2 1762

SOUTH ASIA EDUCATION SECTORTECHNICAL WORKING PAPER No. 2

INDIA

FINANCING OF ELEMENTARY EDUCATION IN INDIAIN THE 1990s

Vandana Sipahimalani

WORILD BANK

New Delhi OfficeReport No. 2November 29, 2000

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ACKNOWLEDGEMENTS

This paper could not have been written without the valuable guidance of and input from

Keith Hinchliffe. I would also like to thank Ward Heneveld, Emmanuel Y. Jimenez,

Christine Allison and Kalpana Seethepalli for their useful comments and suggestions. In

addition, I would like to thank all the India Education team members who have

commented on the various drafts of the paper as it evolved and for responding to my

many questions.

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TABLE OF CONTENTS

EXECUTIVE SUMIMARY ..................................... 4

CHAPTER ONE: INTRODUCTION ............................................................ 7

CHAPTER TWO: HOW HAS PUBLIC SPENDING ON ELEMENTARYEDUCATION CHANGED OVER THE PAST DECADE? .................................. 10

CHAPTER THREE: WHAT IS THE ROLE OF THE CENTRAL GOVERNMENTIN FINANCING ELEMENTARY EDUCATION? ............................................ 1 6

CHAPTER FOUR: WHAT IS THE ROLE OF THE VARIOUS STATEGOVERNMENTS IN FINANCING ELEMENTARY EDUCATION? .................... 20

CHAPTER FIVE: HOW SIGNIFICANT IS THE FINANCIAL CONTRIBUTIONOF HOUSEHOLDS TO ELEMENTARY EDUCATION? .................................. 35

CHAPTER SIX: CONCLUSIONS AND POLICY RECOMMENDATIONS:WHERE DO WE GO FROM ERE'? ............................................................. 41

REFERENCES ............................................................. 44

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EXECUTIVE SUMMARY

(i) Indicators of the status of elementary education in India reveal that education forall remains an elusive goal. According to the National Sample Survey, 34 percent ofprimary school aged children and 57 percent of upper primary school aged children werenot enrolled in school in 1995-96. Financing of this sector is certainly one of the keydeterminants of its outcomes.

(ii) This paper studies the trends in the financing of elementary education in Indiaover the past decade. There are several reasons why this is particularly important. In1994 the Supreme Court issued a directive to universalize free and compulsoryelementary education. The studies estimating resources required for universalization ofelementary education in the near future have emphasized the need to increase the realinvestment in this sector. In addition, jhe Government of India has often stated itscommitment to devote increasing resources to education in general, and elementaryeducation in particular, to achieve the target of spending 6 percent of GDP on educationby 2002. During the past decade, external assistance from donors was also sought for thefirst time for the elementary education sector. In addition, the nineties was a period ofstructural adjustment and economic liberalization in the country. In this changingeconomic milieu, where social service expenditures have often been reduced in othercountries, it is important to analyze the financing of elementary education.

(iii) The financing of elementary education by all agents is considered here includingthe Government of India, individual state governments and households. Data fromcentral and state government budget documents are used to obtain public expenditures.Private expenditures are obtained from survey data. An attempt has been made toconstruct a rudimentary national educational accounts for the country compiling thesegovernment budget and survey data. While state governments collectively contributeover 60 percent of the total expenditure on providing and accessing education,households also contribute a significant amount (approximately 30 percent). Thehousehold contribution is spent mainly on attending non-fee charging schools as well ason fees for private schools. The share of the central government's contribution is about 7percent. The analysis in this paper compares public spending on elementary educationover time and across states. It explores the relationships between spending andnational/state incomes. It also examines the variations in real expenditures and realexpenditure per student. Further, an attempt is made to correlate public expenditureswith enrollments in elementary schools in the various states. Finally, the paper studiesthe role of household spending on sending children to government, private aided andprivate unaided schools in the various states.

(iv) The paper concludes that total real public spending on elementary education grewby 5.3 percent a year over the period 1991-92 to 1996-97 and then rose to 5.8 percent perannum when 1997-98 expenditures are taken into account. The World Bank (1997)estimated that to achieve universalization by 2007 required a real growth of about 8percent per annum. Of course it must be kept in mind that other factors such as strategies

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to reach out of school children and administrative efficiency certainly affect efforts touniversalize elementary education. Nevertheless, sufficient finances are an essentialprerequisite. Real spending per student rose by 4.3 percent per annum between 1991-92and 1997-98. Contrary to the political rhetoric, however, total public spending onelementary education as a proportion of Gross Domestic Product (GDP) has actuallydeclined over the decade. Elementary education has received an almost constant share ofthe education budget, and the education budget as a proportion of the total revenuebudget has been almost constant over the decade. However, the increasing fiscal stressboth at the center and the state government levels for most states has reduced the share ofGDP allocated to revenue expenditures as a whole and developmental expenditures inparticular. International comparisons reveal that India spends a lower proportion of GNPon education than other countries with similar per capita incomes.

(v) The central government increased expenditures on elementary educationsubstantially in the nineties. Total real spending increased almost five times between1991-92 and 1997-98. The Government of India's share of plan funding for elementaryeducation increased from 29 percent in 1991-92 to 52 percent in 1997-98. This fundinghas focussed on a few Centrally Sponsored Schemes such as Operation Blackboard, theNon Fornal Education scheme, the Midday Meal scheme and the externally aidedDistrict Primary Education Program.

(vi) While the financing by the central government as a percentage of GDP hasincreased, state spending has not kept pace with national income growth. Collectively,state government expenditures on elementary education declined from 1.52 percent ofGDP in 1991-92 to 1.28 percent of GDP in 1997-98. While total state government realexpenditure on elementary education increased by approximately 4.4 percent per annumbetween 1991-92 and 1997-98, this is clearly not enough to meet universalization targets(since state government provide 90 percent of the public funds for this sector). Realspending per student by all state governments grew by about 2.9 percent per annum.

