Cover Story

Budget 2007-08

Illusory bonanza for Indian education

Given the unprecedented GDP growth of 9.2 percent in 2006-07 which hugely boosted tax receipts, the finance minister had a great opportunity to make a decisive breakthrough in education. Unfortunately there is a massive mismatch between the legitimate needs of India’s 450 million children and the education provision in Budget 2007-08. Dilip Thakore reports

It was a historic opportunity to decisively shape the destiny of the world’s most populous democracy and put the growth engine of 21st century India firmly on the rails. On February 28 when he rose before Parliament and a national television audience estimated at 108 million to present his sixth Union budget, finance minister P.C. Chidambaram had an unprecedented opportunity to present an authoritative blueprint for the development of the nation’s most abundant and high-potential resource — its 450 million children. But he blew it.

Budget 2007-08, of which there were universally great expectations is a national downer — on a par with India’s cricket World Cup loss to Bangladesh. It has disappointed almost everybody, including political parties allied with the Congress-led United Progressive Alliance coalition government which is midway through its five-year term of office at the Centre. The widespread disillusionment with Chidambaram’s latest set of budget proposals in which he has indicated how the UPA government will spend a massive sum of Rs.680,521 crore for national growth and development in this year ending March 31, 2008, is the natural fallout of its multiplicity of objectives and lack of focus.

Although in his 90 minute and 112,800 word budget address to Parliament, Chidambaram proclaimed that agriculture, which supports 115 million farming families averaged a growth of a mere 2.3 percent per year during the Tenth Plan period (2002-2007), "must top the agenda of policy makers and must hold the first charge of our resources", and that "in allocating resources school education must have primacy", the Union government’s unprecedented tax revenue bonanza has been distributed in dribs and drabs across a broad front. Consequently while formulating Budget 2007-08 Chidambaram has missed a great chance — given that the unprecedented GDP growth of 9.2 percent in 2006-07 hugely boosted tax receipts — to make decisive breakthroughs in agriculture and education. Or in any other sector of the economy, for that matter.

The almost universal disappointment with Budget 2007-08 is rooted in the reality that it is an unimaginative and conventionally opaque statement of the Central government’s taxing and spending plans for the next 12 months. Given that Chidambaram has presented six Union budgets, in one of which he famously admitted that "outlays don’t mean outcomes", he has also failed and neglected to restructure the budget formulation and presentation process so that the people get an idea of how the huge sum of Rs.581,637 crore which passed through the national exchequer last year, was spent in terms of outcomes and assets creation.

It is incontestable that transparent rendering of accounts is the precondition of the citizenry reposing faith that the nation’s finances are in safe and responsible hands. Instead Budget 2007-08 is a turgid financial statement of proposed sectoral outlays with no commitment to outcomes. It’s shocking and indicative of the mute passivity of the citizenry that while the Companies Act, 1956 has been repeatedly amended to compel corporates to disclose production and output data in extenso, there is no such obligation on the Union or state government budgets to account for expenditure incurred in the previous year in terms of output and/or outcomes. The promised outcomes budget promised by Chidambaram two years ago remains a pious intent.

Although your correspondent who has been advocating radical overhaul of the budget formulation and presentation process to reflect major sectoral outcomes and government accountability for over a decade is in a minority, a growing number of monitors of the socio-economic scene are beginning to express dissatisfaction with the opacity of government budgets. "Instead of focusing on quantum sectoral outlays, it is high time that Union and state government budgets provide a detailed review and social audit of what was achieved in the previous year. In fact it’s time the reality that budgetary increments without the audits and accountability only serve to corrupt the system, is acknowledged. This is one of the ironies that we have witnessed in the education sector. As budgetary outlays have increased and programmes proliferated, the system has gone into involution and the quality of teaching-learning has declined. Therefore there is an urgent need for citizens to insist that public audits are made for each programme and details are provided of how outlays have been spent with future allocations being tied to such reviews and audits," says Dr. A.R. Vasavi an alumna of Delhi and Michigan universities and currently professor of social anthropology at the National Institute for Advanced Studies, Bangalore.

