Interim Budget's Fiscal Vision Fails to Address High Dropouts in Rural Areas

Increasing de-enrolment rates after school education reflect poorly on accessibility to higher education.

7 min read
Hindi Female

As Finance Minister Nirmala Sitharaman presented the Interim Union Budget for 2024, one area that failed to garner much attention in the government’s allocative funds was the education sector at large.

Note how the budget outlay for school education has been increased by over Rs 500 crore but the grant for higher education has been reduced by over Rs 9600 crore from the previous fiscal year's Revised Estimate (RE).

Last year, the budget allocation of the Education Ministry increased by a marginal 8% from Rs 1.12 lakh crore as opposed to Rs 1.04 lakh crore in 2022-23.

The finance minister reported a 28% increase in female enrollment in higher education, stating how in STEM (science, technology, engineering, and mathematics) courses, women now make up an impressive 43% of the total enrollment, marking one of the highest figures globally. She forgot to add that educated women also occupy the highest proportion of urban employed youth as per the most recent labor market statistics.

However, if we look at the state of the education sector across India, a lot of blame can go around in the way the Modi government has failed to accredit higher outlays to education year-on-year, given the same government announced an ambitious National Education Policy (NEP) that requires significant funding (on part of the government) to help institutions implement the policy.

A report titled 'Beyond Basics' primarily focuses on four key indicators:

  • Educational and career pathways

  • Practical utilisation of foundational skills

  • Digital accessibility

  • Future aspirations

The survey conducted back in the year 2023 spanned 28 districts across 26 states, reaching a total of 34,745 youth aged between 14-18 years, who formed the sample size of the survey. Of the youth interviewed a considerable proportion of students, i.e. 86.8% were enrolled in educational institutions, however, the enrolment rates reduced as students neared adulthood.

Understanding the reasons behind this increasing de-enrolment amongst kids nearing adulthood reflects a state of abandonment experienced amongst the youth in rural India who would otherwise aspire to gain higher education for a better quality of life.

The structural issue behind rising youth unemployment (mostly amongst the educated youth) has disillusioned more schoolgoers about the limited appeal of higher education for better jobs.

Apart from dealing with this negative perception issue, it also becomes important for the state and the Government to fiscally support education institutions that fail to capture the imagination of those in school to reduce de-enrolments, and increase access to more skilled, employable means of education, especially in rural areas where reasons of experienced deprivations in quality of life/livelihoods are often connected with lower literacy levels.


Fiscal Support for Education in Budget 2024 Is Woefully Insufficient

Key findings of the ASER 2023 report regarding enrolment considering the funding being received by the education departments, both nationally and across states, provide a good empirical case for defining the nature of fiscal support for states and in institutions of higher education.  

Increasing de-enrolment rates after school education reflect poorly on accessibility to higher education.

The aggregate expenditure on education nationally has seen a considerable drop since 2014-15 from 16% of the total expenditure to a mere 13.3% in 2023-24. Lower levels of expenditure on education during the pandemic were expected because of the extraordinary circumstances, however, the numbers have not risen in the post-pandemic era and continue to be lower than the preceding year. Despite education being manifested as a central focus of the NDA government’s electoral manifesto and with the introduction of the New Education Policy in 2020, the allocative expenditure on the same does not meet the desired expectations.  


Upon analysing the data on Net Enrollment in the ASER 2023 report, the three-year average of expenditure on education as a percentage of aggregate expenditure, and the three-year average of social expenditure, we gain insights into the relationship between education spending, net enrollment, and social expenditure across different states in India (see above figure). 

Karnataka, Tripura, and West Bengal stand out with high net enrolment percentages (66.8%, 68.1%, and 69.4%, respectively) and relatively high spending on education as a percentage of aggregate expenditure (11.5%, 13.7%, and 15.5%, respectively). This suggests a commitment towards education in these states, resulting in higher enrolment rates. Whereas states like Kerala and Telangana exhibit a balanced approach.

Kerala has a high net enrolment rate (59.5%) coupled with a reasonable education spending percentage (12.9%). 

Telangana, on the other hand, has a high net enrollment rate (59.8%) but a lower education spending percentage (6.9%). Bihar has a lower net enrollment rate (34.6%) and a significant percentage of aggregate expenditure allocated to education (17.6%). Uttar Pradesh also shows lower net enrollment (33.8%) and a relatively high education spending percentage (12.9%). 