(vii) States differ considerably in their financing of elementary education. During thenineties, Himachal Pradesh, Kamataka, Maharashtra and Rajasthan increased theirfinancial commitment to the sector considerably. Total real spending increased by morethan 40 percent in all four states between 1991/92 and 1997/98. The highest level of realper student expenditure in 1997-98 was in Himachal Pradesh. States that had the smallestreal increases in expenditure were Madhya Pradesh, Andhra Pradesh and West Bengal;all of which are considered educationally backward states. The lowest level of real perstudent expenditure in 1997-98 was in West Bengal. A simple regression analysis ofincreases in real state spending on education on enrolment increases suggests that a fairlystrong positive relationship exists. This is a simplified regression and causality is hard toestablish without taking into account several other factors. Nevertheless, thesepreliminary results do highlight the importance of increases in financing, particularly inthe educationally backward states, where higher real rates of growth in expenditures willbe needed to achieve universalization within the next decade.

(viii) Finally, the paper explores the contribution of household expenditure toelementary education. According to survey data, some households spend a large amounton children attending private unaided schools. Considerable amounts are also spent on

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children going to government and aided schools. A large portion of this expenditure is onbooks and stationery. Other items of expenditure include exam fees, transport, privatecoaching classes and boarding and lodging. Households bear roughly 43 percent of thecost of providing and accessing government schools. It is possible that the high privateexpenditures required to access even government elementary schools may restrictdemand for education by poorer households. In this context, a more effective targeting ofpublic subsidies would be essential to enable poorer children to enroll.

(ix) The paper concludes that in order to enable all children up to the age of fourteento attend elementary schools, higher rates of growth in real expenditures than haveemerged in the nineties will be required. While all states have increased resources forelementary education, most of the educationally backward states need to invest moreresources in the future. It is vital that the central government, households and individualstate governments, in particular, sizably step up their joint investments to meet the futureneeds of this sector.

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CHAPTER ONE: INTRODUCTION

1.1 Education in India is constitutionally a concurrent subject with responsibilityshared between central and state governments. Its financing involves a complexinteraction between the state governments, households and the central government, inthat order. The majority of household expenditures are those required for accessinggovernment facilities and fewer than ten percent of school enrolments are in private, feepaying schools. The extent of educational provision, and its quality, is largely determinedby public spending.

1.2 The fiscal crisis in 1991 set the stage initially for short term adjustment policiesand eventually for the unprecedented economic liberalization reforms which havecontinued over the decade. At around the same time the Government of India, throughacceptance of international declarations of the need to universalize basic education andencouragement of specific accelerated programs, raised expectations of significantincreases in public finance for education. This was strengthened by the Supreme Court'sdirective in 1994 to universalize compulsory and free elementary education. Since thenin meetings of the National Development Council and in documents of the Ninth Planpublished in 1999, central governments have reiterated the desire that public expenditureson education should reach an amount equivalent to six percent of GDP by 2002. In thiscontext, and in light of the well publicized reductions in social services expenditureswhich have coincided with adjustment policies in many countries, particularly in subSaharan Africa, it is important almost a decade later to understand the impact of thereforms on the availability of public finance for the education system.

1.3 Significant efforts to expand and improve elementary education over the pastdecade have been put in place. The largest of these has been the District PrimaryEducation Program which is now implemented in over two hundred districts in fourteenof the fifteen major states. This program is mainly funded by the central governmentthrough grants and loans provided through donor organizations. This provides anotherreason for investigating the patterns and trends in the financing of education, particularlyelementary education, over the past decade. While additional funds have been providedthrough the central government, what has been the behavior of different stategovernments in providing for the children in their states?

1.4 While government policy continues to emphasize universal elementary education,the reality in many states is far removed from this goal. The National Sample SurveyOrganization survey in 1995-96 concluded that the proportion of the relevant age groupattending primary school was 66 percent (71 percent for boys and 61 percent for girls).At the upper primary level, the proportion was 43 percent (48 percent for boys and 38percent for girls). These averages conceal wide variations between different groups ofchildren with those living in rural areas, and particularly girls and members of scheduledcastes and tribes, having much lower enrollment rates. They also conceal wide inter-statedisparities. For almost all states in India, universalizing elementary education stillremains an unfulfilled objective.

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1.5 The broad issues of the overall impact of adjustment and economic liberalizationon public finances for education, and of the effects of additional central governmentgrants on the willingness of states to finance the sector are complex. In this introductorypaper, the major intention is to set out the information on patterns and trends in educationfinance over the past decade and to shed some preliminary light.

1.6 This study traces the trends in elementary education financing in India over thepast decade. It uses data from government budgets to explore the trends in governmentfinancing of elementary education.' It also uses data from NSSO's 52nd round survey(1995-96) and NCAER's 1994 household survey to get information on householdspending. The key questions focused on are:

* How has public spending on elementary education changed over the past decade?* What is the role of the central government in financing elementary education?* What is the role of the various state governments in financing elementary education?* How significant is the financial contribution of households to elementary education?

1.7 The rest of the paper is divided into five chapters. The first three focus on overallpublic expenditure on education and the specific contributions made by central and thenstate governments. Chapter Four analyzes household expenditures. In the final chapter,the conclusions are summarized and some first attempts are made to answer the majorquestions raised above. However, prior to focusing in turn on expenditures by centraland state governments and households, an attempt has been made to review the totalexpenditures by education level and by source which are made to provide and accesseducation in India. Table 1 summarizes the financial resources spent on the various sub-sectors of education by each of the different sources.

' Financial data upto the year 1996-97 were obtained from the 'Selected Analysis of Budget Expenditure', ayearly publication of the Ministry of Human Resource Development. Central government financial dataafter this year were obtained from Union Government budget documents. State government financial datafor 1997-98 (the last year for which actuals are available) were obtained from the study by Bashir (2000).Since these data are not available for three states as well as for union territories, 1996-97 data and, in somecases 1997-98 budget estimates, have been used for these.

