chapter 6 financing higher education in...
TRANSCRIPT
CHAPTER 6
FINANCING HIGHER EDUCATION IN INDIA IN THE ERA OF GLOBALIZATION
Higher Education determines its (India’s) economic and technological progress… Government funding must continue to be an essential and mandatory requirement for support to higher education. The Government/State must continue to accept the major responsibility for funding….
Report of Justice Dr K Punnayya Committee on UGC Funding of Institutions of Higher Education (1993)
6.1 Introduction
Higher education plays very significant role in all round development of the
nation, as it empowers the individuals with necessary competence for achieving
important personal, social and higher level of professional goals. It is inscribed as a
vital factor for survival; it provides people with “an opportunity to reflect on the
critical, social, economic, cultural, moral and spiritual issues facing humanity”
(National Policy on Education, 1986).
The above study shows the relative importance of higher education. But
policies and approach adopted by government after implementation of economic
reforms are not favourable to the higher education. Progress of higher education in
India has been predominantly based on state support; but the presence of the state in
public welfare activities suffered severe erosion since 1991, when India adopted
Structural Adjustment Programme in the wake of globalization (Tiwari & Kumar,
2011).
The process of structural change in the education sector in the country started
with the adoption of New Education Policy in the mid-eighties (GOI, 1986; GOI
1991) and gained momentum with New Economic Policy in 1991, which include
Liberalization, Privatization and Globalization (LPG) process. The process of
economic reforms widened and deepened over the period and almost all sectors
experienced substantial changes with globalization and privatization. The economic
reforms in their stabilization phase have worked through the controlling of fiscal
deficits. The public authorities at various levels tried to maintain the overall level of
public expenditure by adjusting the expenditure levels across the various sectors (Gill
188
& Brar, 2009). The education sector in general and higher education in particular has
suffered setbacks and actually experienced the resource loss. These adjustment
policies also bring imbalances among different levels of education. With the
accomplishing goal of universal elementary education, the government directs the
shift of resources from higher to primary education. While it is essential that the
nation should achieve universal elementary education and total literacy, but at the
same time it cannot afford to neglect higher education in the era of globalisation.
Financial resources play an important role in the expansion and growth of the
educational sector which is not only restricted to government spending but
households, non-governmental agencies and corporate investment contributes
significantly. But the role of the government still remains pervasive and important. On
the recommendation of Education (Kothari) commission (1966), the Government of
India quantitatively fixed the target of investing 6 per cent of Gross National Product
(GNP) on education by the public exchequer by 1986. But the goal of allocating 6 per
cent of (GNP) on education remained elusive. Currently, India spent 4.54 per cent of
GDP on education.
There are a number of studies covering financing of higher education in India.
But all these studies are descriptive in nature and analysed this by examining trends
and patterns of financing higher education from various aspects and ways. There was
a lack of any comprehensive study which empirically examined the impact of
globalisation on public expenditure on higher education in India. This study is an
attempt to fill the gap.
In the first section, the study analysed public expenditure on education both at
the global and national level. Further, this study examines the pattern and trend of
public expenditure, focussing on total, plan, and non-plan expenditure on higher
education in India at current and constant prices (at 2004-05 prices) made by
government. The study also analyse the pattern of intra-sectoral allocation of
resources on education sector in Five Year Plans, which reflect the changing priorities
in education sector. Further this study analysed the role of centre and state in
financing higher education in India at current and real prices. The study also discusses
per-student expenditure on higher education in India both at current and constant
prices. Finally in this section, the study discusses the factors for deceleration in public
189
expenditure on higher education in India. In the second section, impact of
globalization on public expenditure on higher education as percentage of GDP in
India has been analysed. This section ends with empirical results and discussion.
Finally, the chapter ends with a short summary and a few concluding observations.
Section I
6.2 Trends in Public Financing of Education in Developed and Developing
Countries
Before analysing the behaviour of educational expenditure in India over the
years, it may be interesting to make a comparative study of the expenditure on
education in the so called ‘developed’ and ‘developing’ countries of the world.
Table 6.1 shows expenditure on education as a percentage of Gross National
Product (GNP) among developed and developing countries. From this table, it is
evident that in terms of expenditure on education as a percentage of GNP, India is far
behind developed countries and even some developing countries, which are spending
more. The country in which expenditure on education as a percentage of GNP has
gone up during the period 1985 to 2008 is Denmark, USA and UK. The countries
where the percentage has gone down over the said period are Netherlands, Italy,
Germany, Japan and Australia etc. Canada share’s on educational expenditure as
percentage of GNP was 6.6 per cent in 1985 which slightly rose to 7.0 per cent in
1996 but after this year a continuous declining trend has been observed. Among the
developed countries of the world roughly 5 to 8 percentage of GNP was spent on
education. Incidentally in India, educational expenditure as percentage of GNP has
remained constant during the period 1985 to 1996, i.e., it stood at 3.4 per cent in both
the years, but it increased at 4 per cent in 1999 and it declined in the year 2008.
Though according to the Report of the Education Commission (1966), this
expenditure should have been raised to 6 per cent of GNP. Although it is nearly five
decades now, but the target set by the Education Commission has yet to be realized.
It is evident from Table 6.1 that out of 13 developing countries, the share of 8
countries expenditure on education as a ratio of GNP has increased for the period
1985-1996 but these countries have registered a fluctuating trend thereafter. The
countries whose share has decreased after 1996 were China, South Africa and Zambia
190
but simultaneously Mexico and Thailand share has increased in this period but with a
lot of fluctuation. India’s share of GNP on education is not impressive but it is only
better than the figures of Pakistan and Bangladesh. In South Asia, Bangladesh and
Pakistan devotes only 2.6 per cent and 2.7 per cent of their respective GNP on
education in 2006. The analysis does not find a steady progress in many countries
with respect to this indicator. In fact, in a good number of countries, this proportion
has declined between 1999 and 2008. Thus, it is clear from the table that, many
countries in the developing world are spending relatively lesser amount on education
as compared to India. But at the same time, it has been well proved that even at
comparatively very high level of development and well-being countries such as
France and USA have shown their strong consistency in public spending (close to 6
percentage of their GNP) and few developing countries are also devoting high
proportion of their GNP on education.
Table 6.1: Trends in Public Expenditure on Education as a Percentage of GNP (Developed and Developing countries vis-à-vis India)
Country Developed Country Developing
1985 1996 1999 2006 2008 1985 1996 1999 2006 2008
Canada 6.6 7.0 6.0 5.1 5.0 Mexico 3.9 4.9 4.5 5.6 4.9
USA 4.9 5.4 5.0 5.3 5.5 Malaysia 6.6 5.2 6.1 6.6 4.6
Japan 4.9 3.6 3.5 3.5 3.4 Columbia 2.9 4.4 4.5 4.9 4.1
Australia 5.6 3.6 5.1 4.7 4.9 Thailand 3.8 4.1 5.1 4.3 6.3
UK 4.9 5.4 4.6 5.5 5.5 Russian Federation
3.2 4.1 …. 3.9 4.0
France 5.8 6.1 5.7 5.7 5.5 Brazil 3.8 5.2 4.4 4.1 5.3
Finland 5.4 7.6 6.3 6.4 5.9 Jamaica 5.7 5.2 …. 5.6 6.6
Germany 5.4 4.8 4.5 4.6 4.4 Zambia 4.7 2.2 2.0 2.1 1.5
Denmark 7.2 8.2 8.2 8.3 7.8 Bangladesh 1.9 2.9 2.3 2.6 2.2
Rep of Korea
4.5 3.7 3.8 4.6 4.2 Pakistan 2.5 3.0 2.6 2.7 2.9
Netherlands 6.4 5.2 4.8 5.2 5.4 South Africa 6.0 7.9 6.2 5.5 5.6
Italy 5.0 4.7 4.8 4.5 4.3 China 2.5 2.3 1.9 …. …..
India 3.4 3.4 4.0 3.3 3.2 India 3.4 3.4 4.0 3.3 3.2 Note: ….Data not available. Source: i) UNDP: Human Development Report 1999. ii) Global Monitoring Report (GMR) 2008, 2009 & 2011.
Though, public expenditure on education in India has increased after
independence. But still this growth has not been sufficient or satisfactory
191
6.3 Components of Expenditure in India
The educational budget in India is generally, divided into two heads: i.e. plan
(also called developmental) and non-plan (also called committed) expenditure. Plan
expenditure is that part of total budget expenditure, which is meant for financing the
schemes and programmes especially framed under the current five-year plan or the
unfinished tasks of the previous plans. So the plan expenditure indicates the direction
of changes in the education sector. Plan expenditure is mainly for development
purposes, such as the building of new schools or the introduction of new programme
in a school (Varghese & Tilak, 1991). While non-plan expenditure is designed for the
maintenance of the system. It is the expenditure on operating and maintaining existing
education infrastructure. So at the end of a five year plan, the recurring parts of plan
expenditure on different programmes or schemes become part of non plan
expenditure, which, in turn, enhances the non-plan component of the education
budget. Non-plan expenditure is expected to increase steadily over the years.1 Plan
expenditure on education is relatively small in size and a huge proportion of
expenditure on education is of non-plan in nature. While both plan & non-plan
expenditures are important for the growth of education sector.
Another distinction is between expenditure on Revenue Account and Capital
Account. The Revenue Account consists of the expenditure incurred on items such as
administration, direction, and inspection; salaries of teaching and non-teaching staff;
scholarships and students aid programmes, maintenance of buildings, apparatus,
equipment and furniture; laboratory consumables; games and sports; and teaching and
learning material, etc. This type of expenditure has to be incurred every year in order
to run the system and hence is called the recurring expenditure also. The Capital
Account includes the expenditure made on the construction of buildings, libraries and
laboratories; purchase of equipment and furniture, etc. it is also known as non-
recurring expenditure. It actually represents the physical capital formation side of
education system. It is to be noted that out of total public expenditure on higher
education in the country by all states and union territories, the proportion of
1 In the education sector, salary of teachers and administrative staff (other than those recruited under plan schemes), expenditure on repair and maintenance of schools, expenditure on replacement of non-functional teaching equipment and similar items are non-plan expenditure. Expenditure on construction of new schools, additional classrooms, new toilets, salary of additional teachers and non-teaching staff etc come under Plan expenditure.