These surveyed statistics suggest how some states are better able to utilise their limited resources allocated towards education to produce better learning outcomes, while other states have continuously failed to do so, requiring a thorough investigation, and overhauling of educational policies across institutions in these states, in helping them to improve both enrollment rates and the allocative efficiency of education spending.  

However, states with high net enrollment and education spending percentages do not consistently lead to social expenditure. For example, Karnataka, which scores well in education indicators, has a moderate ranking in social expenditure (11.5%). On the other hand, West Bengal, with a strong commitment to education, also allocates a significant percentage to social expenditure (15.5%). 


What's Driving the Enrolment Numbers Up (or Down)?

The report reveals that 86.8% of 14-18-year-olds are enrolled in an educational institution with notable differences by age. As noticed from the graph below the enrollments have gradually declined as the age has increased. It is noticed that a higher percentage of youth are enrolled in government institutions as compared to private institutes within the age group 16-17, showcasing a higher proportion of female participation compared to males.  

Increasing de-enrolment rates after school education reflect poorly on accessibility to higher education.

Although there is a small gender gap in enrolment, notable differences are visible by age. The report reveals that older youth are less likely to be enrolled in school or college.

A total of 24.4% of male youth and 23.6% of female youth surveyed discontinued education during the age group of 17-18 years. The survey also suggests that the highest dropout rates are seen after the completion of Grade XII, which amounts to 24.6% of the students, who de-enrol between 17 and 18 years. The graph below highlights the causes behind de-enrolment among the youth in nearing adulthood. 

Increasing de-enrolment rates after school education reflect poorly on accessibility to higher education.

One of the key factors responsible for students de-enrolling from educational institutions is related to the asymmetric enrolment in vocational training programs. 5.6% of the youth surveyed were enrolled in vocational training programs or other courses, most of whom did so after Grade XII during graduation, amounting to 16.2%. Most students enrolled in such programs decided to do programs of shorter duration, as indicated by the graph below. 

Increasing de-enrolment rates after school education reflect poorly on accessibility to higher education.

Increasing de-enrolment rates as the youth finish school education is a cause of concern, reflecting poorly on the standard of and accessibility to higher education in India, as it directly maps with how little importance has been attributed to education by most national and state governments. For the Modi government in the last eight to nine years, allocation for education as a percentage of total expenditure has dropped from 10.4% to 9.5%, according to the Economic Survey of 2022-23.    

Increasing de-enrolment rates after school education reflect poorly on accessibility to higher education.

Even during the COVID years, the impact of which was measured by ASER 2022-21 studies (analysed here), the overall share of education in total expenditure declined from 10.7% in 2019-2020 to 9.1% in the first COVID year, and remained stagnant in the following year, before being marginally raised to 9.5% in the budgetary estimates for 2022-2023. 

Lower levels of expenditure on education (across levels) are a cause of structural concern since increased budgets for education allow governments to adopt innovative techniques and policy measures, allowing students to continue their education -reducing drop rates and improving upon their employability (in reference to higher education institutions). NEP’s implementation requires sustained fiscal support to institutions by both state and Union governments. Given how badly affected the state budgets are, the Union government is expected to (fiscally) do more in this regard.

More funds are also needed to allocate more towards providing alternatives to students who cannot or choose not to pursue higher education, in the form of high-quality vocational training programs.

Increased expenditure on skill development is pertinent so that students are equipped with certain basic life skills that may prove useful in seeking employment opportunities (see here for a micro case study of our work from Narela in the NCR region of Delhi). Vocational and skilling programs of differing degrees and duration can be introduced as part of the school curriculum as well which has helped enhance the employability of kids in rural areas. 

Higher education and state devolution targeted at education spending budget for the Union Government will allow public institutions across states (and institutions) to provide greater scholarships, and ‘access opportunities’ to students on merit-cum-means basis to prevent them from dropping out on account of financial constraints in secondary schools and higher education institutions. Additionally, higher expenditure on education would also allow students to get better opportunities in public schools vis-a-vis private institutions, by introducing holistic development programs and training, in collaboration with more skilled experts across different fields and applied disciplines of education. One may hope that the Full Union Budget presented in July takes note of this and puts the sector at primary not peripheral importance in the Government’s fiscal priorities. 

(Deepanshu Mohan is a Professor of Economics and Director, the Centre for New Economics Studies (CNES), Jindal School of Liberal Arts and Humanities, O P Jindal Global University. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)

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Topics:  Interim Budget 

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