The Efficiency Of Expenditure Indian Education System

Published Date: 02 Nov 2017

Abstract

This paper deals with efficiency of the big bucks which is spent on the Indian education system. This paper investigates the public spending done on education in three stages of education: primary, secondary and higher education. India has made commitment to millennium developmental goal (MDGs) to universalize its primary education system. It checks the controlling factors such as per capita income, student teacher ratio. We find that primary educational spending has a negligible impact on enrollment rates, primary school transition rates, and performance of students on exams. Instead, districts with greater proportions of private primary schools are found to have consistently better outcomes. Higher per capita income is also correlated with some improved performance measures. Reducing the student-teacher ratio has no effect, a phenomenon possibly explained by rampant teacher absenteeism and lack of teacher motivation. Evidence from this study indicates that policymakers should seek alternatives to improve the quality of primary education, and determine how to achieve a more efficient and equitable allocation of educational funds.

Keywords

MDG, Education System, per capita income, student teacher ratio

Introduction

Education is the cornerstone of economic growth and social development. It creates greater social cohesion and a

strengthened foundation for democracy. At the aggregate level, a better-educated

workforce enhances a nation’s stock of human capital, which is crucial for increased

productivity and economic development (Barro, 1996; Romer, 1986; Lucas, 1988;

Ravallion and Chen, 1997). From an economic standpoint, education is associated with

high rates of return, both private and social.

Indian Constitution made a commitment to make primary and middle education free to children(age 6-14) in 1960 which is still to be implemented fully owing to scarce allocation of resources, political and social reasons.

India has over a third of the world’s children(6–11 year olds) out of school—around 40 million(UNESCO, 2003). Six states of India account for three-fourths of its children out of school (Andhra Pradesh, Bihar, Madhya Pradesh, Rajasthan, Uttar Pradesh and West Bengal)

A concerted effort to mobilize global efforts and resources to help developing

countries was formalized through the endorsement of the Millennium Development Goals

(MDGs) by 189 countries of the United Nations.2 MDG target 2A specifically

incorporates primary education by stating the following: "Ensure that, by 2015, children

everywhere, boys and girls alike, will be able to complete a full course of primary

schooling." Achieving this goal will be an enormously challenging task—given the fiscal crisis of the state, at both central/federal as well as provincial/state level.

Education has always been regarded as one of the leading determinants of economic growth. By promoting basic literacy and numeracy, primary education provides the

foundation for secondary and tertiary education, allowing for a more knowledgeable and

productive labor force. According to World Bank studies, primary education also has a

direct and positive impact on future earnings and farmer productivity, and bestows

significant health and poverty alleviation benefits (IEG, 2006). India has an average literacy level of just 61% and the largest absolute number of primary school age children out of school. The country is also home to more than a third of the global poor. Poor people facing

credit market constraints incur higher private costs of sending their children to school;

they can’t afford to educate their children unless schooling is subsidized (IEG, 2006).

Thus, government funding of primary education is crucial and necessary for greater

nationwide enrollment. As universal primary education was made a fundamental right in

2003, the Indian government provides free primary schooling through its flagship

program for the universalization of primary education, Sarva Shiksha Abhiyan. However,

the question is, does public provision of primary education actually improve enrollment

rates and learning outcomes?

Section 2

In a cross-sectional study of 50 developing countries, Gupta et al. (2002) use OLS

and Two Stage Least Squares (2SLS) to determine the overall level of public spending

and intrasectoral allocation. They use educational attainment measures like enrollment

rates in primary and secondary school, persistence through Grade 4, and primary school.

drop-out rates. The 2SLS technique is used primarily to address the problem of reverse

causality. For instance, higher spending on primary education may have a positive effect

on enrollment, but a higher demand for primary education, reflected in higher enrollment

rates, may also provide a push for higher spending. Most spending and other data are for

1993-1994; the expenditure data, in general, exclude local government spending. Gupta

et al. caution that this could be a major deficiency in countries that have devolved

expenditure responsibilities to lower levels of government. Overall, the authors find that

increased public spending on education and health care is positively correlated with

educational attainment and health status, with the evidence being stronger for education.