192
expenditure incurred under capital account was very minuscule for example, just
(1.82 per cent) during 2003-04 (MHRD, 2003-04). Expenditure accrued under capital
account has not been included in the study because the bulk of expenditure on
education in India is on revenue account and very little amount is incurred on capital
account.
6.4 Public Expenditure on Education in India
According to Schultz (1961), Education Commission (GOI, 1966) and the
National Policy on Education (1968), expenditure on education is as an investment in
human beings, which results in high yielding individual and social returns viz.,
economic, social, cultural and political. Some returns are tangible and some are
regarded as externalities, deserving high priority and an activity on which we need to
spend more and more on education and it should not be treated as a burden on public
exchequer. Education is widely perceived as a crucial vehicle for the upward mobility
of individuals- socially, occupationally and economically –and therefore is an
important instrument of equity in society. In addition, education is regarded as an
important component of human development and a fundamental right, having both
intrinsic and instrumental values. Therefore, public policy towards education is
universally one of the most critical areas of modern development strategies and public
expenditure on education is one of the most significant aspects of such a policy.
Public expenditure on education assumes even greater significance, especially in
developing societies like India, in ensuring equity and quality in education and at the
same time in promoting it as a public good and as a human right. In spite of its
importance in the economy, education system in India suffers from severe inadequacy
of resources and is in a deep financial crisis. The financial crisis includes: inadequacy
in the allocation of resources towards education, relative low fiscal priority for
education and improper allocation of resources within the education sector between
different levels of education (Tilak, 2009).
6.4.1 Education as a Share of Gross Domestic Product and Public Expenditure in
India
Share of education in gross domestic product (GDP) is the most standard
indicator of national efforts on the development of education in a given society. This
reflects the relative priority being accorded to education in the national economy. 193
Table 6.2: Public Expenditure on Education as Per cent of GDP in India Year
Govt. Expenditure on
Education by all Depts. (Rs. crore)
GDP at Constant Prices (Rs. crore) (2004-05 Prices)
% of Education Expenditure to GDP
Period I 1980-81 3884.20 798506 0.48 1981-82 4298.29 843426 0.50 1982-83 5509.17 868091 0.63 1983-84 6229.53 936269 0.66 1984-85 7455.88 973357 0.76 1985-86 8713.02 1013866 0.86 1986-87 9479.13 1057612 0.89 1987-88 11798.35 1094992 1.07 1988-89 14069.82 1206243 1.16 1989-90 17192.50 1280228 1.34 1990-91 19615.85 1347889 1.45
Mean 9840.52 1038225.36 0.89 SD 5257.48 180510.19 0.32 CV 53.42 17.38 36.58
Minimum 3884.2 798506 0.48 Maximum 19615.85 1347889 1.45
Period II 1991-92 22393.69 1367171 1.63 1992-93 25030.30 1440503 1.73 1993-94 28279.69 1522343 1.85 1994-95 32606.22 1619694 2.01 1995-96 38178.09 1737740 2.19 1996-97 43896.48 1876319 2.33 1997-98 48552.14 1957031 2.48 1998-99 61578.91 2087827 2.95 1999-00 74816.09 2246276 3.33 2000-01 82486.48 2342774 3.52 2001-02 79865.70 2472052 3.23 2002-03 85507.24 2570690 3.32 2003-04 89079.25 2777813 3.20 2004-05 96694.10 2971464 3.25 2005-06 113228.71 3253073 3.48 2006-07 137384.00 3564364 3.85 2007-08 155797.27 3896636 3.99 2008-09 189068.84 4158676 4.54 2009-10 242504.82* 4516100 5.37
Mean 86681.47 2545793.84 3.07 SD 59472.03 953303.89 0.99 CV 68.61 37.44 32.25
Minimum 22393.69 1367171 1.63 Maximum 242504.82 4507637 5.37
Notes: (i) *RE: Revised Estimates. Source: 1. Handbook of Statistics, 2012-13, Reserve Bank of India. 2. Analysis of Budgeted Expenditure on Education published by D/o Secondary and Higher
Education. New Delhi, Various Issues.
194
A glance of the figures on expenditure on education as a proportion of GDP
and total government expenditure on education in India is given in Table 6.2. During
pre-globalization period, total government expenditure on education increased by five
times from Rs 3884.20 crores in 1980-81 to Rs 19615.85 crores in 1990-91. Similarly,
during the same period, three times increase in expenditure on education as a
percentage of GDP was observed from 0.48 per cent to 1.45 per cent. It has been
noted that, in mid-1980s, i.e., the era when human resource development was given
top-most priority, an increasing trend in educational expenditure as a percentage of
GDP has been observed. During post-globalization period, total government
expenditure on education was Rs 22393.69 crores in 1991-92 from which it increased
to 242504.82 crores in 2009-10, indicating eleven times increase. On the other hand,
in relative terms, expenditure on education as a proportion of GDP has also shown an
increasing trend in the above said period. In 1991-92, the percentage of educational
expenditure to GDP was 1.63 per cent which increased to a level of 5.37 per cent in
2009-10.
It should be noted that this proportion is less than the requirement of the
education system to provide reasonable levels of quality education to all students and
to provide universal elementary education of eight years for every child of the age
group of 6-14. This proportion is still less than the recommendation of Kothari
Commission (1966) and reiterated by the National Education Policy, 1986 and 1992.
Thus, India is not spending more than 5 per cent of its GDP on education. Further,
even from this low level, only 1/10th is being spent on higher education. Therefore,
any talk of extending higher education to a large number of people on one hand and
improving its quality on the other would be a cry in the wilderness. Therefore, the
immediate tasks before the government should be to generate more resources for
financing education in general and then transferring a great part of resources in favour
of higher education in particular.
The analysis of GDP at constant prices (at 2004-05) in the above table 6.2
shows an increasing trend for the entire period under study. In 1980-81, GDP at
constant prices (at 2004-05 prices) was Rs 798506 crores which increased to Rs
1347889 crores in 1990-91 depicting 1.6 times increase in pre-globalization period. In
1991-92, GDP at constant prices was Rs 1367171 crores which increased by 3.2 times
195
to a level of Rs 4516100 crores in 2009-10, during globalization period. This shows
that, during post-globalization period GDP at constant prices has grown at a fastest
rate.
This table also contains the descriptive statistics of the variables used in the
study. The above table shows that, government expenditure on education has higher
variability during the globalization period as compared to pre-globalization period
with coefficient of variation (CV) of 68.61 in post-globalization period as compared
to the 53.42 in pre-globalization period. The CV of GDP at constant prices also shows
large variability in post-globalization period was 37.44 as compared to pre-
globalization period was 17.38. The CV of government expenditure on education as
percent of GDP also shows variation. CV in pre globalization period was 36.58 and in
post-globalization period are 32.25. The period wise analysis of compound annual
growth rate (CAGR) exhibits that during pre-globalization period, government
expenditure on education was 15.1 per cent which decelerated to 14.6 per cent in post-
globalization period. Government expenditure on education for the entire period was
14.5 per cent. The compound annual growth rate of GDP (at constant prices) remains
almost constant in all the periods (see Table 6.3).
Table 6.3: Compound Annual Growth Rate (CAGR) of Government
Expenditure on Education and GDP in India (Rs. Crore)
1980-81 to 1990-91 1991-92 to 2009-10 1980-81 to 2009-10
Govt. Expenditure on Education by all Depts.
15.1 14.6 14.5
GDP at Constant Prices (2004-05 Prices)
6.2 6.0 6.0
Source: Computed on the basis of data given in Table- 6.2.
Thus, from the above analysis it can be concluded that, expenditure on
education in absolute sense and at current prices is increasing over the period of
study. However, the increase in expenditure on education in pre-globalisation period
is more uniform than the post-globalisation period. Due to this, the CAGR in pre-
globalisation period is found to be more than the globalised era.
196
6.5 Sources of Funds for Higher Education in India
The higher education system in India witnessed enormous and unprecedented
expansion since independence. It is unfortunate that this expansion is not
accompanied by commensurate financial allocations by government, both at the
central level as well as the state level. Nor have universities and colleges been able to
raise adequate finances of their own. New universities have been started without
providing additional resources and the universities on their part have not generated
much resources of their own. There has been, as a result, an excessive dependence on
the government for financing higher education. The government on its part is finding
it difficult to shoulder the heavy responsibility of financing higher education on
account of competing demands from other sectors of an expanding economy. Though
the problem existed earlier, too, its dimensions were different. While earlier the needs
of universities and colleges were limited to strengthening of departments and taking
up new programmes of development, in the present day scenario the very existence of
a large number of educational institutions is threatened on account of lack of funds.
Thus, many universities are finding it difficult to meet essential expenditure on
account of payment of salaries, maintenance of buildings, purchase of books, journals,
equipments etc. (Ahmad, 2002).
The sources of finance for higher education can be broadly classified into two
parts, viz (a) governmental sources and (b) non-governmental sources. The
governmental sources include contribution from the central or union government and
the state governments. The non-governmental sources include student fees, funds,
voluntary donations and endowments, etc. The study is confined to governmental
sources i.e., public expenditure on education in general and higher education in
particular.
6.6 Government Expenditure on Higher Education as a Share of GDP in India
It has been contended that one of the important factors responsible for
inadequacy of resources for education, including higher education, is the inability or
unwillingness of the government to provide a larger percentage of GNP for
educational development. In the context of intra-sectoral allocation of resources, it
was observed that the constitutional commitment of providing universal elementary
197
education is non-negotiable. The secondary education as a preparatory as well as
terminal education cannot be ignored. In the context of globalization and increased
competition, the higher education cannot be overlooked either. Having regard to these
realities, a consensus of a sort is gradually emerging to allocate at least 3 per cent of
GNP to elementary education, 1.5 per cent to secondary education and the remaining
1.5 per cent to higher education and technical education (CABE, 2005, 2005a). With
this perspective, now let us examine the priority accorded to higher education.
In terms of relative priorities higher education suffered severely. Share of
higher education in national income indicates the relative importance given by the
government to higher education. Table 6.4 and Figure 6.1 depict the percentage share
of government expenditure on higher education as percentage of GDP in India at
constant prices.
