Union Budget 2007-08
How to reap India's demographic dividend
With India hosting the world’s largest population of children estimated at 415 million,
Dilip Thakore presents a detailed plan to slash wasteful government expenditure and redeploy savings into the neglected education and healthcare sectors It’s a four-decade-old promise honoured more in the breach than observance. Year after year on while presenting the Union budget on February 28, successive finance ministers of India have made the ritual promise to make every effort to raise the national (Centre plus states) budgetary annual outlay for education to 6 percent of GDP (gross domestic product). This was recommended by the first National Commission on Education (aka the Kothari Commission) way back in 1966. Yet not once in the past 40 years has the combined annual education expenditure of the Central and state governments exceeded 3.5 percent of GDP.The consequences of this continuous, collective failure have been disastrous. India has the largest child population worldwide with 415 million citizens being enumerated as below 18 years of age in the last Census of India (2001). If this massive demographic endowment of post-independence India had been adequately educated and/ or vocationally trained, it would have transformed the Indian economy into a powerful engine of industrial growth, and pitchforked it into the very forefront of developed nations of the contemporary world. Yet currently India is ranked 126th of 177 countries in the Human Development Index of the UNDP (United Nations Development Programme), and over 300 million adult citizens of this high-potential republic which half a century ago was expected to serve as an exemplary trail-blazer for the newly-liberated post-colonial third world, are comprehensively illiterate and live in abject poverty on less than $ 1 per day. Another 380 million are only marginally better off and eke out bleak lives on $ 2 (adjusted for purchasing power parity) per day.
Worse, decades of neglect and under-investment has ravaged the education system and left it in a shambles. According to the PROBE (Public Report on Basic Education) 1998 which focused on infrastructure deficiencies in the four north Indian BIMARU (Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh) states, which together host 35 percent of contemporary India’s 1 billion population, 20 percent of primary schools in these states don’t have a proper building, another one-fifth are single-teacher, multigrade institutions, 58 percent don’t provide drinking water and 70 percent are bereft of toilets and sanitation.
Although a subsequent Annual Status of Education Report (ASER) 2005 of the Mumbai-based NGO Pratham, which surveyed a representative sample of primary schools in 485 (of a total of 603) districts countrywide, indicated considerable improvement in drinking water and sanitation provision, it is pertinent to bear in mind that ASER 2005 presented an all-India, nationwide snapshot. There is no reason to believe that the primary education infrastructure in the laggard BIMARU states has improved. On the contrary media reports indicate that under the rule of divisive caste-based parties which are ensconced in seats of power in these benighted states, the education system has gone from bad to worse.
Glaring infrastructure deficiencies and neglect of actual teaching-learning in India’s classrooms explains why of the 200 million children enrolled in the nation’s 900,000 primary schools at the start of every academic year, a massive 53 percent drop out before reaching class VIII. Of the remaining 100 million, because of insufficient secondary schools (133,000) and over-crowded classrooms, only 33 million complete class X, and half that number finish higher secondary education (class XII). Little wonder that only 10 million (equivalent to a mere 9 percent of Indian citizens in the age group 18-23) make it into tertiary education as against the norm of 40-50 percent in the industrial nations of the northern hemisphere. Moreover while a reported 70 percent of school leavers in Germany enroll for vocational education programmes, in India, only 1 percent of school leavers sign up for vocational study courses, if at all they are available. It’s no surprise therefore, that the Indian economy which for the first time in its history is recording unprecedented 7-8 percent annual rates of economic growth following its liberalisation in 1991, is experiencing an unprecedented shortage of skilled personnel which has driven industrial wages and salaries sky high, deepening the traditionally iniquitous divide between relatively better educated urban and largely under-educated rural India.
Against this backdrop of masterly inactivity of successive governments and finance ministers in the matter of addressing the national education deficit, EducationWorld constituted a think tank of knowledgeable economists comprising Dr. S. Mahadeshwaran, professor of economics of labour and education at the Institute for Social and Economic Change (ISEC, estb. 1972), Bangalore; Sunil Bhandare, former economic advisor to the Tata Group of Companies (1992-2001) and currently professor-in-charge of the research cell at the Sinhagad Institute of Management, Pune and S.V. Raju, convenor of the Mumbai-based Indian Liberal Group, to advise this publication on ways and means to formulate an alternative pro-education Union budget, which accords top priority to doubling the annual outlay for education, raising it to the 6 percent of GDP benchmark.
