As elementary education can be treated as a publicgood, and as UEE is, more than anything else, a Consti-tutional obligation, and as the Constitution desired thatit be provided free to all, very few in India and evenin other countries, argue for raising non-governmentalresources for elementary education substantially. Theargument instead is for using existing resources more

efficiently, for strengthening the base for local finances,and for generation of voluntary community resources tosupplement governmental efforts. The role of localbodies is being expected to be vital in not only generatingmore resources but also in the context of decentralizedplanning and management of school education. The 73rdConstitutional Amendment on panchayati raj institutionsmay result in more demands on panchayats.

DECENTRALIZATION AND MOBILIZATION OF COMMUNITY

RESOURCES FOR FINANCING ELEMENTARY EDUCATION

Quite a few suggestions are being put forward to mobilizeadditional resources for elementary education. The Gov-ernment of India (1986, 1990) explicitly favours commu-nity financing of elementary education. For example,NPE 1986 stated: 'Resources, to the extent possible, willbe raised by mobilizing donations, asking the beneficiarycommunities to maintain school buildings and suppliesof some consumables, raising fees at the higher levels ofeducation, and effecting some savings by the efficient useof facilities' (see DoE 1986, 28).

In contrast to the earlier stand that the state shallprovide resources for UEE, now, even for elementaryeducation it is stated that non-governmental resourceswould be required. The Government of India (1986, 28)states: The Government and the community in generalwill find funds for such programmes as: universalizationof elementary education; liquidation of illiteracy.'

It is being increasingly realized that the governmenthas to accord high priority to UEE. At the same time,it is now being realized that the government's capabilityto fund education has reached a saturation point, sug-gesting the need for a search for community resourcesfor education.

An important development of the 1990s refers tosignificant efforts of the government to decentralize edu-cational planning and administration and involve thecommunity at various levels in planning, administration,financing, monitoring, and supervision of the working ofthe school system. Following the Constitutional amend-ment in favour of panchayati raj institutions, and alsothe launching of externally aided projects in primaryeducation, village education committees, school develop-ment committees, and similar committees at variouslevels have been set up with the involvement of the localcommunity. With the participation of these committees,efforts are also being made to mobilize physical andfinancial resources for the village communities to financeelementary education. For example, the School ReformAct in Andhra Pradesh provides for the establishment ofcommittees for people's participation in educational ac-tivities at various levels—a school committee, zpanchayateducation committee, a mandal education committee, amunicipal education committee, a district education com-mittee, and two boards for monitoring the activitiesrelating to education one at district level called theDistrict Education Board and another at state level calledthe State Advisory Board for School Education. Thesecommittees at various levels are expected to compriseparents, community leaders, and teachers, with a fairrepresentation of women. The Committees are vestedwith several powers including resource generation. Thusa significant move has been made on the part of thegovernment to decentralize the administration of schooleducation in the state. Such experiments have not, how-ever, become widespread.

Financing of Private Schools:Private Enrichment and Public Pauperization

One important issue that has significant implications forfinancing education, even school education, relates toprivate schools and the public policy towards privateschools. In the present period, characterized by theglobal wave of privatization, it is being increasinglyfelt that private schools are an effective answer to theproblem of depleting public budgets. The role of theprivate sector in educational development in India istotally different from that of the private sector in thismixed economy in general. Private education or privateschools necessarily mean a privately managed system,not necessarily a privately funded system of education.Thus private schools are of two kinds: private-aided(PA) schools, and pure private or private unaided (PUA)schools. PA schools do not provide any significantfinancial relief to the government, as more than 95percent of the recurring expenditures, and sometimes

some part of the capital expenditures of these schoolsare met by the government. Private institutions have tosurvive for 3-5 years before they can qualify for govern-ment aid, sometimes even retrospectively.11 Both duringthe initial and later periods, they might make profits byunderpaying teachers and other staff, charging varioustypes of non-tuition fees, and through other questionablepractices. Thus the private sector not only does notnecessarily reduce public financial burden, but also mayenrich itself at government and social expense.

That the PA schools survive only with public subsi-dies is an indisputable fact. For example, out of totalgovernment expenditure on primary education in thestate of Uttar Pradesh, 88 per cent was on PA elementaryschools, in the form of grants; this is to be contrastedwith the number of schools. Just 1.7 per cent of theprimary schools and 14.3 per cent of the secondaryschools in Uttar Pradesh are PA, while the rest are runby government or local bodies (in 1993). In other words,an alarmingly disproportionate amount out of govern-ment expenditure on elementary education was spent onan infinitesimally small number of the primary and upperprimary schools. Similar is the situation in Tamil Nadu,though the degree of unevenness is not as sharp as inUttar Pradesh (see Table 20.16). Thus, PA schools causesevere inequitable distribution of government expendi-ture on education.