Table 6.4: Trends of Government Expenditure on Higher Education as Per cent of GDP
Year Government Expenditure on Higher Education as % of GDP
1980-81 0.31
1985-86 0.38
1990-91 0.43
1994-95 0.36
1999-00 0.47
2004-05 0.31
2009-10 0.41 Source: 1. National Informatics Centre, Budgetary Resources for Education, Department of
Education, MHRD, GOI, New Delhi, (1995), 2. Analysis of Budgeted Expenditure on Education, MHRD, Various Issues. 3. Handbook of Statistics, 2011-12 & 2012-13, Reserve Bank of India.
During pre-globalisation period, government expenditure on higher education
as per cent of GDP was 0.31 per cent in 1980-81 which accelerated to 0.38 per cent in
1985-86 and further it increased to 0.43 per cent in 1990-91. During post-
globalisation period, government expenditure on higher education as per cent of GDP
has shown fluctuating trend. In 1994-95 government expenditure on higher education
as per cent of GDP was 0.36 per cent which increased to 0.47 per cent in 1999-2000.
After that, it continuously declined and becomes 0.31 per cent in 2004-05. But further
it slightly increased to 0.41 per cent in 2009-10.
198
Figure 6.1: Govt. Exp on Higher Education as per cent of GDP (at Constant Prices)
Source: 1. Handbook of Statistics, 2012-13, Reserve Bank of India. 2. Analysis of Budgeted Expenditure on Education published by D/o Secondary and Higher
Education. New Delhi, Various Issues.
Though, in recent years, there is meagre increase in the government
expenditure on higher education as per cent of GDP but still it is far from satisfactory.
Presently 0.41 per cent of GDP is being spent on higher education, while many
developed countries invest between 1.0 to 2.5 per cent of their respective GDP. Even
some of the developing countries in the Asian region, which are economically not
better off than India, seem to be spending more than India on higher education.
6.7 Trends in Plan and Non-Plan Expenditure on Higher Education in India
The total government expenditure on higher education consists of plan and
non-plan expenditures. In the total government expenditure on higher education,
‘plan’ expenditure forms small proportion (less than 30) per cent and ‘non-plan’
expenditure dominates the total (Table 6.5). In fact, non-plan expenditures form the
major chunk of expenditures on higher education. During the process of adjustment,
when the government expenditure has to be reduced, it seems to be relatively easier to
cut plan (development) expenditure than non-plan (maintenance) expenditure;
because it cannot be reduced significantly, since most of the non-plan expenditure
consists of salary expenditure of the existing staff. 199
Table 6.5: Plan and Non-Plan and Total Expenditure on Higher Education in India (Rs crore)
Year At Current Prices As % of total exp on Higher Education
At Constant Prices
Plan Non-Plan
Total Plan Non-Plan Plan Non-Plan
Total
1980-81 75.6 408.1 483.7 16 84 383.6 2070.8 2454.4
1985-86 145.3 901.4 1046.7 14 86 537.8 3336.3 3874.0
1990-91 245.0 2066.9 2311.9 11 89 622.4 5250.7 5873.1
1994-95 524.9 3000.4 3525.3 15 85 873.1 4990.0 5864.0
1999-00 834.5 7413.9 8248.4 10 90 1075.7 9557.0 10632.7
2004-05 1305.0 8198.1 9503.2 14 86 1305.0 8198.1 9503.2
2009-10 5680.6 18505.4 24186.0 23 77 4343.0 14147.9 18490.8 Source: 1. National Informatics Centre, Budgetary Resources for Education, Department of
Education, MHRD, GOI, New Delhi, (1995), 2. Analysis of Budgeted Expenditure on Education, MHRD, Various Issues.
Table 6.5 reveal the analysis of plan, non-plan and total expenditure on higher
education in India. It is apparent from the table that, during pre-globalization period,
plan expenditure on higher education at current prices was Rs. 75.6 crores i.e., 16 per
cent of the total and non-plan expenditure was of the order of Rs 408.1 crores i.e., 84
per cent of the total. The relative share of the plan expenditure in the total went on
declining and in 1990-91 it was only 11 per cent of the total and the remaining about
89 per cent was of non-plan expenditure. In 1990-91 plan expenditure was Rs 245
crore while non-plan expenditure was Rs 2066.9 crore. During post-globalization
period, plan and non-plan expenditure increase to Rs 524.9 crore and 3000.4 crore in
1994-95. During this period, plan expenditure touched its lowest level of 10 per cent
while non-plan expenditure stood as high as 90 per cent of the total in 1999-2000. In
2009-10, plan expenditure was Rs. 5680.6 crores and non-plan expenditure was of the
order of 18505.4 crores. In this year, plan expenditure touched its highest level of 23
per cent and non-plan was its lowest level of 77 per cent.
Further, data analysis reveals that, during 1981 to 2010 period, plan
expenditure ranges from 9 to 23 per cent while non-plan expenditure ranges from 77
to 91 per cent. Thus, it shows that, in this period, there has been lot of fluctuation
between the share of plan and non-plan expenditure on higher education. As far non-
plan expenditure is concerned, it has risen during the period under study except in
200
some year (see Appendix 6.1). This shows that, there is substantial increase in non-
plan expenditure, corresponding to plan expenditure in the whole period. However,
declining plan expenditure, means declining effort for creation or addition of new
educational facilities and swelling non-plan expenditure denotes increasing burden of
maintenance expenditure on the shoulder of the state government. Thus, there is a
need of appropriate policy to balance this type of variation in plan and non-plan
expenditure on higher education.
In absolute terms, the increase in expenditure on higher education at national
level looks very impressive. But these figures are at current prices and the impressive
picture remains no more so impressive, if they are converted into constant prices.
After adjusting these figures for increase in prices with the help of WPI (Wholesale
Price Index), it can be noted that the real rate of growth of plan, non-plan and total
expenditure on higher education is small, as shown in table 6.5. For example in 2007-
08, plan, non-plan and total expenditure on higher education at current prices was Rs
3055.8, Rs 11255.6 and Rs 14311.4 crores but after adjusting with (2004-05 prices)
plan, non-plan and total expenditure was Rs 2620.8, Rs 9653.2, and Rs 12273.9
crores only (Appendix 6.1) during the same period.
Table 6.6 depicts the compound annual growth rate (CAGR) of plan, non-plan
and total expenditure on higher education in India.
Table 6.6: Compound Annual Growth Rate (CAGR) of Plan, Non-Plan and Total
Expenditure on Higher Education in India.
Year At Current Prices At Constant Prices
Plan Non-Plan Total Plan Non-Plan Total
1980-81 to 1990-91 17.4 14.6 15.1 11.5 5.8 9.3
1991-92 to 2009- 2010 14.4 13.3 13.6 7.3 4.4 6.5
1980-81 to 2009- 2010 13.7 13.0 13.2 6.3 4.1 5.8 Source: Computed from the data given in Appendix 6.1.
During pre-globalization period, growth rate of plan and non-plan expenditure
on higher education at current prices was 17.4 per cent and 14.6 per cent which
decelerated to 14.4 per cent and 13.3 per cent during post-globalization period and
again in the whole period, they further declined to 13.7 per cent and 13 per cent.
Likewise, growth rate of total expenditure on higher education also show the same
trend as explained above. At constant prices, compound annual growth rate (CAGR) 201
of plan, non-plan and total expenditure on higher education also follow the same trend
as in current prices but the data shows wide differences between current and constant
prices. For instance, compared to a rate of growth of 13.2 per cent at current prices,
the total expenditure on higher education increased at a rate of growth of 5.8 per cent
only at real prices (2004-05) during the whole period under study. Thus, the data
analysis reveals that CAGR of plan, non-plan and total expenditure on higher
education (both at current & constant prices) was fastest during 80’s i.e. in pre-
globalization period and slowest during the 90’s (mainly due to economic reforms)
i.e. in post-globalization period.
6.8 Trend Analysis of Intra-Sectoral Allocation of Resources in Education
Sector in Five Year Plans in India
Five year plans are an important instrument of development strategy adopted
by the independent India. It set new directions for development- quantitative
expansion, improvement in quality as well as several other dimensions of educational
development. Therefore, it is important to examine the priority given to different
levels of education in the Five Year Plans.
An analysis of intra-sectoral allocation of resources in India during the plan
period shows an emphasis on some levels of education. A clear cut shift in the
priorities is quite obvious from Figure 6.2 and Table 6.7. In the First Plan, 56 per cent
of the total plan resources to education were allocated to elementary education, 13 per
cent to secondary, 9 per cent to university and 13 per cent to technical education. The
allocation to elementary education came down drastically in the subsequent plans, 35
per cent in Second Plan, 34 per cent in the Third Plan and 30 per cent in the Fourth
Plan. Then it increased to 35 per cent in the Fifth plan and again it tended to decline to
30 per cent in the Sixth Five Year Plan. During the Seventh, the Eight, the Ninth Five
Year Plan, significant efforts were made to increase the allocation substantially,
though the allocations made in the Eighth and Ninth Five Year Plan were still less the
corresponding one in the First Five Year Plan in percentage terms. But again in the
Tenth Five Year Plan the elementary education was given a high priority, its share has
increased to 65 per cent of the total plan expenditure on education.
It has to be noted that, 1986 marks the beginning of the renewed emphasis on
elementary education with the formulation of the National Policy on Education 202
(1986), and with the ‘operation blackboard’ and similar other programmes launched
by the union and state governments. Besides, the National Policy on Education
(1986), international environment, particularly the Jomtien Conference in 1990, and
the Dakar Conference in 2001 on Education for All (EFA), Sarva Shiksha Abhiyan
(2000-01) and the beginning of the flow of external assistance for primary education,
are also responsible for increase in priority for elementary education. Thus, theses
show that elementary education was given a boost from the Seventh Five Year Plan
onwards. However, this boost seems to have been possible with severe cuts in plan
resources for other levels of education (Tilak, 2003).
