Modi Govt’s Education Spending: ‘Burden’ On Exchequer an ‘Excuse’?

Withdrawal of govt financial aid to institutions of higher education has increased the space for private players.

4 min read

The recent protests of students in the Capital and other states have triggered the debate on privatisation of higher education all over again. The larger narrative around which this protest happened, revolves around the government’s role in higher education, and the extent to which students should be charged. The continuous withdrawal of government’s support from funding higher education has led to increasing space for private players.

This is evident from the increase in the number of private universities from 178 to 313, colleges from 9,735 to 23,647, and the share of private unaided colleges in total enrollment from 37 percent to 46 percent — within a short span of six years (2010-11 to 2016-17), according to the All India Survey on Higher Education (AISHE).


Steps Towards Privatization of Education

At the policy level, the shift towards privatization is an outcome of the 1991 economic reforms. Punnaya Committee (1992) was an official declaration that universities will have to function on similar lines as exhibited in the reforms. It suggested that universities should increase the quality and cost-effectiveness while also generating internal resources which should be sizeable over time. Fee increment and opening of self-financed courses are the ways to achieve it within the public sector. The Ambani-Birla committee (2000) advocated establishing private universities, confining the government’s role to primary and secondary education, while also overlooking selected institutions of higher learning.

The government’s position on higher education is evident from the Ministry of Finance’s Report on Subsidies (2004), which regarded higher education as something ‘less deserving’ to be subsidised, as compared to elementary education and health.

The new education policy has suggested encouraging funding from philanthropic sources which is welcoming if it does not prove to be a window for commercialisation of higher education.

To what extent should students be charged for the higher education they are getting, and how they should be charged, is a debatable issue. This logic depends on the labour market condition. The sole argument in favour of privatising higher education relies on the assumption of wage premium enjoyed by the educated graduates. Contrary to the general expectation, the chance of unemployment among university graduates in India is far higher than their less-educated counterparts. The latest employment data which showed the unemployment rate at a 45-year high level of 6.1 percent, reveals a higher unemployment rate among university graduates, at 16 percent. Thus, the fundamentals on which the proponents of privatisation frame their argument, does not stand when faced with empirical reality.

Safeguarding Interests of Marginalised Students

The question which comes up at the policy level is, ‘How can the price of a product be charged without the realisation of the intended benefit by its consumer?’ However, higher labour market return for successful graduates is also a reality which cannot be ignored. Thus, a pragmatic approach is needed at the policy level to redistribute the cost of higher education between employed and unemployed graduates.

The deferred payment by successful graduates, once their level of income crosses a threshold level, may be one of the ways to address these concerns.

The income-contingent loan in Australia is one such model which has been used by many countries to develop a financing mechanism with expanding higher education. In this case, successful students are charged in the form of tax when their income crosses a threshold level, otherwise, they are waived off. This may safeguard marginalised students, along with addressing the concern of increasing burden on the Exchequer due to the expansion of higher education.


Arguments for Privatization

The question very often asked is, ‘Why should the government finance higher education out of the taxes paid by the common people?’ This question comes from the academic arguments in favour of privatisation. Broadly, two types of arguments are put forward in this regard:

First, it is argued that the return to higher education is largely appropriated by the person investing in it, so students should bear its cost.

Second, the relatively better-off section of society enrolls in higher education, so any uniform subsidy will lead to the subsidisation of the rich with the taxes of masses comprising a relatively worse off section and eventually leading to the reverse income redistribution.

It is generally argued that it is difficult to subsidise all the students in the wake of expanding access to higher education; the share of enrollment in higher education has increased from 19.4 percent (of the 18 to 23 population) in 2010-11 to 25.2 percent in 2016-17 (AISHE). However, the excuse of a high burden on the Exchequer seems misplaced, as the government has never met the commitment of 6 percent of the Gross Domestic Product to be spent on education. The trend shows the stagnant share of spending on education during 1999-2016 between 3.3 percent 4.1 percent of the GDP.

(Khalid Khan is an Assistant Professor at the Indian Institute of Dalit Studies, and holds a Ph.D from Jawaharlal Nehru University. This is an opinion piece and the views expressed are the author’s own. The Quint neither endorses nor is responsible for them.)

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