In this connection while it is true that raising the annual outlay for education from the current 3.5 percent of GDP to 6 percent is the joint onus of the Central and state governments, we believe it is necessary and possible for the Central government to quadruple its outlay for education from the Rs.25,541 crore budgeted for 2006-07 to Rs. 100,000 crore in fiscal 2007-08. In this feature our intent is to suggest alternative means by which it is possible to augment the Central government’s budgetary and extra-budgetary outlay for education by Rs.74,459 crore during the course of the fiscal year commencing April 1, 2007. We believe that the Union government has sufficient income streams, some of which could be drawn upon to deploy resources into strengthening and augmenting the education infrastructure. It is also our belief that it is imperative to apply the logic of supply-side economics to sharply improve learning outcomes in the nation’s primary, secondary and tertiary institutions of education.
"Never before has India been so fortuitously placed to explore and exploit the advantage of demographic transition than at present. The median age of an Indian in 2020 will be only 29 years, compared to 37 years in China and the US, 45 in Western Europe and 48 in Japan. Even the latest World Development Report 2007 highlights India’s demographic window of opportunity till 2035. But leveraging this demographic advantage requires capacity building efforts — in terms of infrastructure, technology and especially manpower development. And manpower development can only be driven by education and more education. Unfortunately, this sector has been neglected for several decades for want of adequate funding by Central and state governments. It is therefore imperative for the finance minister to restructure budgetary priorities decisively in favour of education by formulating innovative strategies of expenditure reform in the 2007-08 budget," says Sunil Bhandare.
It has always been the contention of EducationWorld since it was launched seven years ago that the fundamental infirmity of the Indian economy is warped expenditure priorities of government rather than inadequacy of resources per se. Therefore if Union finance minister P. Chidambaram recasts the Union budget 2007-08 scheduled to be presented to Parliament on February 28 and dramatically quadruples the Centre’s allocation for education to Rs.100,000 crore, state governments will follow this good example and between them mobilise the remaining Rs.100,000 crore required to raise the national outlay for education in 2007-08 to 6 percent of GDP, with enough left over to double the allocation for the health sector (which is intimately connected with education) to 3 percent of GDP. Therefore in a departure from budget presentation practice while suggesting ways and means to transform the Union budget 2007-08 into the most pro-education resource allocation exercise in Indian history, we first address the resource mobilisation and taxation side to raise an additional Rs.74,459 crore for redeployment into the education sector.
Resource mobilisation for a pro-education budget
In our opinion the budgetary allocations of the following sectors of the Indian economy urgently need to be reviewed and offer considerable opportunity for pruning and redeployment of savings into the social sector, particularly education and health.
D
efence. For fiscal 2006-07 the budgetary allocation for defence declared in the Union government’s budget speech was Rs.89,000 crore. However if defence pensions, the annual budgets of para military forces, coast guards, border fencing, nuclear establishment, debt servicing (including rupee debt payable to Russia) is added to this budgeted amount, a sum of Rs.109,195 crore — almost equivalent to the national (Centre plus states) outlay for education (Rs.110,000 crore) — is spent on defence. Admittedly with a standing army of over 1 million, a huge coastline to protect and a rapidly ageing air force, it is unreasonable to grudge our valiant personnel in uniform their modest emoluments.
Therefore over decades, rising defence expenditure has been transformed into a holy cow and sins of omission such as the pathetic inability of successive governments and the IFS (Indian Foreign Service) to negotiate peace with our neighbours — which would abate the arms race in the subcontinent — has been overlooked. However it is necessary to question whether a poor and ill-educated nation can afford a million men in uniform in perpetual training for war.