Table 6.7 Intra-Sectoral Allocation of Plan Expenditure on Education in Five Year Plans
(Rs Crore)
Five Year Plan
Elementary Secondary Higher Technical Grand Total
1 2 3 4 5 6
First 85 (56) 20 (13) 14 (9) 20 (13) 153.00
Second 95 (35) 51 (19) 48 (18) 49 (18) 273.00
Third 201 (34) 103 (18) 87 (15) 125 (21) 589.00
Fourth 239 (30) 140 (18) 195(25) 106 (13) 822.00
Fifth 317 (35) 156 (17) 205 (22) 107 (12) 912.00
Sixth 883 (30) 736 (25) 530 (18) 324 (11) 2943.00
Seventh 2849 (34) 1829 (22) 1201 (14) 1083 (12) 8500.00
Eighth 9201 (46) 3498 (17) 1516 (7) 2787 (14) 19600.00
Ninth 27363(51) 9526 (18) 4350(8) 4778 (9) 53524.00
Tenth 28750 (65) 4325(10) 4799 (11) 4700 (10) 43825.00 Note: *Figure in parenthesis shows percentages
Source: Annual Financial Statistics of Education Sector, MHRD, various years
The resources allocated to secondary education showed that after an initial
jump from 13 per cent to 19 per cent between the First and Second Five Year Plan, it
got relatively stabilized and remained around that proportion until the sixth five year
plan. In the Sixth Five Year Plan, for the first time, the allocation was increased to 25
per cent. But this level was subsequently reduced to 17 per cent in the Eight Plans and
gradually it declined to 10 per cent in the Tenth Five Year Plan (which shows a very
meagre amount of all the plan period).
203
From Table 6.7 & Fig. 6.2, it can be analysed that regarding higher education
there have been considerable fluctuations. During the First Five Year Plan, higher
education was not given high priority. But probably realising the importance of higher
education soon, in the second five year plan2 the allocations to higher education was
doubled from 9 per cent to 18 per cent of total education outlay. During the post-
Kothari Commission period, higher education received a better treatment with more
than 20 per cent of the total outlay allocated to education being given to higher
education (Tilak, 2003). In the Fourth Plan its share reached all-time peak of 25 per
cent. Since, then it has been consistently declining. The share of higher education in
the total education expenditure in the Eight and the Ninth Five Year Plans was found
to be a meagre (7-8 per cent), the lowest proportions in the last half a century,
compared to 18 per cent (in the Sixth Plan).
Figure 6.2: Share of Different Levels of Education in Five Year Plans
Source: Annual Financial Statistics of Education Sector, Various Issues.
2 An intra-sectotal examination of the plan expenditure on education reveals some interesting points. The Second Five Year Plan marked the beginning of a drastic decline of resources allocated to elementary education and a doubling of resources allocated for higher education. It may also be noted that the overall developmental priorities also changed with the beginning of the second five year plan. Relative emphasis shifted from agricultural sector in favour of industrial sector. Industrial development requires manpower, and higher education was looked upon for the supply of manpower. Accordingly, expenditure was increased considerably.
204
During the First four five year Plans, increasing priority was given to higher
education in the five year plans and in the later period, higher education was paid less
attention in terms of allocation of plan resources. More strikingly, allocations to
higher education in the Eighth and Ninth Five Year Plans reached the all time bottom
levels. This seems to be an undesirable trend, in view of remarkable expansion of
enrolment and institutions on one hand and rising cost of higher education on the
other. Thus, it can be said that, the figure clearly calls for higher and sustained outlay
on higher education, considering the large increase in enrolments. Higher investment
is also necessary to improve the quality and infrastructure facilities which are
deteriorating rapidly due to paucity of funds. In the Tenth Five Year Plan, the share of
higher education slightly increased to 11 per cent. As far as technical education is
concerned, it also received relatively better treatment in the first three year plans, and
ever since, the share allotted to it has came down with some fluctuations.
Amazingly, the interdependence of various levels of education has been
ignored and more emphasis has been given to literacy and primary education. Hence,
the practice of putting one level of education against another in allocation of resources
may not be proper and in fact, may sound absurd. The main constraint to the
expansion of higher educational facilities has been the meagre public resources
allocated to education. The changing financing strategy under economic reforms
(globalization) seems to be developing one level of education at the cost of another,
hence, exacerbating imbalance among different levels of education. It should be noted
that higher education institutions play an important role in setting the academic
standard for primary and secondary education. They are also responsible for not only
providing the specialised human capital in order to corner the gains from
globalization, but also for research and development, training inside the country,
provide policy advice etc. It is to be realised that “higher education is no longer a
luxury; it is essential to national, social and economic development” (UNESCO,
2000).
Thus, the study concluded from table 6.7 reveal that, intra-sectoral allocation
of resources in education sector has shown a mixed trend in the globalised era. The
sector which has accorded more attention and priority are the elementary education.
Due to priority given to this sector, other sector viz. secondary, higher and technical
education suffered a lot. Therefore, government should increase total expenditure on 205
education as a per cent of its GDP so that each level of education can get equal share
and there will be no need to cut the expenditure on any level of education to finance
other level of education.
In this scenario of fast depleting financial support from the government,
various measures for mobilising resources for education in general and higher
education in particular have been suggested. Government has appointed two
committees for the central universities, known as Justice K. Punnaya committee
(UGC, 1993) and the other for technical education known as D. Swaminathan
committee (AICTE, 1994), to recommend alternative methods of mobilising
resources for higher education. Both these committees suggested several measures to
mobilize the non-governmental resources for higher education like (a) raising the
level of fees and funds collected from the students; (b) introduction of self-financing
courses, and (c) student loans. Many other committees were also constructed to deal
with issues pertaining to financing of higher education. The prominent among those
were: UGC (1997); on unit cost of higher education, to review the norms of
maintenance grants for Delhi colleges (UGC, 1999), to formulate the revision of fee
structure UGC (2000), and Ambani-Birla Report (GOI, 2000). Interestingly, all the
committees made recommendations almost on similar lines with central place for the
market in the form of imposition of user charges, introduction of self-financing
courses, and more space for the entry of private players. Consequently many
universities made upward revisions in the level of fees and funds to be charged from
the students.
Under the policy of economic liberalisation, a strong case has also been made
of privatization of higher education. Without going into a detailed discussion on
privatisation it can be argued that complete privatization of higher education in which
there is only profit motive and not the development of education in right directions
will be the over-riding considerations. Therefore, the government cannot and should
not abdicate its responsibility of providing financial support to institutions of higher
education (Azad, 2003). Privatisation in higher education should be encouraged in
India but with close government regulation and at the same time it should not
encourage commercialisation. Privatisation which ensures social justice in higher
education to all class of people and fights against its challenges is most welcome.
206
6.9 Trends of Public Expenditure on Higher Education in India
Higher education in India is in a deep financial crisis, with escalating costs,
and increasing needs of the system on the one hand, and shrinking public budgetary
resources and changing public policies on the other. `It should be noted that huge
public investments have been made in higher education in independent India, but this
impressive growth in investments in nominal prices, is however, more than offset by
increase in prices and increase in population, more particularly numbers of student in
higher education (Tilak, 1993). On the whole, the trend analysis of government
expenditure on higher education shows a real growth rate of 7.5 per cent in the1950s,
had it golden days during the 1960s, with the real expenditure increasing at a annual
rate of growth of 11 per cent but suffered significantly during the 1970s and came
down to 3.4 per cent and showed some tendency to recover during the 1980s at 7.3
per cent (CABE Report 2005). The 1990s heralded an era of austerity and higher
education suffered the most (Tilak, 2005). The very important development of the
early (1990s) is the introduction of economic reform policies that include stabilisation
and structural adjustment programme. Due to these policies, budgetary resources
allocated to higher education have indeed being severely affected.
Pattern of public expenditure in higher education constitutes two important
phases: A high growth phase of public expenditure on higher education from 1980 to
1991 and a low growth phase of public expenditure on higher education from 1992 to
2010. Table 6.8 gives trends in public expenditure on higher education in India both
at current and constant prices.
Table 6.8: Government Expenditure on Higher Education in India (Rs Crores) Year At Current Prices Per cent Shares At Constant Prices
Centre State Total Centre State Centre State Total 1980-81 98.8 384.9 483.7 20 80 501.3 1953.1 2454.4 1985-86 205.9 840.8 1046.7 20 80 762.1 3112.0 3874.0 1990-91 475.5 1836.4 2311.9 21 79 1208.0 4665.2 5873.1 1994-95 684.2 2841.1 3525.3 19 81 1138.1 4725.9 5864.0 1999-00 2201.4 6047.0 8248.4 27 73 2837.7 7794.9 10632.7 2004-05 2099.0 7404.2 9503.2 22 78 2099.0 7404.2 9503.2 2009-10 8346.6 15839.4 24186.0 35 65 6381.2 12109.6 18490.8
Source: 1. National Informatics Centre, Budgetary Resources for education, Department of Education, MHRD, GOI, New Delhi, (1995),
2. Annual Reports, Analysis of Budgeted Expenditure on Education, MHRD, various issues.
207
During pre-globalization period, public expenditure on higher education at
current prices has gone up from Rs 483.7 crores in 1980-81 to 2311.9 crores in 1990-
91. At constant prices (2004-05), it went up over the same period from Rs 2454.4
crores to 5873.1 crores. At current prices, public expenditure on higher education
increased by 5 times but in real prices, the growth is not all that impressive. At real
(2004-05) prices, only 2 times increase in expenditure on higher education has been
observed over the same period. During post-globalization period, public expenditure
on higher education at current prices was Rs 3525.3 crores in 1993-94 which
accelerated to Rs 24186.0 crores in 2009-10. At constant prices, it increases from Rs
5864.0 crores to 18490.8 crores over the said period. During this period total
expenditure on higher education at current prices increased by 7 times and at constant
prices it increased by only 3 times, only by just half. Thus, this shows that after
adjusting expenditure with inflation not much growth was noticed. Inflation has,
however, played havoc with educational financing.
