EDUCATIONAL FINANCE INVESTING IN THE FUTURE
India's education system is gearing itself to meet the needs of a liberalised and fast growing economy by rapidly expanding and improving coverage, quality and efficiency, particularly in elementary education. An important factor that is getting increased attention is the availability and optimal use of financial resources.
Although the central government's contribution to education is small relative to that of states, that contribution has become increasingly strategic, shifting
towards plan expenditure. The central government has expanded its role in plan financing for elementary education relative to the states. The share has increased from 23.1% in the 7th Plan to a projected 31.3% in the 8th Plan.
The central government's plan outlay on education has nearly quadrupled between 1990-91 and 1996-97. Prima and adult education have a proportionately higher share the increase in these allocations; 50% of the centre's plan
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outlay devolves on the states for implementation of key Centrally Sponsored Schemes such as Operation Blackboard and Teacher Education.
The government has been enhancing the plan outlays even as fiscal correctives have been set in motion. Plan expenditure is increasingly gaining importance in elementary education. The share of Plan expenditure in total expenditure of centre and state has increased from about 10.1% in 1990-91 to 21% in 1996-97. To a certain extent, this has reversed the trend of an increasing proportion of expenditure on elementary education being spent on teachers' salaries.
In spite of financial constraints, total expenditure by states has also increased from Rs. 170,440 million in 1991-92 to Rs. 320,509 million in 1996-97. Even in real terms the per capita expenditure in many states has increased.
Expenditure by all central and state departments of education in 1995- 96 was equal to 3.14% of GNP. When expenditures across departments other than education are also included, the share was 3.74%.
The central expenditure on education has increased substantially over the last ten years. The central, plan expenditure was Rs. 30,360 million in the 7th Five Year Plan. The outlay increased to Rs. 74,430 million during the 8th Five Year Plan. For 1997-98, a plan allocation of Rs.40,450 million has been made. This increasing financial
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participation of the central government through Centrally Sponsored Schemes in the process of educational development is in keeping with the spirit of cooperative federalism characterised by ongoing consensual processes and understanding between the central and state governments.
One area that is still of concern is the wide variation across states in terms of coverage and quality, reflecting differences in both past and current resources and in the priority given to the sector. The public expenditure on education varies from 2.5% of SDP (Haryana) to 6% of SDP (Kerala).
There are also substantial variations between states in terms of per capita expenditure on education. Per capita expenditure varies between Rs. 176 in Bihar and Rs. 423 in Kerala. Per capita expenditure is closely related to the poverty level of the states. Poor states spend less per capita on education although they relatively make greater effort. For instance, the state of Bihar spends a higher share of its income, about 4.5%, on education but has a low per capita expenditure of Rs. 176 while Haryana, which spends only 2.5% of SDP on education, has a per capita expenditure of Rs. 270.
The government is committed to raise the expenditure on education to 6% of GDP as against the present level of 3.7%. Fifty per cent of the enhanced allocation is proposed to be spent on primary education.
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