Therefore a beginning to reduce defence expenditure can be made in Budget 2007-08 by freezing the outlay at the current Rs.109,195 crore and simultaneously permitting the Indian Army which boasts some of the finest civil engineers in the country to raise a part of the resources it needs by undertaking infrastructure and civil engineering projects countrywide. Given this freedom, it could easily earn Rs.20,000-25,000 crore annually. There is a precedent: the Peoples Liberation Army in China runs over 15,000 business enterprises in that country and self-finances an estimated 50 percent of its annual expenditure. If this recommendation is accepted, the anticipated 10-12 percent increase of Rs.9,000-10,000 in Budget 2007-08 could be allocated for education.
F
ood. The Central government’s annual subsidy to the public distribution system (PDS) through which rice, wheat, sugar and cooking oil is sold to an estimated 300 million urban and semi-urban poor has climbed to a massive Rs.28,000 crore per year. The infirmity of the PDS is that it is a blanket subsidy scheme under which even the most affluent urban households are eligible for ration cards which permit the purchase of foodgrains and sugar at way below market prices.
The real beneficiaries of the PDS are unscrupulous grain merchants who by the simple expedient of cadging names of affluent local residents from electoral rolls, telephone directories etc, bribe PDS officials to issue ‘ghost’ ration cards in the names of affluent citizens who seldom patronise the PDS. This enables traders and merchants to divert massive quantities of foodgrains purchased from the Food Corporation of India into the open market. Therefore conversion of the PDS into a scheme targeting only the genuine poor would effect savings of at least 30 percent of the annual food subsidy of Rs.28,000 crore, i.e Rs.9,000 crore.
F
ertilizer. The annual subsidy to the fertilizer industry to enable it to provide subsidised urea, potassium and phosphates to the nation’s farmers aggregated Rs.16,254 crore in fiscal 2005-06. However it’s well-known that the fertilizer subsidy schemes which guarantee manufacturers a 12-15 percent return on investment, is an open and continuous scam because manu-facturers ‘gold plate’ manufacturing costs to rake in huge profits. If the fertilizer subsidy scheme is tightened to rigorously eliminate gold plating, an estimated Rs.3,500 crore (20 percent of the annual fertilizer subsidy) could be saved and transferred to the education budget.
"In the extensive regime of budgetary subsidies in India, the fertilizer subsidy is one of the worst-designed. It protects inefficiency in production and damages the long term productivity of land because of over-subsidisation of urea relative to other types of fertilizers. Numerous studies have shown that almost 60 percent of the benefit goes to the fertilizer manufacturing industry, and of the remaining 40 percent a large part accrues to rich farmers. Several attempts to rationalise fertilizer subsidies have failed because of strong opposition from the industry. If the forthcoming budget could rationalize this subsidy by limiting it to poor farmers it would not only ensure more balanced fertilizer usage, but also release substantial resources for investment in the education and health sectors," says Dr. D.K. Srivastava an alumnus of Allahabad and St. Andrews (UK) universities and currently director of the Madras School of Economics, Chennai
G
overnment salaries and establishment expenses. The actual payout by way of salaries, perquisites and establishment costs to India’s huge army of government employees estimated at 18 million countrywide, is one of the most well-kept national secrets. This is hardly surprising since it’s patently obvious that ministers and bureaucrats with their palatial bungalows, retinue of servants, motorcades and dedicated airlines, rule the nation in splendid style reminiscent of the days of the British raj.
With government accounting systems particularly opaque on the issue of government salaries and establishment costs, last year on behalf of EducationWorld, Dr. M.R. Narayan, professor of economics at ISEC (Institute of Social and Economic Change) Bangalore undertook a deep study to ascertain the establishment (pay, allowances and travel) expenditure of the estimated 3.84 million Central government employees, and discovered it was budgeted at a massive Rs.41,334 crore for fiscal 2006-07 (Rs.1.08 lakh per capita). Moreover the Union govern-ment pays out Rs.21,312 crore annually as pension to retired government servants. Against this, the Central government’s budgetary outlay for the education of India’s estimated 375 million school-age children was a mere Rs.25,541 crore (Rs.681 per capita).
Quite obviously no right-thinking person would recommend a reduction of the relatively modest (by global standards) remuneration of government servants. However there is a case for freezing their pay and allowances at current levels (particularly as almost all of them have secondary income streams) and substitute their annual increment in 2007 with a productivity-linked scheme (e.g number of files, applications etc cleared) drawn up by say, the National Productivity Council. Assuming an additional payout of Rs.5,000 crore will be budgeted in 2007-08 towards the Union government’s establishment expenses, Rs.2,000 crore can be saved and the remaining Rs.3,000 crore can be paid out as productivity-linked incentives to government servants.