However, aggregate expenditure is of limited value in India. Disaggregated
analysis is needed because the centre and the states have very different financial
powers and different sets of priorities and constraints.3 It can be seen from table 6.8
that, during pre-globalization period, central and state government expenditure on
higher education at current prices in the year 1980-81 was Rs 98.8 crores and 384.9
crores whereas in the year 1990-91, it amounted to Rs 475.5 crores and 1836.4. At
constant prices, central and state government expenditure on higher education was Rs
501.3 crores and 1953.1 crores in 1980-81 which further increased to 1208.0 and
4665.2 crores in 1990-91 respectively. During post-globalization period, central and
state government expenditure on higher education at current prices, reached to a level
of Rs 684.2 crores and Rs 2841.4 crores in 1994-95 and further it increased to its
highest level of Rs 8346.6 crores and 15839.4 crores in 2009-10. Likewise, central
and state government expenditure on higher education at constant prices went up to
Rs 1138.1 crores and 4725.9 crores in 1994-95 which further increased to Rs 6381.2
crores and 12109.6 crores in 2009-10 respectively. Thus, the key findings emerged
from this data analysis is that at current prices, both central and state government
3 In addition, each state has its own history of education development and its own sets of priorities and limitations.
208
expenditure on higher education has increased but when these expenditure are
adjusted with real prices (2004-05), then both have shown a declining trends.
Figure 6.3 and (Appendix 6.2) clearly shows the details of share of centre and
states in total expenditure incurred on higher education from 1980-81 to 2009-10.
From the figure, it can be analysed that, state share the major burden of expenditure
on higher education, ranges from the level of 65 to 80 per cent while centre share
ranges between 20 to 35 per cent. During pre-globalization period, share of central
government expenditure on higher education increased from 20 per cent in 1980-81 to
31 per cent in 1988-89 but it declined to 21 per cent in 1990-91. During post-
globalization period, centre share has decreased to 17 per cent in 1993-94 but again it
recovers in the year 2007-08 and become 27 per cent and further it increased to 35 per
cent in 2009-10. Similarly, during pre-globalization period, share of state government
expenditure on higher education was 80 per cent in 1980-81 which decelerated to 69
per cent in 1988-89 but it increased to 79 per cent in 1990-91. During post-
globalization period, state share has increased to its maximum level of 83 per cent in
1993-94 but further it declined to 73 per cent in 2007-08 and reached to its lowest
level of 65 per cent in 2009-10.
Figure 6.3: Share of Centre and States to Total Public Expenditure on Higher Education
Source: 1. National Informatics Centre, Budgetary Resources for education, Department of
Education, MHRD, GOI, New Delhi, (1995), 2. Annual Reports, Analysis of Budgeted Expenditure on Education, MHRD, Various
Issues.
209
The analysis of Compound annual growth rate (CAGR) of central and states
government expenditure on higher education and total government expenditure on
higher education in India is given in Table 6.9.
Table 6.9: Compound Annual Growth Rate of Public Expenditure on Higher Education
At Current Prices At Constant Prices
Centre States Total Centre States Total
1980-81 to 1990-91 19.9 13.7 15.1 13.8 7.9 9.3
1991-92 to 2009-10 15.4 13.0 13.6 8.2 5.9 6.5
1980-81 to 2009-10 14.4 12.8 13.2 7.0 5.5 5.8
Source: Computed from the data given in Appendix 6.2.
During pre-globalization period, compound annual growth rate (CAGR) of
central government expenditure on higher education both at current and constant
prices was 19.9 per cent and 13.8 per cent. Whereas, state government CAGR was
13.7 per cent and 7.9 per cent at current prices and constant prices respectively.
During post-globalization period, CAGR of central government expenditure grew at
15.4 per cent at current prices and 8.2 per cent at constant prices. Similarly, CAGR of
state government expenditure grew at 13.0 per cent at current prices and 5.9 at
constant prices in the above said period. The CAGR of the central government
expenditure at current prices for the entire period of the study was 14.4 per cent, but at
constant prices it was only 7 per cent. This trend continued even for state government
expenditure which recorded a compound growth of 12.2 per cent as against 5.5 per
cent at constant prices for the same period. Thus it is evident from Table 6.9 that,
compound annual growth rate (CAGR) of central, states and total government
expenditure on higher education both at current and constant prices has declined in
post-globalization period. However, both at current and constant prices CAGR of
central government expenditure have declined at a greater proportion in comparison
to state government expenditure.
6.10 Role of Centre and State in Financing Higher Education in India
Another important aspect in the context of allocation of resources in India
refers to centre-states relations in financing higher education in India. In the federal
framework, the mechanism of sharing financial responsibilities between the centre
and states is a very important issue. However, if the total plan and non-plan 210
expenditure on higher education is considered, on the whole, the role of the centre is
minimum. As per constitution, education was a ‘state’ subject. However, after the 42nd
amendment of the constitution (1976), education has become a concurrent subject,
i.e., the central and the state governments take the responsibility for education. As
even then, state governments meet a large part of the expenditure on education. As
mentioned earlier the expenditure on education in India comes from both the centre
and states. The bulk of the tax revenue is collected by the centre while states have the
main responsibility of maintaining and developing the education sector (De and
Endow, 2008).
The period-wise analysis of compound annual growth rate (CAGR) of central
and state government, plan and non-plan expenditure on higher education at current
prices is given in Table 6.10 which is computed from (Appendix 6.3). During pre-
globalization period, CAGR of plan expenditure of central government was 20.7 per
cent which declined to 16 per cent in post-globalization period and further it declined
to 15 per cent in the whole period under study). Likewise, CAGR of state government
plan expenditure on higher education has also shown a deceleration trend in post-
globalization period as compared to pre-globalization period and also for the entire
period. The analysis of CAGR of central government non-plan expenditure on higher
education reflects that, during pre-globalization period, it was 18.9 per cent which
decelerated to 14.8 per cent in post-globalization period and further it declined to 13.9
per cent for the entire period. Almost same trend holds true even for state government
non-plan expenditure on higher education but the magnitude of decline was greater in
respect of central government expenditure. As far as total, plan and non-plan
expenditure on higher education of central and state government expenditure is
concerned, both have shown an upsurge in CAGR in pre-globalisation period
compared to post-globalization period. But in comparison with total non-plan
expenditure on higher education, total plan expenditure on higher education has
shown a highest rate of deceleration in post globalization period.
Further, these data reveals that in globalization period, central government
plan and non-plan expenditure shows a high degree of deceleration as compared to
states plan and non-plan expenditure. Non-plan expenditures are almost exclusively
the domain of the state governments. As this involves maintenance of existing
211
infrastructure any decrease in its level would adversely impact the quality of
education. However, it can be noted that centre’s declining share has been one of the
important reasons for deceleration in the public funding of higher education.
Constrained by fiscal shortages, the states found it difficult to invest in plan funding
to improve the quality of higher education (Bhushan, 2009).
Table 6.10: CAGR of Centre and States Plan and Non-Plan Expenditure on Higher
Education
1980-81 to 1990-91 1991-92 to 2009-10 1980-81 to 2009-10
Centre Plan Exp 20.7 16.0 15.0
State Plan Exp 13.4 12.4 12.2
Total Plan Exp 17.4 14.4 13.7
Centre Non-Plan Exp 18.9 14.8 13.9
State Non-Plan Exp 13.8 13.0 12.9
Total Non-Plan Exp 14.6 13.3 13.0 Source: Computed from data given in Appendix 6.3.
Fig 6.4 and (Appendix 6.4) reveals the share of centre and states in plan and
non-plan expenditure on higher education in India. However, the centre accounts for a
relatively small proportion of the total expenditure on higher education though its
share has been increasing over the years. As far as central government is concerned,
its share in plan expenditure increased from 43 per cent in 1980-81 to 52 per cent in
1990-91. On the other hand, states share of plan expenditure on higher education has
decreased from 57 per cent to 48 per cent in the above said year in pre-globalization
period. During post-globalization period, centre share in plan expenditure increased
from 61 per cent in 1991-92 to 72 per cent in 2009-10, while states share in plan
expenditure decreased from 39 per cent to 28 per cent in the above said year.
However, centre’s share has been increasing over the years but with lots of
fluctuations. Thus the above figures depicts that, centre share in plan expenditure has
increased in both pre and post-globalization period but at the same time states share
has decreased in both these periods. However, it is important here, to note that in
compound annual growth rate terms, central government plan expenditure has
deterioted in post-globalization period in spite of its increased share in total plan
expenditure in both periods (i.e. pre and post-globalization period).
212
Figure 6.4: Share of Centre and States in Plan and Non-plan Expenditure on
Higher Education in India (in Percentage)
Source: Computed on the basis of data given in Appendix 6.4.
As far as non-plan expenditure is concerned, during pre-globalization period
central government share was 16 per cent in 1980-81, which reached to its maximum
level of 27 per cent in 1988-89. But in 1990-91, its share has declined to 17 per cent.
In contrast, share of state government was 84 per cent in 1980-81 and reached to its
minimum level of 73 per cent in 1988-89, but further it’s increased to 83 per cent in
1990-91. During post-globalization period, centre share fluctuated between 15 to 23
per cent while state share fluctuated from 85 per cent to 77 per cent. However, these
figures clearly show that central government mainly focus on plan expenditure and
states on non-plan expenditure. Although states are responsible for the bulk of
expenditure, but the centre has come to play a dominant role in shaping the country’s
education system. Much of the central government expenditure on higher education is
routed through the UGC. It is interesting to note that the disbursement of funds by the
UGC is uneven and the bulk of it goes to the central universities and their affiliated
colleges and to a few deemed to be universities. A vast majority of universities and
other degree awarding institutions are not even eligible to receive any kind of grants
from the UGC (Prakash, 2007)
213
6.11 Public Expenditure on Higher Education among Selected States in India
The state governments have borne the major share of expenditure on social
services. Education sector is not an exception. The financing of higher education
among the states in India differs widely. Hence after studying the trend of overall
expenditure pattern on higher education, it would be instructive to have a glance over
the trends in 15 major states over the period of 1980-81 to 2009-10. Table 6.11
presents the compound annual growth rate of public expenditure on higher education
among fifteen major states which gives an idea as to how states have contributed to
the financing of higher education.
It is not surprise to observe from the table, that during post-globalization
period, there has been almost a uniform pattern of deceleration in public expenditure
of higher education across some states. This fact of uniform pattern of deceleration on
public expenditure across states proves a systematic trend and slow withdrawal of
state funding of higher education. It is too well known that in India, states are hesitant
in mobilising additional resources from within the states and therefore the dependence
is largely on central assistance or their share in divisible central taxes. Thus, because
of the financial crunch at the state level, public money to finance higher education is
not coming up in required amount (Ahmad, 2002).
