EDUCATIONAL FINANCE
19.01 In this chapter, we shall examine a few major issues relating to the financing of education. These will mainly include a survey of the growth of educational expenditure in India in the post- Independence period and of the sources of educational finance. We shall also refer to the extent of financial resources likely to be available for education during the next two decades, their appropriate allocation to various sectors and priorities involved. The questions of fundamental importance that arise are
- What should be the total level of financial support for education at all levels to ensure achievement of national goals and rapid advancement of national economy, cohesion and security ?
- What judgment and guidelines can be formulated, and with what degree of reliability and confidence, about the distribution of funds between different levels or stages of education (including research) and different sectors within a level ?
- Although quality and quantity are inseparable, what proportions of the total resources should be broadly devoted to improvement of quality and consolidation and to the expansion of education ?
These questions, by their very nature, do not admit of precise answers because they are not questions in arithmetic or production engineering but in human dynamics involving complex sociological considerations. Difficulties really arise when one tries to give precise values to quantities which are essentially vague. However, if dealt with in the proper perspective, the exercise affords insight and helps the process of decision-making.
TOTAL EDUCATIONAL EXPENDITURE (1950-65) 19.02 The discussion may conveniently begin with an examination of the manner in which the total educational expenditure has increased in the post-Independence period. In 1946-47, the total educational expenditure in 'British' India was Rs. 577 million which worked out at only Rs. 1.8 per head of population. At the end of the Third Plan, the total expenditure on education is estimated at Rs. 6,000 million or
858 EDUCATION AND NATIONAL DEVELOPMENT 19.02
approximately Rs. 12 per capita (at current prices). The details will be found in Table 19.1.
TABLE 19.1. TOTAL EDUCATIONAL EXPENDITURE IN INDIA (1950-51 to 1965- 66)
1950-51 1955-56 1960-61 1965-66
(estimated)
1. Total educational expendi-
ture from all sources
(Rs. in millions) 1,444 1,897 3,444 6,000
2. Index of growth 100 166 301 524
3. Educational expenditure
per capita (Rs.) 3.2 4.8 7.8 12.1
4. Index of growth 100 150 244 378
5. Total national income
(at current prices) (Rs. in
millions) 95,300 99,800 141,400 210,000
6. Index of growth 100 105 148 220
7. National income per Capita
(at current prices) (Rs) 266.5 255.0 325.7 424.4
8. Index of growth 100 96 122 159
9. Total educational expenditure
as percentage of national income 1.2 1.9 2.4 2.9
10. Index of growth 100 158 200 242
First Second Third All Three
Plan Plan Plan Plans
11. Average annual rate of growth
of total educational expenditure 10.6% 12.7% 11.8% 11.7%
Source. The educational data for 1950-51, 1955-56 and 1960-61 have been taken from Form A of the Ministry of Education. Those for 1965-66 have been estimated in the Commission's Secretariat. The data relating to National Income are taken from CSO (the figure for 1965-66 is a rough estimate).
N.B. The total educational expenditure given here does not include:
(1) expenditure incurred by the guardians of the students on their education, except fees paid;
(2) the 'opportunity costs' which are defined as the forgone income which would have been earned by the students if they had engaged themselves in some direct or indirect productive activity instead of attending the school;
(3) the expenditure figures of unrecognized institutions;
(4) the expenditure on pensions due to retired employees of Government in the Education Department (inclusive of teaching and non-teaching staff); and
19.03 EDUCATIONAL FINANCE 859
(5) the expenditure on administration and other expenditure of private societies conducting educational institutions. it will be seen that, during the first three plans
- the total educational expenditure 'increased from Rs. 1,144 million in 1950-51 to Rs. 6,000 million in 1965- 66, which denotes a total increase of 424 per cent in a period of 15 years or a cumulative annual increase of 11.7 per cent. This has varied but little from plan to plan-it stood at 10.6 per cent in the First Plan, rose to 12.7 per cent in the Second, and dropped to 11.8 per cent in the Third.