Moreover by clamping down on ostentatious ministerial expenditure (motorcades, foreign junkets, private jets etc) another Rs.1,000 crore can be saved. By adopting a similar regime of austerity, state governments which have an additional 14 million civil servants could free up a massive Rs.10,000 crore for redeployment into their crumbling education and public health systems.
N
on-merit middle class subsidies. Perhaps the most inequitable drain on the public exchequer is of numerous hidden subsidies paid out by the Central and state governments to the nation’s uncaring, greedy middle and upper classes. Because of the laziness, inefficiency and corruption of the bureaucracy, post-independence India has become a byword for broad-spectrum, untargeted subsidies, theoretically available to all, but in reality hogged by the relatively affluent classes. Thus apart from the food and fertilizer subsidies cited above, electricity, water, cooking gas and higher education in urban India are also subsidised.
Since these blanket subsidies are provided by Central and state governments as well as public sector enterprises (cooking gas) and public utilities (electricity, water), it is difficult to trace or quantify them. However in 1998-99 a study conducted by the Delhi-based Institute of Public Finance and Policy estimated the aggregate nationwide annual payout under non-merit subsidies at 14.7 percent of GDP or a humungous Rs.500,000 crore per year. It is perfectly feasible to put the country’s 18 million bureaucrats to work hard at saving at least 10 percent of this amount for redeployment into the public education and health systems.
In particular there is a strong case for abolition of blanket subsidisation of higher learning which absorbs one-third of the annual national outlay for education (Rs.35,000 crore). Currently the 10 million (mainly middle class) students in tertiary level institutions pay barely 5 percent of their actual cost of tuition and even education in the IITs and IIMs, whose students command six figure salaries upon graduation, is heavily subsidised. As has been repeatedly advocated in EducationWorld, subsidisation of higher education needs to be abolished forthwith and replaced by a national higher education loans regimen. The rules of natural justice, equity and fair play mandate that privileged students in institutions of higher education pay full fees which also would enable colleges and universities to upgrade their infrastructure, facilities and attract top-ranked faculty.
A
nnual interest payout burden. Because of persistent deficit financing, especially on the revenue account (i.e excluding capital or assets-building expenditure), for several decades, the Union government has been misusing its power to borrow unlimitedly from the Reserve Bank of India, public sector banks, LIC, GIC etc by issuing treasury bonds. As a result its annual interest payout burden has risen to a massive Rs.139,823 crore. A greater proportion of the sums thus borrowed have been utilised to promote useless, loss-making public sector enterprises (PSEs) which require persistent budgetary support.
For several decades and in several avatars (Business India and Businessworld) your correspondent has been advocating global auctioning of loss-making PSEs to raise finances to retire the Union government’s massive public debt estimated at Rs.2473,262 crore to reduce the heavy annual interest payout burden and free up resources for public education. The market capitalisation of existing Central government PSEs is estimated at Rs.1000,000 crore.
If only 5 percent of equity in PSEs is sold away annually, the Union government could invest Rs.50,000 crore in education and health services every year while simultaneously reducing its annual interest payout burden. Admittedly the Congress-led UPA government at the Centre has attempted to enact this proposal which predictably, has been vetoed by its allied communist parties. However if the finance minister were to assure them that all proceeds of PSE disinvestment would be invested in development of education and health infrastructure facilities, the comrades would be confronted with an offer they couldn’t refuse!
"There is a huge wealth to be unlocked in non-performing, loss-making PSEs which are holding on to undervalued land and real estate and also in profit-making PSEs whose valuations in the stock market could rise significantly given the current level of investors’ confidence in the future of the Indian economy. We can certainly raise large sums of money through this process, of which at least one third could be utilised for repayment of high cost debt, and the balance could be used equitably in development of physical infrastructure and increased allocations for social sector commitments, and in particular, to the languishing education and healthcare sectors," says Sunil Bhandare (quoted earlier).