It may, however, quite interesting to note that most of the major states in India
have shown deceleration in the compound growth of public expenditure on higher
education. Out of these states- Assam, Bihar, Haryana and Punjab have shown the
largest deceleration during post-globalization period. In spite of deceleration, some
major states have shown acceleration in the compound growth rate of public
expenditure on higher education in post-globalization which is Karnataka, Kerala,
Maharashtra and Orissa. States like West Bengal have shown lesser degree of
deceleration in public expenditure on higher education during post-globalization
period. Tamil Nadu and Uttar Pradesh are the only states where the compound growth
rate of expenditure remains almost same in both pre and post-globalization period.
214
Table 6.11: Compound Annual Growth Rate (CAGR) of Public Expenditure on Higher
Education among Selected States
States 1980-81 to 1990-91 1991-92 to 2009-10 1980-81 to 2009-10
AP 12.8 12.0 11.9 Assam 18.2 15.5 14.8 Bihar 25.0 14.6 12.3
Gujarat 13.7 12.9 12.7 Haryana 16.8 14.8 14.3
Karnataka 10.1 11.6 11.9 Kerala 10.7 12.6 13.0
MP 12.3 11.8 11.6 Maharashtra 12.0 13.0 13.3
Orissa 13.8 14.1 14.2 Punjab 13.6 11.7 11.3
Rajasthan 12.8 11.9 11.7 Tamil Nadu 11.3 11.2 11.2
UP 11.9 12.0 12.0 West Bengal 13.0 12.5 12.4
Source: Computed on the basis of data given in Appendix 6.5.
6.12 Per Student Public Expenditure on Higher Education in India
The magnitude of expenditure on education becomes more meaningful when it
is represented as per student expenditure. The per student expenditure shows the
relative resource availability to the educational system. Estimates on unit costs of
education are extremely useful in investment decision making in education. But they
have been rarely used in planning in education, including in forecasting of resources
requirements, budgeting, allocation of resources to education in India (Tilak, 2003).
The trends in per student expenditure on education, that is indicative of some aspects
of quality and efficiency of education in terms of physical and human infrastructure
facilities available to students on average, are indeed disturbing. In nominal term, per
student public expenditure on higher education has shown a tremendous increase but
in real terms public expenditure has gone down over the period. This has been given
in Table 6.12 and Figure 6.5.
At constant prices (2004-05), per student expenditure has declined which
suggests that we are spending less and less resources per pupil at higher levels of
education i.e. enrolments is growing faster than resource allocated for higher
education. Decline in per student expenditure means decline in real resources
available per student on an average, seriously affecting the quality of higher
215
education. There were steep cuts in budget allocations for libraries, laboratories,
scholarships and faculty improvement programmes etc. Given the present level of
development, it may be necessary to ensure that per student expenditure does not
decline in real terms over the years (CABE Report, 2005).
Table 6.12: Per Student Public Expenditure on Higher Education in India
Year At Current Prices At Constant Prices Index (At Constant Prices)
1980-81 1757 8915 100.0
1985-86 2904 10748 120.56
1990-91 4694 11925 133.76
1994-95 5766 9591 107.58
1999-00 10246 13208 148.15
2004-05 8829 8829 99.03
2009-10 15469 11826 132.65 Source: 1). UGC Annual Reports various issue 2). Analysis of Budgeted Expenditure on Education, MHRD, Various Issues.
During pre-globalization period, per student expenditure on higher education
has gone up from Rs 1757 in 1908-81 to Rs 4964 in 1990-91, thus indicating about
2.8 fold increase at current prices. At constant prices, it went up over the same period
from Rs 8915 to Rs 11925, indicating only 1.3 fold increase. During post-
globalization period, per student expenditure on higher education in India went up to
Rs 5766 in 1994-95 and further to Rs 15469 in 2009-10 at current prices. The
corresponding figures at constant prices stood at Rs 9591 and Rs 11826 respectively.
At constant prices, per student cost has declined, this may be due to a better utilization
of resources or declining quality of education. Though we are unable to provide
empirical evidences on what accounts for declining costs, there are reasons to believe
that the quality of education has been declining. Moreover, the governments, in many
states have been encouraging the participation of private sector in a big way, thereby
shifting the burden of spending to the private sector and students (Duraisamy, 2003).
The index of growth of per student expenditure at constant prices, however, shows a
fluctuating trend.
216
Figure 6.5: Per Student Public Expenditure on Higher Education in India
(At Current and Constant Prices)
Source: Computed on the basis of data given Appendix 6.6.
The compound annual growth rate of per student expenditure has shown a
large variation in real terms as compared to current prices which is given in table
6.13.
Table 6.13: CAGR of Per Student Public Expenditure on Higher Education in India
1980-81 to 1990-91 1990-91 to 2009-10 1980-81 to 2009-10
At Current Prices 8.7 7.2 6.8
At Constant Prices 3.25 0.5 -0.9 Source: Computed on the basis of data given in Appendix 6.6.
The compound annual growth of per student expenditure at constant prices
(2004-05 prices) was 3.25 per cent during pre-globalisation period, which was almost
less than half as compared to current prices of 8.7 per cent. During post-globalization
period, compound annual growth of per student expenditure at current prices was 7.2
per cent while at constant prices it was meagre 0.5 per cent. It is evident from table
that compound annual growth of per student expenditure at current prices has shown a
very impressive figure of 6.8 per cent for the entire period but at constant prices, it has
registered a negative growth of -0.9 percent. Thus, it shows that inflation has
adversely affected higher education to a large extent. 217
Thus, whenever there is a cut in public expenditure on education, it is the
quality and more important equity that get traded off, which has been a matter of
serious concern for the educational planners. One can also note a steep decline in the
budgets for scholarships in higher education, that have great potential for promoting
equity in higher education, as a large proportion of scholarships are meant for weaker
sections. At a time when fees were increasing, and when the economic reform policies
caused severe problems to the lower and middle income groups, allocations to
scholarships were also on reduced (CABE, 2005). Though all those who advocate
increase in fees also argue for sufficient protective measures for weaker sections, and
increased sizeable efforts being made in the form of scholarships to weaker sections
etc., are yet to be seen.
Expenditure on scholarships in higher education has been declining over the
years at the macro level, but the decline was severe after the period of globalization,
that has begun in India (since 1991). According to Analysis of Budgeted Expenditure
on Education of various years, scholarships however constituted a very small
proportion of total expenditure on higher education. But there was a steep decline in
this small proportion: it decline from 0.52 per cent in 1989-90 to 0.28 per cent in
1997-98 in higher education, which came down to 0.11 per cent by the end of the
decade 1999-2000 and slightly increased to 0.45 per cent in 2008-094.
Thus to sum up, the state unwillingness to invest in education is clear from the
policy statements occasionally made, particularly with respect to, but not necessarily
confined to, higher education. For e.g., following the recommendations of the
committees set up by the University Education Commission (UGC, 1993) and the All
India Council for Technical Education (AICTE, 1994) (Dr Justice Punnayya
Committee and Dr Swaminathan Committee respectively), institutions of higher
education were required to raise at least 20 per cent of the required resources through
fees and other sources, implying that government subsidies would be restricted to less
than or about 80 per cent of the requirements. Secondly, the Ministry of Finance
(1997) in its paper on Government subsidies in India has stated that subsidies to
higher education would be gradually reduced to 50 per cent. Thirdly, when
reformulating the student loan programme in the early 1990s, the government argued
4 Annual Reports, Analysis of Budgeted Expenditure on Education, Various issue. 218
that loan programmes would be recognised so that with the recovery of loans, higher
education would eventually become self-financing. Lastly, and tellingly, there is the
encouragement and support given to private educational institutions with the almost
stated objective of saving public resources. It is difficult not to infer from these the
increasing unwillingness of the state to allocate budgetary resources to education
(Tilak, 2004).
6.13 Factors for the Deceleration in the Growth of Public Expenditure on
Higher Education in India.
Until now this chapter has discussed the trend of financing of higher
education, especially public expenditure. Here, an attempt has been made to discuss
the factors which have impacted these variables. A study conducted by Tilak (2003a)
found the overall decline in public expenditure on higher education is mainly due to
(a) decline in resource capacity of the government; (b) neo-liberal policies introduced
in the beginning of 1990s and (c) a strong but a wrong assumption that higher
education does not matter for development. This is a point of great significance that in
spite of higher growth of GDP, the states has been finding it difficult to step up public
expenditure on higher education in the period since 1990s. There are several factors
which led to the deceleration of public expenditure on higher education which have
been listed below:
The investment on the education as a whole has not been as par with the target of
six per cent of GNP. The expenditure on education as a per cent of GDP over the
period from 1980 to 2010 has varied between 0.48 per cent and 4.5 per cent.
Despite various recommendations and suggestions of Education Commission and
National Policies on Education, the expenditure on education as percentage of
GNP could not exceed to 5 per cent. India, even, is spending less than as
compared to small countries like Thailand and Malaysia which is spending 6.3
per cent and 4.6 per cent of GNP respectively (GMR, 2011). Thus, government
allocation must be raised to achieve the stipulated target of expenditure on
education.
At the time of economic reforms, fiscal adjustment programme was introduced in
order to curtail fiscal deficit from a peak of 7.8 per cent of GDP in 1990-91.
Since large fiscal deficit pose instability problem in the economy. Thus, 219
government has committed itself to a policy of fiscal adjustment. In India, fiscal
imbalance has been caused mainly by imprudent increase in public expenditure.
If fiscal imbalance is to be corrected, it is necessary to reduce the government
expenditure to around 25 per cent of GDP. However in 2009-10, the government
expenditure constituted 29.1 per cent of GDP. Thus, curtailment of public
expenditure and generation of additional revenue become essential. The
government, however, has failed to take hard corrective measures to curtail
consumption expenditure, subsidy payments and interest payments. Due to this,
some soft options such as reduction in capital expenditure and social services in
real terms have been opted. Inevitably, these adjustment policies had serious
implications for social sector, as it led to drastic reduction in developmental
expenditure. As a result of the functioning of such programmes; social services
become a soft target. Thus, expenditure on social sectors viz. health and
education has declined in real terms (Misra & Puri, 2011).