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TABLE 1: SPENDING ON EDUCATION BY SOURCE OF FUNDS: 1995-962(Rs. Million)

Central State/UT Households TotalGovernment Governments

Elementary 12029 140449 92504 244982[4.9] [57.3] [37.8] [52.6)

Secondary 7023 96944 39249 143216[4.9] [67.7] [27.4] [30.7]

University and 7132 31907 15367 54406other Higher [13.2] [58.6] [28.2] [11.7]

Technical 4942 10059 n.a 15001[32.9] [67.1] [3.2]

Other 2044 6428 n.a 8472[24.1] [75.9] [1.8]

Total 33170 285787 147120 466077[7.1] 161.3] [31.6] [100.0]

Note: Figures in parenthesis are percent of total. Percentages in first three columns sumto hundred horizontally i.e. the percentage of total expenditure on each sub-sector byeach agent. Percentages in the last column sum to hundred vertically i.e. the percentageof total education expenditure spent on each sub-sector.

1.8 Overall, state governments provide 61 percent of the total cost of providing andaccessing education, households, 32 percent, and the central government, 7 percent. As ashare of total cost at each level, the central government subsidy is greatest for higher andsecondary education. For each level of education, the state governments provide between57 percent and 68 percent of total costs. Household expenditure on accessing education,both private and public is substantial. Overall it is almost one third of the total. What isperhaps most surprising is that the household share is greatest at the elementary levelwhere it accounts for almost two fifths compared to both secondary and higher educationwhere the contribution is just over one quarter.

2 Data used are from budget documents for GOI and state spending. Household spending is estimated byusing data from the National Sample Survey Organization 1995-96 survey. Unit costs are multiplied bytotal enrollments to arrive at these estimates.

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CHAPTER TWO: HOW HAS PUBLIC SPENDING ON ELEMENTARYEDUCATION CHANGED OVER THE PAST DECADE?

2.1 The central and state governments in India collectively bear the responsibility forfinancing the provision of public elementary education. While state govermmentsundertake most of the public expenditure on elementary education, the centralgovernment has a significant role to play in financing plan expenditures. Thus it isimportant to study the pattern of total government spending on elementary educationover the past decade.

2.1 TOTAL EXPENDITURE

2.11 A good indication of the priority accorded to elementary education by thecountry's governments is the extent to which public spending on this sector has kept pacewith national income. The Government of India and collective state governments haverecently reiterated the target of allocating 6 percent of GDP for education by the end ofthe 9th Plan period (1997-2002). Currently, the reality is still far removed from this target.Further, the overall proportion declined from 3.65 percent (3.18 percent if onlyDepartments of Education expenditure is considered) in 1991-92 to 3.48 percent (2.77percent if only Departments of Education expenditure is considered) in 1996-97. Theproportion of GDP spent by the Government of India and all states collectively onelementary education has also declined from 1.57 percent in 1991-92 to 1.37 percent in1996-97, as figure 1 and table 2 illustrate.3

2.12 While the target for expenditure is not being achieved, it is not clear that thisnecessarily reflects a decline in the importance given to elementary education (oreducation as a whole) relative to other sectors. As Table 2 reveals, education expenditureas a proportion of total revenue expenditures by states has hovered around 19.5 to 20percent over the decade and elementary education has consistently received about 48-50percent of the revenue expenditure on education in the 1990s. Thus, elementary educationexpenditure as a proportion of total revenue expenditure by states has also remainedalmost constant at about 10.2 percent over the decade. While expenditures on educationhave been able to retain a constant share of revenue expenditures, the proportion of GDPspent by states on revenue expenditures as a whole has fallen over the decade. In otherwords, the growth rate of revenue expenditures has not kept pace with GDP growth. Thisis seen in the first row of Table 2. In addition, the share of revenue expendituresdevoted to developmental expenditures also declined until 1994-95 since when it hasstabilized at around 61-62%. Overall, it could be argued that the decline in the share ofeducation expenditure (and of elementary education expenditure) in GDP appears to bemainly the result of the decline of revenue and development expenditure as a share ofGDP rather than the result of a decline in its importance relative to other sectors. On theother hand, there is no evidence of an increase in its importance as has been continuallypromised.

3 All figures are included in the annex to the text.

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TABLE 2: EXPENDITURE PATTERNS OF STATE GOVERNMENTS4

91-92 92-93 93-94 94-95 95-96 96-97 97-98Budget

EstimatesRevenue 15.7 15.3 14.9 14.8 13.1 13.1 13.8

expenditure of allstates (percentage

of GDP)Developmental 67.1 66.0 64.8 61.5 61.6 62.8 61.6

expenditure of allstates (percentage

of revenueexpenditure)Education 31.6 32.1 31.9 31.3 31.6 30.6 30.4

expenditure of allstates (percentageof developmental

expenditure)Education 19.8 20.6 19.7 19.5 19.9 19.6 19.7

expenditure of allstates (percentage

of revenueexpenditure) ____ == _

Elementary 10.5 10.2 10.3 10.2 10.5 10.2 Not availableeducation

expenditure of allstates (percentage

of revenueexpenditure)

Elementary 1.5 1.5 1.4 1.4 1.3 1.3 1.3education

expenditure of allstates (percentage

of GDP)

Elementary 1.6 1.5 1.5 1.4 1.4 1.4 1.4education

expenditure of allstates + GOI

(percentage ofGDP)

2.13 Figure I illustrates the trend in spending on elementary education when externallyprovided assistance (most of which are District Primary Education Program (DPEP)

4 State budgets are divided into revenue and capital accounts. Within each there are plan and non-plancategories. Education expenditures on the capital account are negligible.

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funds) is excluded. In the absence of externally provided assistance, the proportion ofGDP spent by the GOI and states on elementary education would have declined evenmore sharply from 1.57 percent in 1991-92 to 1.35 percent in 1996-97.