Dr. M.R. Narayana, professor of economics at the Institute for Social and Economic Change, Bangalore (estb.1972) also deplores the calculated opacity of the Central and state government budgets. "The Union budget as it is presented together with 11 budget papers is too technical for lay people to understand. It is possible — and necessary — for the finance minister to provide an overview of the major outcomes attained in the previous year to boost public confidence in the budgetary process. In this regard the finance minister’s assurance about the preparation of outcome budgets by government ministries and departments is welcome. I hope he remembers this promise next year," says Narayana.

This call for transparency in the budget formulation and presentation process is highlighted by the self-congratulatory tenor of finance minister Chidambaram’s assertion in Budget 2007-08 that he has enhanced the Central government’s allocation for education by 34.2 percent to Rs.32,352 crore for the current year. Of this allocation more than half (Rs.22,143 crore) will be spent on boosting (secondary) school education — a 35 percent higher outlay. This incremental allocation for school education is overdue because a severe capacity constraint in secondary education is in the offing if the ambitious Sarva Shiksha Abhiyaan (SSA) which mandates compulsory primary education for all children, is even modestly successful. The current year’s outlay for SSA which is funded by a special 2 percent cess on all taxes is Rs.10,671 crore (cf. Rs.10,041crore in 2006-07).

There are several other commendable provisions for dissemination and upgradation of education in Budget 2007-08. The annual outlay for teacher training institutions has been increased from Rs.162 crore to Rs.450 crore; the mid-day meal scheme, now accessible by lower primary school children, has been allocated Rs.7,324 crore this year (cf. Rs.4,813 crore in 2006-07) to cover upper primary classes in 3,427 educationally backward blocks; Rs.750 crore has been provided towards a National Means-cum-Merit Scholarship Scheme which will bestow 100,000 students completing class VIII and topping a national test, scholarships of Rs.6,000 per year to persist with their education to class XII; an additional 55,512 habitations and 34,000 schools have been provided drinking water supply under the Rajiv Gandhi Drinking Water Mission at an outlay of Rs.5,850 crore and the provision for the Total Sanitation Campaign has been raised to Rs.954 crore (Rs.754 crore).

Moreover perhaps in response to this publication’s repeated pleas for greater investment in the vocational education infrastructure "to take advantage of the demographic dividend thrown up by an increase in the working age population", a token provision of Rs.50 crore has been made towards a Vocational Education Mission which is being strategised by the Planning Commission; and Rs.750 crore has been earmarked towards the modernisation of 1,396 government promoted ITIs (Industrial Training Institutes) which remain to be upgraded since their modernisation programme began in 2005 (see box).

Yet surely the erudite finance minister — reportedly a leading legal luminary in his own right — can’t be unaware that the despair of India’s farmers community is not credit unavailability but inability to service loans because of pathetically unremunerative prices of agriculture produce. In the circumstances the appropriate government response should have been to do whatever it takes — including massive incentivisation of the food processing industry — to prevent distress sale of agricultural produce which is the rule in rural India. Directing public sector banks to increase rural lending (which they do in the most insulting and paper-intensive fashion), which would drive farmers deeper into debt and the clutches of ruthless rural debt collectors, is unlikely to reduce the policy imposed misery of the nation’s farm communities.

Likewise there is a massive mismatch between the legitimate needs of India’s 450 million children and the provision made for education in Budget 2007-08. Over 40 years ago the high-powered First National Commission on Education (aka the Kothari Commission) made a strong recommendation that the annual government (Centre plus states) outlay for education should immediately be raised to 6 percent of GDP. For over four decades this target has never been attained despite every government in New Delhi and the state capitals paying lip service to this worthy cause. Similarly the CMP (common minimum programme) of the Congress-led UPA government which was sworn into office in May 2004 pledged that the incumbent government would ensure that the Kothari Commission’s recommendation would be given top priority. However government investment in education has never crossed 3.5 percent of GDP except in the First Plan period, way back in the 1950s.

In this connection it is pertinent to note that if annual official investment in education is approaching the 4 percent of GDP mark, state governments are contributing an aggregated 3 percent of GDP with New Delhi chipping in a mere 1 percent. The 34.2 percent higher allocation of Rs.32,352 crore for education trumpeted in Budget 2007-08 aggregates to less than 1 percent of GDP (Rs.3,717,500 crore in fiscal 2006-07). Therefore quite clearly, the onus is on the Central government to triple its annual expenditure on education so that the 6 percent goal recommended by the Kothari Commission is attained.