The authors further note that other socio-economic variables, such as urbanization and

per capita income, are important determinants of educational attainment Using panel data from 118 developing countries in 1971–2000, Baldacci et al.

(2008) estimate a non-linear model to capture the spending-outcome relationship. They

account for the interaction between education and health, and control for governance and

the higher growth attributable to better human capital and country income levels. The

fixed-effects model is utilized to make the most out of limited cross-country time series

data, and minimize distortions from heterogeneity. Baldacci et al. find strong evidence

that public expenditure on education directly results in increased better educational

outcomes.7 However, the positive effects of education spending are reduced in countries

suffering from poor governance. The authors further find that higher spending alone is

insufficient; other policy interventions, such as improving governance and taming

inflation, must be incorporated to achieve the MDGs. They warn that their results should be interpreted with caution given the wide variety of country circumstances and

nonlinearity in the effects of public expenditure. Specifically, health and education

spending would impact regions with different needs in non-homogenous ways. Baldacci

et al. conclude that additional research is needed to assess the impact of different

components of social expenditure.

At the state level, Kaur and Misra (2003) have done a similar empirical analysis for

fifteen states in India. They analyze the impact of public expenditure on primary and

intermediate, and secondary school enrollment rates, controlling for variables such as the

level of economic development and quantity of physical infrastructure in a state. Their

panel regression results from 1985-86 and 2000-01 indicate that public expenditure on

education has been generally productive, especially in poorer states. In terms of

outcomes, public expenditure has a greater effect on primary education than secondary

education. The role of public funding decreases at higher stages of education. The authors

speculate that one of the reasons for this could be that private funding plays a greater role

in secondary education. However, they caution that their study could be limited, as cross state analysis cannot directly assess and compare the micro-level outcomes of educational

expenditure, such as improvements in local school management across districts.

Overall, the literature on public expenditure on education shows a mixed bag of

results on educational spending and outcomes both within and across countries.

Theoretically, there are several reasons why such analysis may fail to detect a

relationship between spending on primary education and improved outcomes. Parental

investments of time or money, and a child’s intrinsic motivation may be more influential

than the effect of public expenditure (Appleton et al., 1996). Also, higher expenditures

may not translate into better educational outcomes in the absence of good governance or

if the expenditures are used ineffectively (Rajkumar and Swaroop, 2008). For increased

spending to improve primary school attainment, it must be accompanied by good

governance, detailed monitoring and evaluation projects, and supply-side interventions

such as building new schools and classrooms within easy walking distance (IEG, 2006).

Shifting educational responsibilities to lower and more localized levels, such as districtlevel

school-based management, can also improve educational outcomes. Activating

community support and involving parent in primary school management can be

advantageous as well.

III. Indian Education Programs and Progress

Educational provision in India, especially at the primary, intermediate and

secondary levels, is largely determined by the extent and quality of targeted

governmental spending. The central government and individual state governments share

the responsibility of funding public education. State governments further pass down most

of the educational planning and expenditure to the district-level; the extent of locally transferred responsibility differs by states. The three stages of school-based education are

primary, intermediate (middle school), and secondary (high school). Primary school

includes children of ages six to eleven, organized into grades one through five.

Intermediate pupils aged eleven through fourteen are organized into classes six through

eight, and high school students aged fourteen through seventeen are enrolled in classes

nine through twelve. Higher education includes technical schools, colleges, and

universities.

In terms of public expenditure, 3.5% of GDP was allocated to the entire education

sector in 2006. The state governments provide the major portion of the funds spent on

primary education. Table 1 shows that state governments contribute more than threefourths

of the total revenue expenditure on education in the country.

Table 1: Expenditure on education (2006-07: Revenue Account)8

Center States / UT (Union Territories) Total

Expenditure 311.7 1012.8 1324.5

(Rs. in billions)

Share with respect to

total (%) 23.5 76.5 100

Source: Government of India, Ministry of Human Resource Development

Table 2 compares fifteen major Indian states in terms of their expenditure on

primary, secondary (high school) and tertiary (university) education. Despite the evident

political commitment to education, we can see that public expenditure on different

education sub-sectors varies significantly between states. This phenomenon occurs

because the states have diverse social and political environments, and are at different levels of development. Also, since decentralization affects each state in a different way,

they accordingly allocate their budgets to the level of education that they deem the most

important for overall development. A striking similarity, however, that emerges from

Table 2 is that most states spend more on primary education than secondary or tertiary

education. This suggests that there is a shared understanding that there are increased

social rates of return associated with primary education, which in turn is aligned to the

MDG of providing universal primary education.