2.14 A decline in the share of GDP does not mean that total real government (GOI +states) spending on elementary education has also declined over the decade. In fact, asFigure II illustrates, real government spending per student increased by an average of 4.3percent a year between 1991-92 and 1997-98.5 This was accompanied by an averagegrowth in enrollment over the same period of around 1.3 percent a year. However, giventhe net attendance rates for primary and upper primary schooling described above, neitherthe rate of increase of expenditures nor the increase in enrolments are at levels likely tolead to a rapid realization of universal elementary education.

2.2 INTERNATIONAL COMPARISONS

2.21 While it is hard to obtain comparable figures for a cross section of countries forspending on elementary education, the data presented in table 3 relating to total spendingon the education sector are indicative. According to the 1999 Human DevelopmentReport published by the UNDP, India spent 3.4 percent of its GNP on education. Thecountries grouped under the 'Medium Human Development' category (to which Indiabelongs) spent, on average, 3.8 percent of GNP on education and several includingBrazil, Thailand, Kenya and Mexico spent more than India. Even some of the countriesin the 'Low Human Development' category spent proportionately more on education thanIndia. These include, for instance, Cote D'Ivoire, which spent 5 percent of GNP andBurkina Faso, which spent 3.6 percent of its GNP on education.

S 'Real' spending refers to expenditures at constant prices in 1982. The consumer price index for industrialworkers (which forms the basis of the dearness allowance) is used as the deflator.

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TABLE 3: INTERNATIONAL COMPARISONS OF EDUCATIONEXPENDITURE

Country/Region Percent of Percent of Percent ofGNP government education

expenditure expenditure onprimary &secondaryeducation

High Human Development 5.1 12.5 Not availableU.S.A. 5.4 14.4 67.8

South Korea 3.7 17.5 81.1Medium Human Development 3.8 13.9 Not available

Mexico 4.9 23.0 73.9Thailand 4.1 20.1 73.2Brazil 5.2 68.7

Sri Lanka 3.4 8.9 74.8China 2.3 11.9 68.3India 3.4 11.6 66.0Kenya 6.6 16.7 78.5

Pakistan 3.0 8.1 77.3Low Human Development Not available Not available Not available

Bangladesh 2.9 Not available 88.6Cote D'Ivoire 5.0 Not available 82.6Burkina Faso 3.6 11.1 Not available

Developing countries 3.6 14.8 Not availableWorld 5.4 12.7 Not available

Source: UNDP Human Development Report, 1999. Table 10.

2.22 India's indicators of expenditure on education are also low when compared withthose of other low income countries. The 1999/2000 World Development Report statesthat India spent about 3.4 percent of GDP on education in 1996 compared to an averageof 3.9 percent of GNP by all low income countries. In this context, it is revealing toinvestigate the relationship between GNP per capita and public spending on education.Figure III illustrates the positive relationship between the two. India spends a lowerproportion of GNP on education than 'expected' by international standards. Countrieswith levels of expenditure above that expected by international standards includeEthiopia, Malawi, Kenya and Togo. Thus, in terms of both 'human development status'and per capita income, India fares poorly on account of the proportion of GDP spent oneducation when compared to other countries.

2.3 PLAN VERSUS NON PLAN EXPENDITURE

2.31 This section examines how 'plan' expenditure on elementary education haschanged over the past decade. All expenditures by the central and state governments areclassified as either plan or non-plan. Plan expenditures largely finance new

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developmental activities over the five year plan periods. Once the plan period is over,recurring plan expenditure is classified under the non-plan account. Thus while planexpenditure is not the same as non-recurring expenditure, a large proportion of it is usedfor investment purposes. The ratio of plan to total revenue expenditure on elementaryeducation by GOI and all states combined has increased over the decade. It increasedfrom 11.1 percent in 1991-92 to 21.2 percent in 1996-97. This is an indication that agreater proportion of funding in the sub-sector is being devoted to new programs.Nevertheless, this is not always the case. For example, some states such as Assam, underfiscal duress, spend on items of recurrent expenditure and allocate them under the 'plan'head.

2.4 EXPENDITURE ON ELEMENTARY EDUCATION RELATIVE TO OTHERLEVELS OF EDUCATION

2.41 The pattern of government spending on the Indian education system can beanalyzed according to its three tier structure. The bottom rung of the ladder is theelementary education sub-sector. This comprises of Grades I through VIII in most states(Grades I through VII in a few states). Of these, grades I through V comprise primaryschool in most states and grades VI through VIII are considered upper primary school.However, budget data are not available separately for the primary and upper primarylevels. Secondary school consists of grades IX through XII. Finally, the higher andtechnical education category consists of college and post-graduate education.

2.42 There has been little change in the distribution of public expenditure on educationby level since 1991-92 (Table 4). The share of the states' Departments of Education andthe central government's Ministry of Human Resource Development's expenditure oneducation which is devoted to elementary education has risen slightly over the decadefrom 49.3 to 49.5 percent. The share of the budget allocated to secondary education hasfallen very slightly over the decade. Finally, the share of the education budget spent onhigher and technical education stayed approximately constant over this period.

TABLE 4: PERCENTAGE ALLOCATION OF TOTAL EDUCATIONEXPENDITURE BY LEVEL

91-92 92-93 93-94 94-95 95-96 96-97Elementary 49.3 45.2 46.2 49.0 49.7 49.5Secondary 34.0 35.1 33.8 34.3 34.2 33.3

Higher and Technical 14.3 14.5 15.1 14.4 14.0 14.4Other 2.4 5.2 4.9 2.3 2.1 2.8

2.43 Official budget documents do niot provide expenditure data separately for primaryand upper primary schooling. An estimate has been made using the ratio of teachers ateach level (since teachers' salaries constitute about 95-97 percent of total expenditure forthe elementary education sub-sector). Based on this ratio, approximately 30 percent oftotal elementary education expenditure was spent on the upper primary sub-sector in1996-97 compared to 28 percent in 1991-92.

