The adult literacy rate in India is 81 percent, which is lower than the world average of 86. The employability of engineering graduates has been reported to be as low as 20 per cent. The employability of others, including management graduates, is also a major concern. The election manifesto promises lakhs of jobs but lakhs of people are unemployed. Did subsequent governments allocate insufficient resources to educate their people? Should the Union Budget be to blame?
The National Policy on Education (NEP) 1968 recommended spending 6 percent of GDP on education. NEP 2020 Recommend the same. Now, 6 per cent of GDP spends around Rs 14 lakh crore for 2021-22 looking at an estimated nominal GDP of Rs 232.15 lakh crore. The last Union Budget saw an allocation of around Rs 93,224 crore for education. The combined budget allocation of 25 major states of the country during 2021-22 is Rs 6.11 lakh crore. This is about 50 percent of the recommended amount. Who will fund this gap?
Can the Center bridge the budget gap?
States have not allocated funds in proportion to the NEP 2020 recommendation of 6 per cent of GDP. The Center has set a target of expenditure through NEP, but the expenditure has to be met largely by the states. It sounds a bit vague but it is so. The center has no GDP. The GDP of a country is nothing but the sum of the GDP of the states. So each state has to spend around 6 per cent of its Gross State Domestic Product (GSDP) and the Center can contribute as needed.
Calculations on the back of the envelope show that about 16 per cent of states spend less than 2 per cent of GSDP, 36 per cent spend between 2-3 per cent, 20 per cent between 3-4, 8 per cent. Spend between -5 percent. percent, and 12 percent between 5-6 percent. Only two states Bihar and Tripura spend more than 6 per cent of GSDP on education.
The Center does not have the resources to bridge such a huge gap. The Rs 6.11 lakh crore expenditure by the states leaves around Rs 8 lakh crore to be spent by the Center to meet the target of Rs 14 lakh crore. The total receipts in the Union Budget 2021-22 are expected to be Rs 19.76 lakh crore. Out of this, the interest payment cost is Rs 8.09 lakh crore and one has Rs 11.67 lakh crore left. If the Center spends Rs 8 lakh crore on education, then only Rs 3.67 lakh crore is left to spend on defense, electricity, transport, health services, agriculture etc. of the country.
Each sector is expected to have a substantial allocation in the Centre’s budget, but resources are limited. How much can the country borrow to allocate more to these sectors?
Every state government is promising to provide smartphone tabs or laptops to the students. UP Government has started with Digi Shakti Portal and Digi Shakti Study App. There is a need to encourage such initiatives of the states through budgetary support from the Center to create good quality content for the users.
edtech revolution
There is an edtech revolution in the country. NEP 2020 also encourages a symbiotic relationship between edtech service providers with traditional schools and universities. The pandemic helped edtech grow and, in turn, it enabled learning through social distancing. Although GST comes under the purview of the GST Council, the budget can help equate these companies with traditional education providers. Less than 18 per cent GST will benefit the learners.
Credit growth (YoY) in India stands at 6.6 per cent as of December 2021. It has remained low for quite some time. Finance minister should take advantage of this opportunity to provide interest subsidy to the people who are seeking education loan. The move will improve credit growth, profitability of banks and more learning for the people. Subsidy should be available to the borrowers for education through edtech companies.
– Written by Professor VP Singh, Professor of Economics and PGDM Program Director, Great Lakes Institute of Management, Gurgaon
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