- the total educational expenditure per capita rose from Rs. 3.2 at the beginning of the First Plan to Rs. 4.8 at the end of the First, Rs. 7.8 at the end of the Second and Rs. 12.1 at the end of the Third-an overall increase of 278 per cent;
- the total educational expenditure represented 1.2 per cent of the national income in 1951. This proportion rose to 1.9 per cent at the end of the First Plan, 2.4 per cent at the end of the Second and 2.9 per cent at the end of the Third. This represents an increase of 142 per cent in 15 years.
- the rate of growth of the educational expenditure in the first three plans (11.7 per cent) is 2.2 times the rate of growth of national income at current prices (5.4 per cent). It is 1.6 times the rate of growth of enrolment and 1.7 times the rate of growth in the number of teachers.240
19.03 Three points need emphasis in this context. The first is that the total educational expenditure given in the preceding table is at current prices. Unfortunately, no effort has been made so far to convert the educational expenditure in the country to constant prices. We began this exercise, but it could not be completed due to absence of necessary data. We, however, recommend that such an exercise should be taken up and completed as early as possible. The UGC may consider giving financial assistance to a well-established department of economics of a university for this purpose. We may, however, point out that, during this period, the wholesale price index has risen by about 53 per cent and the cost of living index for the working classes by about 65 per cent. Although these indices cannot be used to reduce the total educational expenditure to constant prices, they indicate that a good deal of the increase in total educational expenditure is due merely to a rise in the price level.
240 During this period the total enrolment in educational institutions has increased from 24.287 million in 1950-51 to 70.292 million in 1965-66 which shows an average annual rate of growth of 7.3 per cent per year. The number of teachers has also increased from 798,192 in 1950-51 to 2,168,786 in 1965-66 which shows a rate of growth of 6.9 per cent per year.
4
860 EDUCATION AND NATIONAL DEVELOPMENT 19.04
19.04 The second point is that the proportion of national income devoted to education in India is small in comparison with that in educationally advanced countries of the world. The absolute amount per capita spent by us on education is about one-hundredth of that spent by a highly industrialized country like the USA. This reflects the close interaction and interlocking between the level of education and the level of industrialization. Japan and the USA and the USSR are spending considerably more than 6 per cent of their GNP on education, about twice as much as India. In making international comparisons, however, one should not miss the important point that in countries with low levels of national incomes, the disposable surplus is much smaller and it is, therefore, far more difficult for them to make a given effort for education than for those countries which have a comparatively higher income per capita and, in consequence, a larger disposable surplus. For instance, an educational expenditure of 3 per cent of the national income in India, where the national income per head is only about Rs. 400, has to be regarded as a much higher degree of 'effort' than an expenditure on the same or even higher percentage of the national income in the UK, or the USA.
19.05 The third point is that the increase of educational expenditure has been much faster than that of the growth of economy. The overall resources available to education are a function of two variables-ability or the national income per head of population and effort or the proportion of national income allocated to education. During the first three plans, ability has shown a relatively lower rate of growth. Between 1950 and 1965, the total national income rose from Rs. 91,400 million in 1950-51 to Rs. 163,600 million in 1965-66 (at 1960-61 prices) which implies that the national economy grew only at about 4 per cent per year and that the income per head of population increased only from Rs. 256.5 to Rs. 330.7 which implies a growth-rate of only 1.7 per cent per year. It is unfortunate that, in 1965-66, there has been a bad failure of the monsoon so that the net national product in the primary sector has been very adversely affected and the total national income threatens to be about 3 per cent less than that in 1964-65. But even if this year is set aside, the growth in total national income between 1950-51 and 1964-65 would be only 4.5 per cent per year and that in the per capita income (from Rs. 256.5 to Rs. 348.7) only 2.2 per cent per year. Since the precise figures of educational expenditure at constant prices are not available, it is not possible to compare the rate of growth of ability, at constant prices, with the rate of growth of effort. But there is enough indirect evidence available to show that, even at constant prices, the rate of growth in educational expenditure far exceeds that in the national income.
19.10 EDUCATIONAL FINANCE 861
19.06 A more precise comparison is, however, possible at current prices. As shown in Table 19.1 the national economy has grown at 5.4 per cent per year during the first three plans while educational expenditure has grown at the rate of 11.7 per cent per year. The effort or the national income devoted to education has thus increased at more than twice the rate of ability or national income.