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2.44 Another issue that may be highlighted is that, as Table 5 demonstrates, the stategovernments' share of total elementary education expenditure has gradually decreasedover the decade from 96.7 percent of total public spending in 1991-92 to 88.9 percent in1997-98. The trends in spending imply that central spending has increased at a faster ratethan state spending. The next chapter discusses central government expenditure onelementary education over the past decade.

TABLE 5: GOI AND STATES' SHARE OF REAL SPENDING ONELEMENTARY EDUCATION

(Rs. Million)

YEAR GOI ALL STATES TOTAL1991-92 1292 38445 39737

(3.3) (96.7)1992-93 1318 38349 39667

(3.3) (96.7)1993-94 887 40513 41400

(2.1) (97.9)1994-95 1250 42722 43971

(2.8) (97.2)1995-96 *3843 448546 48697

(7.9) (92.1)1996-97 4584 46946 51530

(8.9) (91.1)1997-98 6193 49701 55894

(11.1) (88.9)Note: Figures in parentheses are percentages of total. They sum to hundred percenthorizontally for each year.

6 Figures for Jammu and Kashniir, Uttar Pradesh, Punjab, all North Eastern states except Assam and allunion territories are budget estimates. Figures for all other states are actual expenditures.

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CHAPTER THREE: WHAT IS THE ROLE OF THE CENTRALGOVERNMENT IN FINANCING ELEMENTARY EDUCATION?

3.1 The Government of India (GOl) has traditionally financed a small share ofelementary education expenditure relative to the state governments. Most of this fundingcomes in the form of Centrally Sponsored Schemes (CSS) which are grants in-aid to Stategovernments. However, as the analysis below reveals, the central government's sharehas grown during the past decade. In addition, central government financing ofelementary education is strategically important since it provides a significant portion ofthe plan expenditure for the sector.

3.1 TOTAL SPENDING BY GOI

3.11 Table 6 demonstrates that total nominal spending by the Government of India(GOI) on elementary education increased over the decade, with a major increaseoccurring in 1995-96. Fifty percent of this increase came from the introduction of themidday meal scheme as a Centrally Sponsored Scheme.

TABLE 6: GOI TOTAL SPENDING ON ELEMENTARY EDUCATION(Rs. Million)

91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-2000(RE) (RE) (BE)

Total 2829 3163 2289 3549 12029 15679 22668 27431 30370Total 2829 3163 2254 2609 10017 13839 17059 21931 22870

excludingDPEP __ __

Total 2829 3163 2074 2429 9747 13480 16546 21339 22099excluding all

externallyprovidedassistance

Total (real)7 1292 1318 887 1250 3843 4584 6193 6626 NotI__ I I I available

3.12 The increase in nominal spending by GOI on elementary education during theperiod 1991-92 to 1998-99 was almost tenfold. In contrast, nominal spending by allstates and union territories only almost doubled during this period. Real spending by GOIfell in 1993-94 and then rose considerably in 1995-96. Since 1994-95, it has continued torise with the introduction of new centrally sponsored schemes. Total real spendingincreased by almost five times between 1991-92 and 1997-98.

7 'Real' spending refers to expenditures at constant prices in 1982. The consumer price index for industrialworkers (which forms the basis of the dearness allowance) is used as the deflator.

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3.2 CENTRALLY SPONSORED SCHEMES

3.21 The central component of GOI plan expenditure on education is in the form ofgrants-in-aid to states known as Centrally Sponsored Schemes (CSS). As discussedearlier in Chapter Two, GOI spending (particularly plan spending) on elementaryeducation rose relative to state spending during the 1990s. The GOI's share of totalelementary education expenditure has gradually increased over the decade from 3.3 in1991-92 percent to 11.1 percent in 1997-98. In addition, the GOI's share of planexpenditure on elementary education has increased more rapidly from 29.2 percent to52.1 percent during the same period, perhaps because of the growing debt servicingburden of the states. Thus, although their share of' overall elementary educationexpenditure is relatively small, GOI spending has had an increasingly strategic role toplay.

3.22 The total nominal expenditure under CSS rose from Rs.2829 million in 1991-92to Rs.22668 million (revised estimates) in 1997-98. The schemes which received thelargest share of CSS funding were Operation Blackboard (OB) and the Midday Mealscheme. Table 7 below summarizes the expenditure on account of the various CentrallySponsored Schemes.

TABLE 7: GOI SPENDING: CENTRALLY SPONSORED SCHEMES(Rs. million)

91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99Teacher training 421 834 650 775 1076 1000 895 1590

[14.9] [26.4] [28.4] [21.8] [8.9] [6.4] [3.9] [5.8]Non Formal Education 400 452 1066 1312 1531 1583 1831 1600

[14.1] [14.3] [46.6] [37.0] [12.7] [10.1] [8.1] [5.8]Operation Blackboard 1755 1579 179 215 2681 2790 3010 3040

[62.0] [49.9] [7.8] [6.0] [22.3] [17.8] [13.3] [11.1]Midday Meal/Nutritional 4412 8000 10704 14002

Support [36.71 [51.0] [47.2] [51.0]DPEP(EAP) 35 940 2011 1840 5609 5500

[1.5] [26.5] [16.7] [11.7] [24.7] [20.1]Other EAP schemes 180 180 271 359 513 592

[7.8] [5.0] [2.2] [2.3] [2.2] [2.2]Other 253 298 179 128 46 107 107 1108

[9.0] [9.4] [7.8] [3.6] [0.4] 0.7] [0.5] [4.0]Total 2829 3163 2289 3549 12029 15679 22668 27431

Notes: Figures in parenthesis represent the percent of total CSS expenditure on theparticular scheme.EAP refers to 'externally aided programs'.