Thus it seems that the PA sector rarely generatessubstantial resources on its own, but relies extensivelyon governmental grants. By taking away disproportion-ately (in relation to number of schools) large amountsfrom limited public budgets, the private sector alsocontributes to pauperization of government schools andmisallocation of public resources. It has already beennoted in the earlier sections that the contribution of theprivate sector to public education in the form ofvoluntary donations and endowments is very small, andfurther that this share is rapidly declining. Given suchevidence, it would be unrealistic to assume that theprivate sector in education would provide any financialrelief to the government.

The unaided primary schools do provide some finan-cial relief, but at huge social and economic cost. Theadverse effects include accentuating dualism, elitism,and class inequalities. Tilak (1994b) has analysed thevarious characteristics of private versus public schoolsin India, and has found that the private schools cater tothe needs of the rich only, their quality of education isnot necessarily superior to that of state-run schools, andthere are no equity-oriented programmes in these schools.

11 In fact, it may not be appropriate to refer to such schoolsas 'private' schools.

GovernmentNumber of

a Given

Andhra Pradesh

Arunachal Pradesh

Assam

Bihar

Goa

Gujarat

Haryana

Himachal Pradesh

Jammu & Kashmir

Karnataka

Kerala

Madhya Pradesh

Maharashtra

Manipur

Meghalaya

Mizoram

Nagaland

Orissa

Punjab

Rajasthan

Sikkim

Tamil Nadu

Tripura

Uttar Pradesh

West Bengal

Chandigarh

Delhi

Pondicherry

All India

TABLE

Assistance20.16to Private\ Schools

Private Schools—ExpenditureLevel of Education

Governmentassistant*

1989-90

8.3

-

1.5

0.0

0.0

0.0

1.0

0.0

0.0

3.8

53.8

2.2

0.1

4.6

69.6

32.6

0.6

27.9

0.5

45.6

0.5

80.2

0.0

91.5

0.0

4.5

72.4

0.0

27.4

1995-6

1A

-

1.2

0.0

0.0

0.0

1.2

0.1

0.0

1.5

55.9

5.9

0.1

12.6

28.8

17.3

0.1

1.8

3.6

1.6

0.9

31.7

0.0

87.7

95.1

0.0

0.0

0.0

25.9

(Revised)

andon

% of privateschools'+(1993)

Primary

4.19

1.15

0.21

0.59

4.15

1.40

0.82

0.53

0.28

1.73

59.54

1.65

4.67

16.71

22.30

10.51

1.82

0.76

0.53

1.04

0.38

16.17

0.64

1.65

7.96

0.00

2.76

1.13

3.94

' Middle

7.96

2.20

3.38

1.82

16.38

5.62

1.70

2.69

0.95

11.28

65.83

3.27

6.04

23.50

91.55

39.75

14.08

5.16

2.01

3.17

0.00

32.94

1.15

14.26

73.95

0.00

11.93

7.95

10.71

Note: * as per cent of total government expenditure on Educationat the given level.+ as per cent of all schools.

Source: Analysis of Budgeted Expenditure on Education 1989-90to 1991-2 and 1995-6 to 1997-8, Minsitry of Human ResourceDevelopment, Department of Education, New Delhi; 1991-2 and1995-6 to 1997-8, Minsitry of Human Resource Development,Department of Education, New Delhi; 1986-7 and 1990-1 to1992-3, Minsitry of Human Resource Development, Departmentof Education, New Delhi.

It has earlier been found that the effects of privateschools on income distribution in society are so severethat they even outweigh the positive effects of the vastpublic (government) school system, the net effect therebybeing significantly negative.

The private sector is slowly but steadily growing insize, though its present size is still very small. It isinteresting to note that voluntary contributions to gov-ernment institutions have quite significantly come down,and at the same time the number of profit-making privateinstitutions has increased. These trends reflect a shiftfrom motives of philanthropy and charity on the part ofprivate enterprise to profit and greed.

Lastly, the size of private sector is very small, thoughit is causing significant distortions in the pattern offinancing education. At the same time, its relative sizecannot increase significantly, as the benefits attached toprivate schooling are mostly due to scarcity of places inprivate schools, and get reduced with expansion of theprivate sector. It has also been found that the privatesector has already reached 'optimum' levels in India, the'optimum' levels being defined in terms of the share ofthe private sector in developed countries like the US.

CONCLUDING OBSERVATIONS

The Constitutional Directive of UEE in India is stillelusive, even four decades after the expiry of the deadlineprescribed by the Constitution. It is feared that unlesssufficient resources are devoted to elementary education,and meaningful strategies are adopted, the goal mightremain unaccomplished. In this chapter a quick reviewof a few key dimensions of financing elementary edu-cation has been attempted. It should be seen as a modestattempt to present an analytical and descriptive reviewof major issues in financing education in India. Broadtrends in financing education in India are outlined, andthe policies discussed. Squeezing data from differentsources, an elaborate statistical profile has also beenattempted. For this purpose a few important issues havebeen selected, and on each issue empirical evidence ispresented, and the available research is briefly surveyedto highlight the gaps in research and knowledge. Butneither are the issues selected exhaustive, nor is thediscussion on them in-depth.