M
iscellaneous. The annual revenue of the Union government which aggregated Rs.563,991 crore in fiscal 2006-07 and is likely to rise to Rs.630,000 crore in 2007-08 is by any yardstick, a substantial amount, sufficient to meet the needs of the Indian economy. This writer and this publication have persistently contended that the problem with the Union government is not paucity of resources for investment in human capital, but its wasteful deployment into its establishment expenses and unmerited, unwarranted subsidies. Apart from the major heads recited above which offer considerable scope for savings and redeployment, the finance minister can raise additional resources for investment in human development by tightening up tax legislation and the tax collection machinery. According to the well-known Delhi-based economist Bibek Debroy writing in the Indian Express (January 15), numerous tax exemptions and concessions granted to individuals and corporates result in the Union government suffering an aggregate revenue loss of Rs.100,000 crore per year. Commencement of the process of tightening tax laws to eliminate exemptions and concessions in fiscal 2007-08 could raise an additional Rs.10,000 crore for investment into education and health.
Another resource mobilisation option available to the finance minister is to forthwith revoke the edict granting income tax exemption to corporates on revenue generated from exports which currently aggregates $100 billion (Rs.450,000 crore) per year. In particular India’s globally reputed and flourishing information technology (IT) companies which have benefited greatly from income tax exemption for over two decades, need to make a greater contribution to the public purse. To his credit N.R. Narayana Murthy, the iconic chairman and chief mentor of the blue-chip Infosys Technologies Ltd has conceded that given the spectacular global success of India’s top-ranked IT companies, it is high time the corporate income tax exemption status of all IT companies whose annual revenue exceeds Rs.50 crore, is revoked.
If this proposition is accepted, given that the aggregate annual revenue of India’s IT industry according to NASSCOM (National Association of Software and Services Companies) is $ 30 billion (Rs.112,500 crore), the finance minister could easily mobilise a sum of Rs.15,000 crore from the IT industry for investment into a dedicated education development fund. Moreover since the IT industry requires a steady flow of educated and trained manpower, it is likely to enthusiastically embrace this proposal.
Budget 2007-08
Raising resources for education | Rs.(crore) |
| Defence expenditure saving | 10,000 |
Food subsidy saving | 9,000 |
Fertilizer subsidy savings | 3,500 |
Government salary savings (Centre plus states) | 5,000 |
Non-merit subsidy cuts | 50,000 |
PSE disinvestments | 50,000 |
Tax exemption savings | 10,000 |
Taxation of IT industry | 15,000 |
Total | 152,500 |
Reallocation of budgetary savings into education
Post-independence India’s education system has been given low budgetary priority and has been neglected for so long that it requires a massive regimen of financial injections and careful monitoring to ensure that investments made in the system result in actual, measurable development of the nation’s abundant human capital. Inevitably opinions on investment priorities and options will differ and it’s possible that a better and more refined investment plan than suggested hereunder will emerge from a national debate on the subject. However it is important that early closure is applied to debates and as is customary, the search for perfect solutions must not delay urgently needed investments in infrastructure and maintenance of the country’s pitifully decrepit public education — primary, secondary and tertiary — and health service sectors. The guiding principle for resuscitation and reinvigoration of the education system should be that all additional resources invested — even sub-optimally — contribute to the greater good of society.
While it’s true that raising resources for education (and health) from within the budget by redrawing expenditure priorities in favour of developing the nation’s human capital is by no means a facile endeavour, and will require a radical mindset change within government and the establishment including the middle class which has become accustomed to a wide range of non-merit subsidies, there’s no gainsaying that it’s feasible. If all the modest savings under the various heads mentioned above are decreed by the finance minister on February 28 — and the heavens won’t fall if they are — are aggregated, a corpus of Rs.152,500 crore, equivalent to less than 5 percent of GDP would be created for investment in the country’s public education and healthcare (two sides of one coin) systems. Guidelines for sectoral deployment of an additional Rs.100,000 crore by the Union government — which would almost double the annual investment in education from the current 3.5 percent of GDP to the 6 percent recommended by the Kothari Commission in 1966, are given hereunder.