3.23 During the early part of the decade (1991 to 1993), the major portion of thisfunding was devoted to the Operation Blackboard (OB) scheme (See Table 7). OperationBlackboard was initiated in 1986 to provide grants to states to construct an additional

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classroom and hire an additional teacher in single-teacher schools. In addition, itmandated that half the newly hired teachers be women. Finally, a portion of the grantwas used to finance a standardized package of teaching-learning materials. The schemewas partially successful, particularly in hiring new women teachers and buildingadditional classrooms. However, the mid-term evaluation of the Operation Blackboardscheme, conducted by the National Institute of Rural Development, Hyderabad in 1993also revealed several weaknesses. The evaluation criticized the quality of teachinglearning materials as not being up to the mark. In addition, in several states thedistribution of these materials was said to be flawed. Finally, the report argued thatteachers were not adequately trained to use the new materials.8 A more comprehensiveevaluation of the scheme by the National Institute of Educational Planning andAdministration is currently underway.

3.24 During the mid-1990s, the largest share of CSS funding went towards the Non-Formal Education (NFE) scheme. The Department of Education (DOE) launched theNFE scheme to provide an alternative to the formal schooling system. In particular, theprogram was aimed at getting working Children and girls into school. The Ninth Planevaluation of this scheme by the Planning Commission concluded there were severalweaknesses in its implementation, including poor quality of inputs and infrastructure.The program was significantly revamped as a result of the recommendations of thisstudy.

3.25 During the latter part of the decade (1995-96 to 1999-2000), a large portion ofcentral funding was allocated to the Midday Meal scheme (later known at 'NutritionalSupport to Primary Education'). In fact, in 1996-97 as much as 51 percent of the totalfunding from CSS was allocated to the Midday Meal scheme. Several studies haveconcluded that the scheme has been somewhat successful in increasing enrollments inschool, particularly that of girls (Dreze et al (1999), Kaul et al.(1999), Sipahimalani(1999)). However, an evaluation of this program by the Operations Research Group in1999 is less favorable and cites a negligible impact on attendance rates and delays indistribution of food grains.

3.26 Since 1994-95, the District Primary Education Program (DPEP) has also provideda substantial portion of the CSS funds to the states. Amongst the externally aidedprojects, DPEP's funding has been the most significant. The initial evaluations of thisongoing program have found it to be successful in raising enrollments, particularly that ofgirls, and training teachers while building schools, classroom and hiring teachers. Sincethis project is ongoing, a final evaluation is awaited.

3.27 In addition to the Centrally Sponsored Schemes of the Department of Education,there are some allocations made on the capital account for construction of schoolbuildings under schemes of a few other departments. The most significant of these is theJawahar Rozgar Yojna (JRY) in the Rural Development Department. Unfortunately, it is

8 S.K.Singh and S. Rajakutti. "Implementation of Educational Policy in India: The Case of OB Scheme inMadhya Pradesh" in Journal of Educational Planning and Administration, Volume XII, no. 2. NIEPA,New Delhi, April 1998.

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very difficult to account for all these expenditures when computing total expenditure byGOI on education. This is because schemes such as the JRY do not allocate a certainproportion of funds for school construction. They give a block grant to local governmentbodies and the amount allocated to school construction is left to their discretion. Almostall studies of elementary education financing thus do not account for the expenditure onschooling under schemes such as the JRY. In order to ascertain whether accounting forthis expenditure might affect the trends discussed in this study, it is possible to estimateapproximately the funds under JRY spent on school building construction. Totalexpenditure in 1993-94 were Rs.38787.1 million i.e. 0.52 percent of GDP. In 1995-96this figure was Rs.43911.2 million or about 0.4 percent of GDP. In 1993-94, forexample, 39,000 school buildings were built from JRY funds. Assuming a rough averagecost of Rs.2.5 lakh per school building, the total amount spent would be approximatelyRs.9520 million or about 0.13 percent of GDP. This figure has declined slightly over thedecade.9

9 These figures are obtained from "Rural Development Statistics, 1998" (National Institute of RuralDevelopment).

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CHAPTER FOUR: WHAT IS THE ROLE OF THE VARIOUS STATEGOVERNMENTS IN FINANCING ELEMENTARY EDUCATION?

4.1 State governments provide the major portion of the funds spent on elementaryeducation (as discussed earlier in Chapter One). While their combined share has beendecreasing in the 1990s, they still provide almost 90 percent of the public finances. Thecircumstances and experiences of the states vary widely both in terms of elementaryeducational outcomes and financing. It is thus important to analyze the patterns in thegovernment financing of elementary education in the various states. Sections 4.1 and 4.2focus on nominal expenditures and their relationship with national income and revenueexpenditures of the states. This analysis is supported by studying the trends in 'real'expenditures in Section 4.3.

4.1 SPENDING RELATIVE TO GSDP AND TOTAL REVENUE EXPENDITURE

4.11 It is important to study the trends in state government spending on elementaryeducation relative to state domestic products and total state revenue expenditures. This isa reflection of the financial commitment of the respective state governments to thissector. In addition, it is also indicative of whether the spending has kept pace with theeconomic progress in a state. It must be kept in mind, of course, that some states such asKerala and Tamil Nadu have very high elementary education enrollment rates and lowbirth rates. Thus the increase in spending required in these states would be much lowerthan that required in most of the rest of the country. The relationship between spendingand enrollment is discussed further in Section 4.4.