PATTERN OF EDUCATIONAL EXPENDITURE (1950-65) 19.07 We may now pass on to examine how the available financial resources are allocated to different sectors and programmes of education at present. From this point of view, the data regarding educational given in Table 19.2.
N.B. The educational expenditure given in Table 19.2 is divided into two categories-direct and indirect-in accordance with the classification adopted by the Ministry of Education. Some clarifica- tions are, however, necessary to relate this classification to the usual classification of 'recurring' and 'capital' expenditure. AR expenditure which is classified as 'direct' is recurring in character. All items of expenditure classified as 'indirect' are also recurring except in the case of 'buildings'. (This bead includes all capital expenditure on buildings but does not include expenditure on their maintenance.) Expenditure shown under hostels includes only the maintenance charges but does not include the capital expenditure on the construction of hostel buildings and the food charges of the inmates.
19.08 It will be seen that the indirect expenditure given in Table 19.2 is not divided according to different stages or sectors of education. We, therefore, divided this expenditure, on the assumptions given below, into two sectors-school and university. Our calculations are given in Table 19.3.
19.09 On the basis of the above break-up, the expenditure at the three levels of education will be as shown in Table 19.4.
19.10 In the initial stages of development, the total expenditure on education is generally low and the bulk of it is spent on school education. As societies become industrialized, the total expenditure on education begins to grow and an increasingly larger part of it comes to be devoted to higher education and research. This broad trend is maintained in spite of the increase that takes place in the expenditure on school education on account of universalization of primary education, expansion (or even universalization) of secondary education, and the
862 EDUCATION AND NATIONAL DEVELOPMENT
TABLE 19.2 EDUCATIONAL EXPENDITURE BY OBJECTS IN INDIA (1950-
51 to 1965-66)
Total expenditure Percentage Average
Object (Rs. in 000's) of total annual
expenditure rate of
growth
1950-51 1965-66 1950-51 1965-66
A. Direct Expenditure
1. Pre-Primary Schools 1,198 11,000 0.1 0.2 15.9
2. Lower Primary Schools 364,843 1,220,500 31.9 20.3 8.4
3. Higher Primary Schools. 76,990 717,500 6.7 12.0 16.0
TOTAL (FIRST LEVEL) 443,031 1,949,000 38.7 32.5 10.4
4. Secondary Schools 230,450 1,181,000 20.1 19.7 11.5
5. Vocational Schools 36,944 250,000 3.2 4.2 13.6
6. Special Schools 23,335 39,920 2.0 0.7 3.6
7. Boards of Secondary/In-
termediate Education 5,338 45,000 0.5 0.8 15.3
TOTAL (SECOND LEVEL) 296,067 1,515,920 25.9 25.3 11.5
8. Universities 49,052 270,000 4.3 4.5 12.0
9. Research Institutes 6,256 65,000 0.5 1.1 16.9
10. Colleges for Arts and
Science 71,714 327,500 6.3 5.5 10.7
11. Colleges for Profe-
ssional Education 42,194 350,000 3.7 5.8 15.1
12. Colleges for Special
Education. 2,224 17,500 0.2 0.3 14.7
TOTAL (THIRD LEVEL) 171,440 1,030,000 15.0 17.2 12.7
13. TOTAL (DIRECT) 910,539 4,494,920 79.6 74.9 11.2
B. Indirect Expenditure
14. Direction and
Inspection 27,364 114,009 2.4 1.9 10.0
15. Buildings 99,270 666,055 8.7 11.1 13.5
16. Scholarships,
Stipends, etc. 34,456 420,035 3.0 7.0 18.1
17. Hostels 18,264 95,463 1.6 1.6 11.7
18. Miscellaneous 53,928 209,518 4.7 3.5 9.5
19. TOTAL (INDIRECT) 233,282 1,505,080 20.4 25.1 13.0
20. GRAND TOTAL 1,143,822 6,000,000 100.0 100.0 11.7
Source. Ministry of Education, Form A.
19.11 EDUCATIONAL FINANCE 863