P
rimary education. Currently there are an estimated 900,000 primary schools in India, of which 85 percent (765,000) are Central or state government owned and managed. Lack of proper buildings, insufficient teachers etc apart, the greatest lacuna of government schools is lack of toilets, especially for girl students. Therefore an immediate allocation of Rs.5 lakh should be made to the School Development Monitoring Committees recommended by the model Right to Education Bill 2006, for the express purpose of building toilet facilities for students in all government primary schools, which is a prime cause of mass women’s illiteracy in India. This allocation will absorb Rs.38,250 crore.
Moreover the Union budget should make provision to add one additional teacher paid an annual remuneration of Rs.100,000 in each of the 765,000 government primary schools country-wide (Rs.7,650 crore). This will abate the number of single teacher multigrade schools and improve teacher-pupil ratios in the country’s classrooms.
S
econdary education. Perhaps the most valuable legacy endowed by the late prime minister Rajiv Gandhi (I944-91) upon the nation is the 551 Jawahar Navodaya Vidyalayas which are CBSE-affiliated class VI-XII boarding schools delivering free-of-charge secondary education to meritorious rural children. A class apart from rundown state government schools, these institutions administered and funded by the Union government funded Navodaya Vidyalaya Samiti, deliver high quality academic and extra-curricular education on a par with CBSE and CISCE affiliated private sector schools. Over the two decades past, the JNVs have acquired a good reputation for the quality of secondary education provided to 150,000 students, whose passage they have facilitated into institutions of higher education and later into government and industry. In short, the JNV experiment has proved a success and needs to be replicated and accelerated.
Therefore it is proposed that one new JNV which will provide thoroughly contemporary education to 500 rural students is constructed at a liberal cost of Rs.10 crore in each of India’s 603 administrative districts. This will require a Union budgetary outlay of Rs.6,030 crore. Moreover Budget 2007-08 should also provide a sum of Rs.2 crore to each new JNV towards administrative expenses and student freeships (Rs.1,206 crore).
T
ertiary education. As recounted above
in passim, a factor which is seriously hobbling the orderly growth and development of higher education in India, is government domination of this sector which has resulted in blanket over-subsidisation of tuition fees frozen for several decades. Recently Montek Singh Ahluwalia, deputy chairman of the Planning Commission which is in the process of formulating the Eleventh Five Year Plan (2007-12) awoke to the reality that students in India’s 17,600 colleges and 355 universities pay barely 5 percent of their tuition cost. This situation is untenable and iniquitous because the recipients of these massive subsidies are mainly middle class students who can easily afford higher tuition fees, and afford to pay back the cost of their higher education once they start working. Therefore there is an urgent need to sharply reduce subsidies to improve the fee incomes of institutions of higher education and enable them to upgrade infrastructure and improve faculty remuneration to attract top-rank talent into teaching and research.
Moreover one of the great drawbacks of the tertiary education system is that it is able to accommodate only 10 million students constituting a mere 8-9 percent of youth in the 18-23 age group (cf. 81 percent in the US). Consequently now that the Indian economy has experienced a great leap forward from the so-called Hindu rate of growth (3.5 percent per anuum) and is expanding at 7-8 percent annually, Indian industry is experiencing an unprecedented shortage of trained personnel. Therefore it would serve the national interest if one new IIT (Indian Institute of Technology) is promoted in each state (29) and four Union territories of India.
India’s seven IITs are globally renowned institutions with reputations to lose. Therefore the new IITs need to be of a comparable standard and well-equipped with labs, libraries and research facilities, requiring an investment of Rs.120 crore each. This will require an allocation of Rs.3,960 crore. However as they should be mandated to charge the actual cost of tuition (with long-term loans made available to students), they won’t require additional allocations for administration, maintenance etc. Likewise for the same reasons and at the same cost, an additional 33 IIMs (Indian Institutes of Management) need to be promoted.
V
ocational education. One of the most glaring infirmities of post-independence India’s education system is its persistent neglect of vocational education. Whereas in a large number of European countries, notably Germany, over 80 percent of school leavers enroll in government-funded vocational programmes to learn trades such as plumbing, masonry, iron mongering, automobile mechanics, electrical repairs and maintenance etc, in India a mere 2 percent of school leavers (1-1.5 million) enroll for VET (vocational education and training) programmes.