4.12 The total spending on elementary education (in nominal terms) by all states andunion territories combined increased from Rs.84,194 million in 1991-92 to Rs.160,555million in 1996-97, an increase of 90.7 percent (See Table 8). The states with growth intotal spending higher than the all India average were Jammu and Kashmir, Rajasthan,Maharashtra, Haryana, Gujarat, Karnataka, Himachal Pradesh, Assam, Uttar Pradesh andMadhya Pradesh (See Table 8). While the lower growth in spending in Kerala and TamilNadu may be justified to some extent by high existing enrollment rates, the low growthrate in the other states points to low financial commitments of the respective stategovernments to this sector. However, these figures on state spending have to be analyzedkeeping a few caveats in mind. First, these figures do not include any untied grants givenby state governments to the districts. To the extent that these grants are spent onelementary education, the figures here would underestimate state spending. Some statessuch as West Bengal give a higher proportion of their budgets as untied grants. Inaddition, due to the non-availability of data, the spending figures here do not includespending by departments other than the Education departments of the states. In certainstates (such as Tamil Nadu) spending on elementary education by other departments suchas the Welfare department is non-trivial.

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TABLE 8: TOTAL SPENDING ON ELEMENTARY EXPENDITURE BY STATE:1991/92 - 1997/98

(Rs. million)

STATE 91-92 96-97 97-9810 Percent increase (91/92 to96/97)1

Jammu & Kashmir 617 2146 n/a 247.5Rajasthan 4563 10948 117 139.9Haryana 1584 3559 3784 124.6

Maharashtra 8869 19239 21469 116.9Gujarat 5418 11349 11687 109.4

Kamataka 4686 9746 11042 108.0Himachal Pradesh 1019 2112 2618 107.4

Assam 3096 6213 6944 100.7Uttar Pradesh 10662 21311 n/a 99.9

Madhya Pradesh 5945, 11476 11517 93.0Total: States/Union 84194 160555 n/a 90.7

territoriesBihar 7911 14788 16483 86.9Orissa . 3131 5834 6831 86.3Punjab 1685 3113 n/a 84.8Kerala 4115 7500 8070 82.2

Andhra Pradesh 5017 8549 9429 70.4West Bengal 4824 7723 8252 60.1Tamil Nadu 7353 11704 135 59.2

4.13 As discussed earlier in Chapter Two, the proportion of GDP spent by the statescollectively on elementary education has, however, declined over the decade from 1.52percent in 1991-92 to 1.25 percent in 1996-97. Figure IV reveals that the proportion ofGross State Domestic Product (GSDP) spent by states collectively on elementaryeducation has also declined continuously over the decade.

4.14 The states where the proportion of GSDP spent on elementary education fell overthe period 1991/92 to 1997/98 are Andhra Pradesh, Gujarat, Kerala, Madhya Pradesh,Maharashtra, Punjab, Tamil Nadu and West Bengal. The states where this proportionrose are Bihar, Haryana, Kamataka, Orissa, Rajasthan and Uttar Pradesh.' Table 9illustrates this point. In Bihar, however, the GSDP itself rose very little over the decade(in fact by the least amount when compared with all the other states). Thus, while the

10 Data for Janmmu & Kashmir, Punjab, Uttar Pradesh, and 'All States/Union Territories' are for 1996/97since only budget estimates were available for 1997/98.

11 1996-97 is used as the end of the period instead of 1997/98 since 'actuals' are not available for all statesand union territories collectively for 1997/98. Thus comparisons of how well states have done relative tothe national average cannot be done for this year.

12 Data on Assam, Himachal Pradesh and Jammu & Kashmir were not available for this purpose.

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proportion of GSDP spent on elementary education rose, this did not translate into asubstantial rise in real expenditure (see Table 12 below).

TABLE 9: EXPENDITURE BY STATES ON ELEMENTARY EDUCATION AS APERCENTAGE OF GSDP"

STATE 1991-92 1997-9814Bihar 2.7 3.3

Rajasthan 2.0 2.2Kamataka 1.6 1.7

Uttar Pradesh 1.7 1.8X Orissa 2.2 2.4

Haryana 0.9 0.9Punjab 0.7 0.7Kerala 2.4 2.1

All states/union territories 1.4 1.3Maharashtra 1.2 1.1

Madhya Pradesh 1.8 1.6Andhra Pradesh 1.2 1.0

Gujarat 1.8 1.4Tamil Nadu 2.0 1.6West Bengal 1.2 0.9

4.15 Of the states where the proportion of GSDP spent on elementary education fellover the decade, Punjab, West Bengal and Andhra Pradesh spent the lowest proportion ofGSDP on elementary education amongst the major states at the beginning of the decadeas well, reflecting poorly on these states' ability and willingness to spend enough on thissector.

4.16 In addition to spending in relation to state incomes, it is also important to analyzethe spending on elementary education relative to total expenditure by states. Table 10summarizes the changing proportion of total revenue expenditure spent on elementaryeducation by the states over the past decade.

13 Information on Assam, Himachal Pradesh and Jammu & Kashmir was not available. The states are listedin descending order of the increase in percent of GSDP spent on elementary education.

14 Figures for Punjab, Uttar Pradesh and 'All states/union territories' are for 1996-97 since 'actuals' for1997-98 were not available.

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TABLE 10: EXPENDITURE BY STATES ON ELEMENTARY EDUCATION ASA PERCENTAGE OF REVENUE EXPENDITURE15

STATE | 1991-92 1996-97Increased percentage of revenue expe nditure

Rajasthan 11.1 13.0Maharashtra 8.9 10.0

Bihar 14.5 16.4Assam 15.5 17.4Punjab 4.0 4.5

Tamil Nadu 8.4 8.8Guj arat 10.8 11.1

Karnataka~~J- 9.4 9.5Decreased percentage of revenue exp nditure

Uttar Pradesh 11.5 11.1Orissa 11.9 11.4Kerala 12.7 11.0

Madhya Pradesh 10.9 9.2Haryana 6.9 5.3

Andhra Pradesh 7.7 5.9West Bengal 10.1 7.5

4.17 The states where the proportion of revenue expenditure spent on elementaryeducation fell over the period 1991-92 to 1996-97 are Andhra Pradesh, Haryana, Kerala,Madhya Pradesh, Orissa, Uttar Pradesh and West Bengal. The states where thisproportion rose are Assam, Bihar, Gujarat, Karnataka, Maharashtra, Punjab, Rajasthanand Tamil Nadu. Once again, total revenue expenditure itself rose very little over thedecade in Bihar compared to the other states.