Table 2: Sectoral composition of total expenditure on education

According to the UNESCO Institute of Statistics, the number of out of school

children decreased from 30 million in 2000 to an estimated 9.6 million in 2007. This was

a significant achievement, largely due to the two decades of basic education programs

that expanded access to schools in India. However, there are still wide inter-state

disparities in the net enrolment rate (NER), which is defined as the number of students

enrolled in a level of education who belong in the relevant age group, as a percentage of

the population in that age group. An important goal of the National Policy of Education is to reduce the gap in NER across states.

India and World

India’s educational achievements have had mixed success. On the down side,

India has 46 per cent of the world’s illiterates, and is home to a high proportion of the

world’s out-of-school children and youth. Absenteeism and low accountability of

teachers is also perceived as a major problem across the country (Ramachandran 2005).

On a more positive note, it has made encouraging recent progress in raising schooling

participation (UNESCO). Table 4 presents India’s adult male and female literacy rates

alongside equivalent figures for its regional neighbors, as well as for countries in the

BRIC grouping (Brazil, Russian Federation, India and China) – countries with which

India is increasingly compared. While India does well compared to Bangladesh and

Pakistan, it falls substantially behind all the other BRIC countries and Sri Lanka, and is

also behind the average for developing countries. Indeed, it is striking that its overall

adult literacy rate is similar to – and female adult literacy rate lower than – that of Sub-

Saharan Africa. India’s male and female adult literacy rates are around 22 percent and

36.5 percent lower than those of China, another emerging "superpower". Further, India

lags behind the average global literacy rate by a little more than 21%.

Table 4: Adult and youth literacy rates around the world

Adult literacy rates (15+ years old)

Total Male Female

Bangladesh 42.6 51.7 33.1

Pakistan 49.9 63.0 36.0

Sri Lanka 90.7 92.3 89.1

India 61.0 73.4 47.8

China 90.9 95.1 86.5

Brazil 88.6 88.4 88.8

Russian Federation 99.4 99.7 99.2

World 82.2 87.2 77.3

Developing Countries 76.8 83.5 70.1

Sub-Saharan Africa 61.2 69.5 53.3

Source: 2000-2004 dataset from the Education for All Global Monitoring Report (UNESCO, 2006)

IV: Theoretical Framework

Two different models were useful to construct the model used in this paper. The

former by Gupta et al. (2002) examines the impact of public expenditure across countries,

while the latter by Kaur and Misra (2003) analyzes the impact of public expenditure

across states in India.

Gupta et al. use the following model to evaluate the effectiveness of government

spending on education and healthcare in a cross-sectional study across 50 developing and

transition countries:

Yi = f (X1i, X2i, Zi) where Yi is a social indicator reflecting education attainment or health status for acountry i, X1i the aggregate public spending on education or health care as a share of GDP; X2i is allocations to different programs within the sector (i.e., primary education

and primary health care) as a share of total sectoral spending; and Zi is a vector of

socioeconomic variables. Four measures of education attainment are used: gross

enrollment in primary and upper-primary education, gross enrollment in secondary

education, persistence through Grade IV, and primary school drop-out rates. The gross

enrollment rate (GER) represents the number of students enrolled in a level of education

as a percentage of total number of students of proper age for that specific level. The GER

measure includes under-age and over-age children, as well as grade repeaters.

Kaur and Misra use a similar model to evaluate the impact of public expenditure

across states in India:

Yit = f (Eit, GSDPit, Xit)

where Y is a social indicator, E denotes social sector spending, GSDP is defined in per

capita terms, X is the vector of other control variables. i denotes states in the sample, and

t denotes time period. The model is estimated for two measures of education attainment:

(a) gross enrolment in primary and secondary education and (b) gross enrolment in

secondary education.