The rationale for financing of education is clear. Botheconomic theory and empirical evidence on returns toinvestment in education and distribution benefits ofinvestment in education necessitate financing of educa-tion. The recognition of the investment nature and thepublic good characteristic of education are expected toinfluence the policies and pattern of financing educationpositively and significantly. The role of the governmentis found to be justifiably crucial in funding education inIndia.

Despite recognition of education as an investment, andas a 'crucial investment, for national survival' by theGovernment of India, the pattern of allocation ofresources to education is far from satisfactory, judgedin terms of adequacy, efficiency, and equity. The priorityaccorded to education in the Five Year Plans, totalgovernment budget expenditures, and expenditure inGNP need to be improved. There are signs of improve-ment in intra-sectoral allocation of resources in favourof elementary education.

The beginning of the 1990s is marked by a fewsignificant developments in the socio-economic spheresof the developing countries of the world. The WorldConference on Education for All (Jomtien Conference)held in Jomtien, Thailand, in March 1990 has made afew significant contributions in the form of (i) recogni-tion of importance of education for development and(ii) correspondingly a revival of commitment of thegovernments, the internal organizations, and the societiesat large to education in general and to primary educationin particular. In a sense, governments became moreserious with the goals of EFA.

Parallel to this, unfortunately the 1990s also markeda beginning of serious economic problems in most de-veloping countries, necessitating adoption of stabilizationand structural adjustment reform policies. The economicreform policies had a serious adverse effect on publicexpenditures in general, including education. Publicbudgets for education, including elementary education,began to seriously suffer. The social safety net programmesand corresponding flow of foreign aid to primary edu-cation mitigated the adverse effects of economic reformpolicies on primary education, but only to a certainextent. As a result, today we find mixed trends in publicfinancing of education in many developing countries.

India is not an exception to these global trends.Though the public expenditures on education, and alsoas a proportion of the government budgets showed anincrease in the 1990s, public expenditures on educationas a proportion of national income declined steeply fromabove 4 per cent to much below 4 per cent. Governmentexpenditure on elementary education as a proportion ofnational income also declined from 1.6 per cent in1990-1 to 1.4 per cent in 1996-7. In the last couple ofyears, allocations to elementary education have in-creased. But a substantial part of the increase in outlayfor elementary education is accounted for by externalaid, leading many to warn that the growth in publicexpenditure on elementary education is largely 'bor-rowed growth.'

The need to enhance the levels of funding elementaryeducation is obvious. It is estimated that realization ofthe long-cherished goal of UEE requires additionallyRs 137 thousand crore in the next ten years—aboutRs 14 thousand crore a year, or on average about 0.7per cent of national income per annum. This does notseem to be an unachievable target, nor is it unaffordable.At the end it may, however, be noted that financesare only a necessary, but not a sufficient, condition forachieving UEE in India.

The issue of mobilizing additional resources foreducation is also briefly discussed here. First, it isconcluded that as far as school education, specificallyelementary education—a 'pure public' and 'merit' good-is concerned, there are no magic solutions. The govern-ment has to 'generously' finance education. Effortsto augment non-government resources may be restrictedto higher education. Additional resources that can begenerated from the community for financing schooleducation may be viewed as supplementary resources andthe government should assume complete responsibility offunding. There are a few developments taking place infunding school education. Two important developmentshave been reviewed: privatization and international aid.Both have their limitations. The former accentuates

socio-economic disparities besides leading to the enrich-ment of the private sector and the pauperization ofgovernment schools, and the latter cannot be an effectivesolution even if associated anomalies can be eliminated.A strong political commitment to finance the educationsector liberally from domestic resources seems to be theonly alternative.

To conclude, the new economic policies initiated in1991 that involve short-term stabilization and long-termstructural adjustment policies in India will, it is feared,lead to immediate cuts in public budgets for education,as happened in several developing countries that adoptedthese policies, as these policies clearly involve reductionin public expenditures and deficits, and in the long runthey may result in a drastic change in public policies onfinancing of education. The higher education sector inIndia has already experienced drastic budget cuts. It isfeared that primary and elementary education mightalso suffer. However, the DPEP, being launched withexternal assistance in several states, it is hoped willprovide some sort of protection to primary educationfrom the budget squeezes. Nevertheless, the financialcrisis in education is transparent, and it is forecasted tocontinue.

The need for strengthening the resource base foreducation is obvious. However, the choices seem to belimited as far as school education is concerned. Giventhe Constitutional Directive, and other considerations,the government should continue to take on completeresponsibility of financing elementary education, andother sources can only supplement governmental efforts.There is need to improve the overall allocation patternin financing education in India.