Although prima facie this seems a tall order, it’s not as difficult a proposition as made out by establishment apologists who perpetually plead resource constraints. It was precisely to take this standard excuse to deny justice and equity to the nation’s cruelly denied and short-changed children and youth head on, that on budget eve Education-World featured a detailed cover story entitled ‘Union Budget 2007-08 — How to reap India’s demographic dividend’ (EW February).

In this road-map feature we demonstrated how with mild pruning of defence expenditure, fertilizer, and non-merit subsidies; linking government salaries to productivity; disinvesting a tiny percentage of equity in public sector enterprises; plugging tax exemption loopholes; and modestly taxing the booming tax-exempt IT industry, the finance minister could have comfortably raised a massive Rs.100,101 crore for education with Rs.52,000 crore left over for investment in the worse neglected health sector.

Predictably neither the finance ministry, nor the country’s inert academic community reacted to this set of proposals while the nation’s greedy middle class battening on unmerited subsidies and supremely unconcerned about public education, completely ignored it. Regrettably middle class India is content with the iniquitous status quo under which the vast majority of citizens at the base of the social pyramid are denied basic education while it harvests a plethora of non-merit subsidies, particularly over-subsidised higher education. The largest item of expenditure recommended by EducationWorld was Rs.38,250 crore — more than the entire education budget of the Centre for fiscal 2007-08 — to build toilet blocks (at Rs.5 lakh each) in 765,000 government primary schools countrywide. This we argued, is necessary to prevent girl children in particular from dropping out of the education system (of the 200 million children enrolled in primary school at the start of any given academic year, over 53 percent drop out before reaching class VIII).

Moreover while the finance minister has promised to recruit 200,000 additional teachers and build 500,000 additional classrooms (and don’t expect any reference to this commitment in next year’s budget), EducationWorld’s alternative pro-education budget provided for the recruitment of 765,000 primary school teachers and construction of 603 (i.e one in each district) new Jawahar Navodaya Vidyalayas (JNVs) which are high quality free-of-charge class VI-XII rural boarding schools (at Rs.10 crore each) to add to the existing stock of 551 highly successful JNVs, and 603 new VET (Vocational Education and Training) institutes, apart from 33 (i.e one in each state and Union territory) new IIMs and IITs (at Rs.120 crore each). Quite clearly we believe that a massive rather than routinely incremental, resource mobilization and deployment effort needs to be made to reap the country’s demographic dividend in the foreseeable future.

Yet despite these seemingly radical investments in primary, secondary and tertiary education infrastructure, EducationWorld’s alternative pro-education Budget 2007-08 yields a sum of Rs.30,000 crore to be allotted towards building a National Scholarship Loans Fund which would begin the process of eliminating subidisation of higher education. In sharp contrast the best that the finance minister could do in Budget 2007-08 was to provide Rs.750 crore for a new Merit-cum-Means Scholarship for 100,000 exceptional children who persist with secondary education beyond class VIII. Moreover even after making all these relatively handsome provisions, EducationWorld’s alternative budget yields a surplus of Rs.51,000 crore for investment in the country’s pathetically inadequate health infrastructure (see box p.30).

Somewhat belatedly, the puerile inability of successive finance ministers to innovate radical interventions to develop post-independence India’s abundant human resource which has the potential to take on the world, is beginning to exasperate even the reticent tribe of economists. "I view the provisions made for education in Budget 2007-08 with mixed feelings. Most of the provisions introduced are small steps in the right direction. But they will take a long time to effect any substantial improvement. The bottom line is that not much has been added to the Centre’s education outlay. For instance the 1 percent cess for higher education is a positive step in the right direction but it won’t raise any significant amount. To mitigate earlier investment shortfalls, the task on hand is huge and complex — attainment of full literacy, reduction of secondary school dropouts, expansion of vocational education, to name a few urgent priorities. Against this the education outlay of Budget 2007-08 is very inadequate. We need other bold initiatives to raise urgently required resources for education," comments Sunil Bhandare, former economic advisor to the Tata Group of companies and currently research professor at the Sinhagad Institute of Management, Pune.