Contrary to academic opinion, this is not because of popular aversion to training for blue-collar jobs as much as it is to the massive shortage of VET institutions. Although the country’s 5,100 Industrial Training Institutes (ITIs) boast an aggregate enrollment of 400,000 students, their annual output of trained technicians is too meagre for the needs of the Indian economy, growing at the fast clip of 7-8 percent per year. Moreover the large number of untrained plumbers, motor mechanics, electricians, carpenters, masons etc doing slapdash work are inflicting damages of billions of rupees annually upon the Indian economy.
In the circumstances, it is an urgent national priority to establish a spanking new, fully equipped vocational training institute in all of the country’s 603 administrative districts, for which a provision of Rs.6,030 crore should be made in Budget 2007-08. Moreover since these institutes will need to provide highly subsidised education, they should each be allocated Rs.5 crore per year towards administrative, faculty and freeship expenses. Together these provisions will absorb Rs.9,080 crore.
Budget 2007-08
Proposed allocations for education | Rs. (crore) |
Toilet blocks for 765,000 government primary schools | 38,250 |
Additional teacher in all government primary schools | 7,650 |
603 JNV (Jawahar Navodaya Vidayalaya) schools cost of construction | 6,030 |
New JNV operational subsidy @ Rs.2 crore each | 1,206 |
33 IITs (Indian Institutes of Technology) construction cost @ Rs.120 crore each | 3,960 |
33 IIMs (Indian Institutes of Management) construction cost @ Rs.120 crore each | 3,960 |
603 VET (Vocational Education and Training) institutes @ Rs.10 crore each | 6,030 |
New VET operational subsidy @ Rs.5 crore each | 3,015 |
Proposed National Scholarship Loans Fund corpus | 30,000 |
| |
Total | 100,101 |
Aggregated, the proposals to fashion India’s most pro-education Union budget will release an additional Rs.152,500 crore for investment into education infra-structure, institutions and facilities which will more than quadruple the Central government’s investment in education of Rs.25,541 crore in 2006-07. Although when viewed against the historical precedent these resource mobilisation proposals for developing the nation’s long-neglected and abundant human resource pool may seem radical, it is pertinent to bear in mind that they require a modest realignment of within-budget spending priorities rather than additional taxation (see box p.30). Therefore they are unlikely to disturb the equilibrium of the traditional budget formulation process. Moreover it should be noted that the aggregate sum proposed to be allocated for primary, secondary, tertiary and vocational education development in Budget 2007-08 is Rs.100,101 crore, which requires mobilisation of an additional Rs.74,560 crore. After making a provision of a nominal Rs.30,000 crore towards creation of a National Scholarship Loans Fund (together with public sector banks), the remainder Rs.52,000 crore could be allocated to the national healthcare sector in which annual expenditure for public health will triple to almost 3 percent of GDP as a consequence. Unfortunately constraints of time and space don’t permit recommendations to efficiently deploy the additional healthcare outlay. This task should be entrusted to a specially constituted task force with the brief to devise a child-friendly national programme, because education and healthcare are deeply connected.
"The government’s annual education expenditure as a percentage of GDP has never risen above 4.3 percent of GDP, despite the target of 6 percent having been set as far back as 1966 by the Kothari Commission. Now that India’s GDP is growing at a much higher rate, immediate action on the expenditure side of budget is required to find the money to reach this target. With almost 97 percent of the Centre and states’ annual expenditure consumed by way of teacher and staff salaries, there’s an urgent need to mobilise additional resources for education infrastructure and capacity creation. The proposals made by EducationWorld may seem radical, but they are rational and feasible and provide a valuable framework for public debate, discussion and refinement," says Dr. S. Mahadeshwaran professor of economics of labour and education at the Institute for Social and Economic Change, Bangalore.
Certainly it is readily conceded that the proposals made herein for transformation of Union Budget 2007-08 into the most education and human capital development- friendly in Indian history, are less than perfect. Nevertheless they constitute perhaps the first detailed plan to slash wasteful government expenditure to mobilise resources to reap 21st century India’s demographic dividend. I commend these proposals for the consideration of the finance minister, government, Parliament and the public.
With Hemalatha Raghupathi (Chennai) & Autar Nehru (Delhi)