Last week, Finance Minister Nirmala Sitharaman announced an allocation of Rs 99,300 crore for the education sector in her presentation of the Union Budget for the upcoming financial year 2020-2021 – a 5% increase from the last financial year. Of this, Rs 59,845 crore has been allocated for school education and literacy department, while the department of higher education was given Rs 39,466.52 crore. An allocation of Rs 3,002.21 crore has been made for the skill development ministry.
Referencing the demographic dividend, the Finance Minister made a slew of announcements for skill training, apprenticeship courses, online education programs as well as opening the sector to External Commercial Borrowing and Foreign Direct Investment. This has divided the experts in the field to the perennial debate of privatising the education sector. Discourse on education reforms lead to the same old rhetoric – public education lacks quality, but reforming it is too complex; while advocating for private education leads to accusations that the government is not taking up responsibility.
The concerns voiced in the Budget are valid and pressing, be it the poor teacher student ratio, poor accessibility to quality education, or the lack of a skilled workforce. Investment in education is vital as it is a catalyst for economic growth. Equipping the youth with transferable skills is the need of the hour.
In the absence of government funding, the country is in dire need of alternatives. According to the FDI data provided by the Department for Promotion of Industry and International Trade (DPIIT), the education sector FDI equity inflow from April 2000 to June 2019 is USD 2,506.52 million (Rs 15,459.63 crore). This amounts to 0.57% of total inflows, which is a small slice, when compared to the sector’s market size of having the world’s largest population in the age group of 5 to 24 years.
Being a concurrent responsibility of the Union and the state, the education sector is a highly regulated space, making it a less attractive avenue for investments. Sectoral issues need to be addressed to make this space lucrative for financial inflows. The government needs to do away with some of these policy maladies that restrict private players from entering this sector. With layers of regulatory bodies and overlapping rules, the policies at national and state level do not correspond with each other. Under the existing laws, educational institutions can only be registered as not-for-profit institutions; they must be affiliated to an existing government university; they are mandated to route 85% of their profits back into the sector. Such a restrictive regulatory environment must be addressed to meet the objectives of the proposed initiatives.
The experience of the four Asian Tigers holds key lessons for our economy. Hong Kong, Singapore, South Korea, and Taiwan witnessed rapid industrialisation and high growth rate by investing heavily in infrastructure and education. The investments in education made by these four economies was in relation to their respective national income. With appropriate public policies, high quality human capital was developed in a few decades.
Education must be an integral dimension of national economic policies and it must be reflected in resource allocation. Economies have to allocate high proportions from national income and government budget for education. Addressing a single input will not give us the desired results; complementary inputs (like teacher training, learning materials, parental support, teacher student ratio) addressing multiple issues are needed to bring change.
While the private sector can cater to the demands of the population, public education should not be abandoned. Private players can be incentivised to bridge the gap but parallel efforts to strengthen public education are important. The four Asian Tigers show that even the poor economies can afford to make huge investments in education.
This article was published in The News Minute on February 14, 2020 click to read
Views expressed by the author are personal and need not reflect or represent the views of Centre for Public Policy Research.