The repeated failure of successive governments and finance ministers at the Centre to provision allocations even remotely approximate to the education needs of India’s 500 million children and youth below age 25, is less attributable to paucity of resources than lack of will and poverty of imagination. According to economist Sunil Bhandare (quoted above) the current market capitalisation of publicly-funded public sector enterprises (PSEs) is over Rs.1,000,000 crore. Yet in Budget 2007-08, presumably because of the antipathy of the neanderthal Communist Party (Marxist) which supports the UPA government in Parliament to PSE equity dilution, there’s not a single word about public sector disinvestment to raise resources for vital development sectors such as education and health.

Similarly to keep the politically influential and articulate middle class happy, there’s no proposal in Budget 2007-08 to cut unwarranted middle class subsidies to release resources for priority sectors of the economy which would enable the vast majority at the bottom of the socio-economic pyramid to get a foothold on the ladder to self-attainment. On the contrary subsidy to the fertilizer industry described by Chennai-based Dr. D.K.Srivastava, director of the Madras School of Economics, as the "worst-designed" of all government subsidy schemes, has been increased in this year’s budget.

"Regrettably in a year characterised by unprecedented revenue buoyancy, the finance minister has formulated a pedestrian, run-of-the-mill budget. While the enhanced allocation for education is superficially impressive, this outlay is wholly unrelated to needs and standards required in Indian education. With India’s school system suffering the highest teacher-pupil ratios in the world, there is an urgent need for additional capacity creation. Simultaneously it is imperative to raise teaching standards in government and aided schools to CISCE and CBSE norms. This necessitates the induction of graduate teachers on a massive scale into these schools. But no meaningful provision has been made in Budget 2007-08 to meet these pressing needs of Indian education," laments Dr. A.S. Seetharamu, former professor of education at the Institute of Social and Economic Change, Bangalore and currently education advisor to the Karnataka state government.

Clearly with the Indian economy having expanded by an unprecedented 7.5 percent, 9 percent and 9.2 percent during the past three years ended March 31, 2007 and the Centre’s tax revenue by the finance minister’s own admission having risen by 19.9 percent, 20 percent and 27.8 percent over the same period, Chidambaram had a unique and unprecedented opportunity to present a bold and resolute Budget 2007-08 to actualise the UPA government’s oft-proclaimed ideal of inclusive growth. Moreover he had a great chance to make a historic and decisive intervention in favour of India’s uncomplaining children struggling to equip themselves to compete with their well-provided and well-educated foreign counterparts in the rapidly emerging global marketplace for goods, services and new ideas.

Instead perhaps unnerved by the electoral rout of Congress governments in the states of Punjab and Uttarkhand and an imminent drubbing in the heartland state of Uttar Pradesh (pop.166 million) which is scheduled to go the polls in April/May, Chidambaram and the Congress leadership opted for the soft option of a please-all Budget 2007-08, which doesn’t disturb the status quo. Therefore no effort has been made to reduce the revenue expenditure of government which has risen to a massive Rs.557,900 crore, lest self-centred political allies, bureaucrats and the myopic middle class become restive.

As a consequence the two-nations theory which distinguishes between fast-track urban India and stone-age rural Bharat is fast becoming reality. On the one hand there is the glamour and glitter of imperial Delhi, where daily tariffs of hotel rooms exceed the annual incomes of 300 million Indians and chic eateries charge — and abundantly receive — dinner prices equivalent to the monthly incomes of toiling rural families. On the other there is the languishing rural hinterland supporting 150 million households suffering severe deprivations of law, order, electricity, roads, communications and even the equality of opportunity that a minimally sustainable education infrastructure offers.

Against this backdrop of rising revenue expenditure of government which supports perquisites including sprawling air-conditioned offices, palatial homes, lengthening car convoys, private airlines, foreign junkets and servant retinues of government officials and India’s subsidies-addicted middle class, in his Budget 2007-08 address Chidambaram cruelly insinuated that the citizens of rural Bharat toiling without reward are victims of their own inertia. "If ploughmen keep their hands folded, even sages claiming renunciation cannot find salvation," said Chidambaram quoting first century (A.D) Tamil sage Tiruvalluvar.

The fault, dear finance minister, is not in them but in their benighted leaders, that they are perpetual underlings.

With Gaver Chatterjee (Mumbai) & Autar Nehru (Delhi)