As evident from data that inflation in the post-reform period was higher as
compared to pre-reform period. Thus, this rising inflation has played havoc with
the investment in education. This has substantially eroded the real value of
financial inputs. As explained earlier, total public expenditure on higher
education and per student expenditure at current prices shows a very dismal
picture in terms of constant prices. This shows that the growth of per student
expenditure in higher education in real terms deteriorated i.e., total expenditure
could not kept pace with the inflation over the period. Such situations pose a big
constraint before the development of higher education in the state (Ahmad,
2002).
In India, public expenditure on higher education has been crowded out by the
expenditure on elementary education. It is, however, pointed out that in pre-
globalisation period, public expenditure on higher education had crowded out the
expenditure on secondary education. But crowding out arises in any sector due
to the shortage of financing or a particular attention to a one sector. Since it is a
well known fact that in post-reform period, various programmes for elementary
education has been initiated which led to the financing crunch for higher
education. Thus, the picture becomes clear by the table 6.14 given below which
220
clearly shows the crowding out pattern at different levels of education over the
period of study.
Table 6.14: Compound Annual Growth Rate of Total and Central Government
Expenditure at Different Levels of Education
Levels of Education 1980-81 to 1990-91 1991-92 to 2009-10 1980-81 to 2009-10
Elementary Total 16.02 15.06 14.84
Secondary Total 14.54 14.10 13.99
Higher Total 15.16 13.61 13.25
Elementary Central 36.46 32.39 31.47
Secondary Central 27.20 19.51 17.80
Higher Central 19.93 15.47 14.47
Source: Computed on the basis of data given in Appendix 6.7.
Section II
6.14 Globalization and its Impact on Expenditure on Higher Education in India
The trend and pattern of public expenditure on higher education in India has
changed over the period. Thus, in this section an attempt has been made to empirically
examine the expenditure on higher education for the period of study. The empirical
examination has been done to find out the impact of globalization on public
expenditure on higher education. In this study the variables which are included in the
model are total expenditure on higher education, gross domestic product,
globalization, dummy variable and cross product of dummy and globalization.
Total Government Expenditure
The total government expenditure incurred on education shows the priority
accorded to education. Traditionally in public finance, the commitment to a particular
sector is expressed through the share of gross domestic product (GDP) allocated to
that sector. Hence we have taken total government expenditure on higher education as
a percentage of GDP.
Dummy Variable
In this study, period has been classified into pre-globalization period and post-
globalization period. In order to see the overall effect of the pre and post globalization
period, the dummy variable has been chosen as a proxy for the impact of
221
globalization. Value ‘0’ for the period 1980-81 to 1990-91 and ‘1’ for the time period
from 1991-92 to 2009-2010.
Globalization
Globalization is a complex process to define. It means different things to
different people and it is interpreted and defined in different ways. It is a generic term
which has reached into every corner of society. It is a process that is increasing “the
flow of people, culture, ideas, values, knowledge, technology, and economic across
borders, resulting in a more interconnected and interdependent world”. Globalization
affects each country differently. It can have both positive and negative consequences,
according to a nation’s individual history, tradition, culture, priorities and resources’
and education is one of the sectors impacted by globalization (Knight, J, 2006).
Measuring globalization is difficult as many economic indicators have their
causes and magnitude to behave. However, the openness, which is otherwise called as
the worth of international trade to nation, has been widely accepted as an indicator for
globalization in a country. Hence, globalization in this study is measured in terms of
sum of exports and imports divided by gross domestic product (GDP), [(Exports +
Imports) / GDP]5 (see Appendix 6.8).
Gross Domestic Product
GDP is the total market value of final goods and services produced in an
economy in a year. The existing literature highlights the significant role played by
income in determining the educational expenditure. Hence, GDP at constant (2004-
05) prices is incorporated to capture the economic well-being of India.
6.15 Data Sources and Methodology
The sources of finance for higher education in India can be broadly classified
into two parts, viz. (a) governmental sources and (b) non-governmental sources. The
governmental sources include contribution from the central or union government and
the state governments6. The non-governmental sources include student fees, funds,
5 Aka, Bédia. F. (2006). Openness, Globalization and Economic Growth: Empirical Evidence from Cote D’ivoire. International Journal of Applied Econometrics and Quantitative Studies, 3 (2), pp. 67-86.
6 The 42nd constitutional Amendment of 1976 has shifted the subject of education from the state list to the concurrent list of the constitution. So higher education in India has been financed by both the union government and the States/UT.
222
voluntary donations and endowments, etc. This study does not take into account the
private expenditures of various types incurred by the individuals, households and
other private providers of education on either acquiring of education or education
development in general. It deals only with the public expenditure on higher education
in India from the governmental sources only i.e., public expenditure on education in
general and higher education in particular. Further, the study is confined to the public
expenditure incurred on higher education on revenue account only. It is to be noted
that the bulk of public expenditure on higher education in India is accrued under the
revenue account while very little amount is incurred on capital account. Therefore,
expenditure incurred on capital account has not been taken in this study.
The study is based on secondary sources of data which has been availed from
the various organisations. The data for Gross Domestic Product (GDP) and
Globalization are collected from Handbook of Statistics on the Indian Economy
published by Reserve Bank of India, Mumbai. Total Expenditure on Higher Education
is collected from Analysis of Budgeted Expenditure on Education of various issues,
Ministry of Human Resource Development: Government of India. In this study total
expenditure on higher education as percentage of GDP at constant prices (at 2004-05
prices) is used as dependent variable whereas dummy variable, globalization and
cross product of dummy and globalization are taken as independent variable. Higher
education is qualitative and social in nature and there are many social factors which
do affect higher education in many ways. But social factors could not be quantified
that is why these factors have not been included in the study.
The period of the study is 1980-81 to 2009-10, which has been divided into
two sub periods; 1981-1991 (pre-globalization period) and 1992-2010 (post-
globalization period). The dummy variable has been used to divide the period of the
study. Ordinary Least Square (OLS) method has been used to investigate the impact
of globalization on Indian higher education.
The following null hypothesis has been formulated and tested.
(a) Globalization had no significant impact on total expenditure on higher education
in India during the period (1991-92 to 2009-10).
223
6.16 Empirical Results and Discussion
Model I
To measure the impact of globalization on total expenditure on higher
education in India, following model is used.
TEHEYt= α1 + α2Dt + β1 GLOBt + β2 (DtGLOBt) + µt (1)
Where,
TEHEYt = Total expenditure on higher education as a percentage of gross
domestic product at constant prices in time t.
GLOBt = Exports and imports as percentage of gross domestic product
(indicator for openness and globalization for an economy) in time t.
DtGLOBt = Cross product of dummy variable and globalization.
Dt = Dummy variable (d=1 for period 1991-92 to 2009-10;
= 0, otherwise i.e., for period 1980-81 to 1990-91)
µt = Random error term independently and identically distributed with
zero mean and constant variance.
α2 is the differential intercept and β2 is the differential slope coefficient, also
called slope drifter, indicating by how much the slope coefficient of the second period
total expenditure on higher education function differs from the first period.
Estimating equation (1) by using OLS, we have
TEHEYt = 0.229*** + 0.164***Dt + 0.046 ***GLOBt – 0.048*** (DtGLOBt)
(5.135) (3.405) (3.709) (-3.781)
Values in parentheses are t-value where *** indicates 1 per cent level of
significance.
From the above estimated equation, we can derive the pre and post-1992 period mean
regression equation as:
TEHEYt = 0.229*** + 0.046***GLOBt
And, TEHEYt = 0.393*** – 0.002***GLOBt
224
Table 6.15 presents the result of the regression analysis. In the above
estimated regression equation, both the differential intercept and differential slope
coefficients are statistically significant, which strongly suggests that the regression of
total expenditure on higher education on globalization for the two time periods is
different. The intercept in pre 1992 period is 0.229 which is statistically significant at
1 per cent level of significance. The coefficient value of differential intercept in post-
1992 period becomes (α1 + α2) i.e., (0.229 + 0.164 = 0.393) which shows that there is
slightly an upward shift in the level of expenditure.
The coefficient value of globalization (GLOB) during pre 1992 period is 0.046
which is statistically significant at 1 per cent level of significance suggesting that a
one per cent change in globalization (GLOB) will positively lead to 0.046 per cent
change in total expenditure on higher education. The coefficient value of globalization
(GLOB) during post-1992 is -0.048 which is statistically significant at 1 per cent level
of significance shows that globalization has had a negative impact on total
expenditure on higher education and remains. It implies that, a one percent change in
globalization will decrease total expenditure on higher education by -0.002 per cent
respectively. Thus, public expenditure on higher education has declined during post-
1992 period. The reason behind this is that the role of private sector has increased to a
large extent and government feel that large amount of expenditure should be made to
elementary education instead of higher level of education because, private benefits are
greater than social benefits in higher level of education. Therefore, government is
reducing its responsibility in funding higher education at optimum level which is
important to maintain the overall quality and standard of education.
Table 6.15: Estimated Results of Total Expenditure on Higher Education as
percentage of GDP
Variables Coefficient t-ratio p-value Constant 0.229*** 5.135 (0.000) Dummy 0.164*** 3.405 (0.002) GLOB 0.046*** 3.709 (0.001)
DGLOB -0.048*** -3.781 (0.000) R2 0.395
F (k, n-k) F (3, 26) 5.649
(0.004) Notes: Level of significance *, **, *** are denoted as 10 per cent, 5 per cent and 1 per cent. P values
in parentheses denote the probability of the level of significance. 225
The overall significance of the model I can also be judged from the value of
the coefficient of multiple determination i.e. R-squared (R2). The value of R2 is 0.39
indicates that about 39 per cent of the variation in the total expenditure on higher
education is explained by the all explanatory variables included in the model over the
period 1980-81 to 2009-10. The F-calculated value 5.649 shows that the explanatory
variables included in the model collectively had significant effect on total expenditure
on higher education.
6.17 Conclusion
The study concluded the analysis of the behaviour of educational finance at
the aggregate level by re-emphasising that in spite of the sizeable inputs in education
sector over the years, the expenditure is not adequate to meet the ever-growing
requirements of quality of education. It is pointed out that India’s investment in
education as proportion of GNP has been below the national target of spending 6 per
cent. Further it has been found that India stands no comparison with the so called
developed or even with some developing countries in relation to investment in
education.
The analysis of total government expenditure and educational expenditure as
percentage of GDP in India shows that, during pre-globalization period total
government expenditure on education increased by five times and expenditure on
education as a percentage of GDP increased by three times. In mid-1980s, i.e., the era
when human resource development was given top-most priority, an increasing trend
in educational expenditure as a percentage of GDP has been observed. In absolute
terms and at current prices both total government expenditure and government
expenditure as per cent of GDP has increased to a large extent during post-
globalization period. But government expenditure as per cent of GDP is still less than
recommendation of Kothari Commission (1966) and reiterated by the National
Education Policy, 1986 and 1992.
The study also shows descriptive statistics of the variables and found that
government expenditure on education and GDP at constant prices has shown higher
variability during post-globalization period as compared to pre-globalization period.
The CV of government expenditure on education as percent of GDP also shows
226
variation. CV in pre globalization period was 36.58 and in post globalization period
are 32.25. The period wise analysis of compound annual growth rate (CAGR) of
government expenditure on education exhibits that, during pre-globalization period, it
was 15.1 per cent which slightly decelerated to 14.6 per cent in post-globalization
period and for the entire period it further decline to 14.5 per cent. However,
compound annual growth rate of GDP (at constant prices) remains almost constant in
all the periods. The study concluded that, expenditure on education in absolute sense
is increasing over the period of study. However, the increase in expenditure on
education in pre-globalisation period is more uniform than the post-globalisation
period. Due to this, the CAGR in pre-globalisation period is found to be more than the
globalised era.
The study also shows that in terms of relative priority higher education
suffered lot. Despite the fact that higher education is important for the development of
a nation, it is not given much importance in this globalised era. Government
expenditure on higher education as per cent of GDP in pre-globalization period has
shown rising trend. This has increased from 0.31 per cent in 1980-81 to 0.43 per cent
in 1990-91. Since then a fluctuating trend observed. The expenditure as per cent to
GDP has declined marginally to 0.36 per cent in 1994-95 but it further increased to an
all time high of 0.47 per cent to GDP in 1999-2000. However, this increase was short
lived and declined to 0.31 in 2004-05. In 2009-10, the expenditure on higher
education as per cent of GDP was recorded a modest increase to 0.41 per cent.
Further the study analysed the trends in public expenditure on higher
education during pre and post-globalization period and found that, pre-globalization
period stands marked by acceleration in the public expenditure on higher education
and post-globalization period shows deceleration in public expenditure on higher
education in India. In addition to this, it has been noted that, public expenditure on
higher education increased from Rs 483.7 crores in 1980-81 to 24186.0 crores in
2009-10 at current prices with compound annual growth rate (CAGR) of 13.2 per
cent. However, rising inflation makes this increase an illusion. After adjusting public
expenditure on higher education for inflation with whole sale price index (WPI), the
CAGR turns out to be just 5.8 per cent respectively in the above said period.
227
An analysis of compound annual growth rate of plan, non-plan and total
expenditure on higher education reveals that, India was faring better during the 1980s
(i.e. in pre-globalization period) both in current and constant prices. But after
economic reform measures introduced in the beginning of 1991, including
stabilization and structural adjustment programme, fiscal squeeze was experienced in
all the social sectors investment which affected education sector in general and higher
education in particular. Due to these adjustment policies the resources for education
particularly higher education in terms of plan, non-plan and total expenditure, both at
current and constant prices has decelerated in post-globalization period. These
policies mainly rely more on private support for expenditure. It also tries to enhance
the contribution from students in the form of user charges.
The foregoing analysis found a mixed trend in the globalised era with respect
to intra-sectoral allocation of resources in education sector. Among the different
sectors of education, the only sectors which attract attention during the reform period
are the elementary education, its share in total allocation on education stood at 65 per
cent in Tenth Plan period. While the share of secondary, higher and technical
education stood at 10 per cent, 11 per cent and 10 per cent in total education during
this period. This shows that, relative priority assigned to other sector viz. secondary,
higher and technical education suffered a lot. The changing financing strategy under
globalization seems to be developing one level of education at the cost of other,
hence, creating imbalances among different levels of education. Therefore,
government should increase total expenditure on education as per cent of GDP so that
each level of education can get equal share and there will be no need to cut the
expenditure on any level of education to finance other levels of education.
A further analysis reveals the trends in the development of expenditure on
higher education which is reflected to some extent in the compound annual growth
rate of centre and states government expenditure on higher education. The pre and
post-globalization period analysis of CAGR exhibits that central and states
government plan, non-plan and total expenditure on higher education at current and
constant prices has shown a declining trend in the post-globalization period The
analysis further shows that in comparison with non-plan expenditure on higher
education, plan expenditure on higher education has shown a highest rate of
228
deceleration in post-globalization period. As compared to states plan and non-plan
expenditure on higher education, centre plan and non-plan expenditure shows a high
degree of deceleration in post-globalization period. However, centre’s declining share
has been one of the important reasons for deceleration in the public funding of higher
education. Constrained by fiscal shortages, the states found it difficult to invest in
plan funding to improve the quality of higher education (Bhushan, 2009). The study
also shows that, during the period 1980 to 2010, central government mainly focus on
plan expenditure while states on non-plan expenditure. It has been also observed in
this study that, state share the major burden of expenditure on higher education ranges
from the level of 65 to 80 per cent while centre share ranges between 20 to 35 per
cent. Thus, the analysis shows that, the centre-states relations in financing higher
education do not seem to be promoting equitable and efficient educational
development.
Analysis of per student expenditure on higher education shows that, in
nominal terms per student expenditure increased by several times but in real terms it
has registered a downward trend. The compound annual growth rate of per student
expenditure has shown a large variation in real terms as compared to current prices.
The compound annual growth of per student expenditure at current prices has shown a
very impressive figure of 6.8 per cent for the entire period but at constant prices it has
registered a negative growth of -0.9 percent. However, inflation has adversely
affected expenditure on higher education. This shows that, there is decline in real
resources available per student on an average, seriously affecting the quality and
standard of higher education.
Further, inter-state analysis shows that, Assam, Bihar, Haryana and Punjab has
shown deceleration in the compound growth of public expenditure on higher
education, during post-globalization period. While, states like Karnataka, Kerala,
Maharashtra and Orissa have shown acceleration in the compound growth rate of
public expenditure on higher education in post-globalization period. Tamil Nadu and
Uttar Pradesh are the only states where the compound growth rate of expenditure
remains almost same in both pre and post-globalization period.
Thus the hypothesis of deceleration in the public expenditure on higher
education after the period of globalization is fully supported. The reasons for the
229
deceleration in the public financing of higher education is systematic. They are: (i)
Underinvestment in education; (ii) Fiscal crisis following structural adjustment
policies; (iii) The deleterious impact of inflationary pressures; and (iv) The crowding-
out of higher education as a result of increased priority given to the financing of
elementary and secondary education in India.
It is also observed that due to deep waves of globalization and competition,
important economic rationale for government funding for higher education has been
neglected. Globalization has exposed the economy to a greater worldwide
competition. This requires a strategy geared towards upgrading the quality of human
resource, including ‘education for all’, through reduction in relative inequalities. In
this process, higher education is highly relevant to meet the requirements of skilled
labour. Thus, public support for higher education remains essential to ensure a
balanced achievement of educational and social missions, apart from surviving in the
knowledge-based society. Therefore, sequencing of policies i.e., universal primary
education first, secondary and higher education later (as and when resources are
available or/ and left to private initiatives) would be very costly strategies in the era of
globalization. Hence, due importance needs to be given for the development of all
levels of education.
In section II, the purpose of the study is to provide econometric evidence of
the impact of globalization on total expenditure on higher education in India which is
dependent variable whereas globalization, dummy and interaction variable i.e. (cross
product of dummy and globalization are taken as independent variable. We have
taken dummy variable for the period 1980-81 to 1990-91 (d=0) and for the period
1991-92 to 2009-10 (d=1).
The empirical results obtained from Table 6.15 indicate that in Model 1, both
the differential intercept and differential slope coefficients are statistically significant,
which strongly suggests that the regression of total expenditure on higher education
on globalization for the two time periods is different. It shows that there is structural
break in expenditure during pre and post-1992 period. The result shows that, there is
slightly an upward shift in the level of expenditure during post-1992 period but the
rate of expenditure has not increased, in spite of increase it has decreased. Results
obtained from the econometric analysis concluded that during pre-1992 period,
230
globalization has positive and significant impact on total expenditure on higher
education whereas during post-1992 period, globalization has had a negative impact
on total expenditure on higher education but remains statistically significant. Thus, for
Model I we reject the null hypothesis that globalization had no significant impact on
total expenditure on higher education during post-1992 period and accept the
alternative hypothesis that it has negative and statistically significant impact on total
expenditure on higher education in India. However, the overall findings of our
empirical exercise, shows that globalization is adversely affected total expenditure on
higher education during post-1992 period.
Our result corroborates the findings of Chakrabarti & Joglekar (2006), Rani
(2004) and Tilak (2004). The latter documented the declining trend in allocation of
resources for higher education in India, particularly post 1991-92 periods. In addition
to this, Rani (2004) and Tilak (2004) analysed the alternative mechanisms designed
for generation of revenue from non-government sources for financing higher
education. The analysis of various government policy documents during post-
economic reform period reflects that liberalisation of Indian economy as a result of
structural adjustment programmes lead to the policy shift regarding financing of
higher education in India and this policy shift is also influenced by the ideas of World
Bank and international agencies. The overall thrust of these policies is on
deregulation, privatization and introduction of cost-recovery mechanism (Kaur,
2011). Thus, on account of cut in the budget for higher education, there are severe
pressures for higher education system to mobilise resources from non-governmental
resources, including privatization.
In sum, it can be concluded that, the emergence of knowledge economy has
highlighted the need for better skill development and better access to knowledge,
necessitating the need for development of higher education. With the coming into
existence of GATS, the need for strengthening higher education system has been
further accentuated in order to make it competitive with the foreign institutions. In
such a paradoxical scenario, the financing of higher education has become quite a
contentious issue.
231