4.18 Thus states that have unambiguously demonstrated an increasing commitment toelementary education (i.e. where the proportion of GSDP as well as the proportion ofrevenue expenditure spent on elementary education rose over the period) are Karnatakaand Rajasthan. Despite this increase, however, Karnataka still spent a lowerproportion of revenue expenditure on elementary education than eight other majorstates. Andhra Pradesh, Kerala, Madhya Pradesh and West Bengal decreased theirspending on elementary education not only relative to GSDP but also relative to theirtotal revenue expenditure.

4.19 Low and falling proportions of GSDP and revenue expenditure spent onelementary education reveal either decreasing commitment to the sector and/or increasingfiscal problems in the state leading to cuts in spending on the social sectors. In fact bothAndhra Pradesh and West Bengal have experienced particularly acute and increasing

15 Information on Himachal Pradesh and Jammu & Kashmiir was not available. The states are listed indescending order of the increase in percent of revenue expenditure spent on elementary education.

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fiscal stress over the past decade. While Andhra Pradesh has embarked on a reformprocess to alleviate the situation, West Bengal has not done this as yet. The impact of thefiscal reforrns in Andhra Pradesh on elementary education remains to be seen. Theexception in this case is, of course, Kerala where high enrollment rates have already beenachieved in the elementary grades, thus explaining the need for smaller increases infinancial allocations to the sector. Thus the decreasing proportion of GSDP and revenueexpenditure spent on this sector in Kerala may be justified unlike in Andhra Pradesh,Madhya Pradesh and West Bengal, all of which are educationally backward states.Nevertheless, further analysis of the 'quality' of schooling in states like Kerala would berequired to explore whether the current levels of funding are adequate to ensure goodquality.

4.2 PLAN EXPENDITURE

4.21 Another revealing indicator of state governnent financing of elementaryeducation is the proportion of total expenditure that is plan expenditure. This indicatesthe extent of spending on developmental expenditure. The share of total expenditure onthis sector devoted to plan expenditure by all states collectively has steadily risen over thedecade. States with the highest proportion of total revenue expenditure that was planexpenditure in 1996-97 were Assam, Himachal Pradesh, Rajasthan and Karnataka. Thosewith the lowest proportion of total revenue expenditure devoted for plan purposes in1996-97 were Punjab, Kerala, West Bengal and Bihar. All states except Bihar, Orissaand West Bengal spent a higher proportion of their revenue expenditure on planexpenditure in 1996-97 when compared with 1991-92 (See Table 11). This may indicateless attention given to developmental expenditures in this sector by these three stategovernments.

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TABLE 11: RATIO OF PLAN TO TOTAL REVENUE EXPENDITURE ONELEMENTARY EDUCATION BY STATE

STATE 91-92 96-97 97-98(E)

ASSAM 17.8 28.7 27.0HIMACHAL PRADESH 19.3 26.0 24.5

RAJASTHAN 14.3 22.8 16.2KARNATAKA 12.4 21.9 16.9

JAMMU & KASHMIR 13.2 14.3 20.7MADHYA PRADESH 9.5 14.2 8.8

HARYANA 9.5 13.7 9.4UTTAR PRADESH 8.1 13.5 14.3MAHARASTHRA 3.0 11.3 3.6

ANDHRA PRADESH 9.7 11.0 13.4ORISSA 12.5 10.5 15.4

TAMIL NADU 5.6 7.1 5.3GUJARAT 3.0 5.9 6.8

BIHAR 6.6 3.4 6.9WEST BENGAL 2.3 2.2 10.0

KERALA 0.4 1.8 0.6PUNJAB 0.3 0.6 0.4

ALL STATES & UNION 8.1 13.4 11.4TERRITORIES

GOI + STATES & UNION 11.1 21.1 21.2TERRITORIES

4.22 Bashir's study of government financing of elementary education analyzes the roleof Centrally Sponsored Schemes in total plan expenditure in some detail, including theextent of dependence of each state on this source of finance. She concludes that the levelof dependence has been consistently high in Andhra Pradesh, Bihar, Orissa and UttarPradesh; perhaps revealing a relative lack of commitment by the governments of thesestates.

4.3 REAL EXPENDITURE

4.31 All the above indicators deal with nominal expenditure on elementary educationby state governments. It is, in fact, more important to study changes in the 'real'expenditure on elementary education, thus taking into account inflation. Total realspending on elementary education by the states rose from Rs.38,445 million in 1991-92to Rs.49,701 million in 1997-98 (in 1982 prices), an increase of 29.2 percent. (See Table12).

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TABLE 12: TOTAL REAL SPENDING ON ELEMENTARY EXPENDITURE(Rs. Million)

STATE 91-92 96-97 97-9816 Percent change (91/92 to97/98)17

Jammu & Kashmir 282 627 n/a 122.3Himachal Pradesh 465 618 715 53.8

Rajasthan 2084 3201 3192 53.2Maharashtra 4050 5625 5866 44.8

Haryana 723 1041 1034 43.0Karnataka 2140 2850 3017 41.0

Assam 1414 1817 1897 34.2Orissa 1430 1706 1866 30.5

Total: States/Union 38445 46946 49701 29.2Territories

Gujarat 2474 3318 3193 29.1Uttar Pradesh 4869 6231 n/a 28.0

Bihar 3612 4324 4504 24.7Punjab 769 910 n/a 18.3Kerala 1879 2193 2205 17.3

Madhya Pradesh 2715 3356 3147 15.9Andhra Pradesh 2291 2500 2576 12.4

TamilNadu 3358 3422 3692 9.9West Bengal 2203 2258 l 2255 2.4

4.32 The states where total real spending increased by the most were Janimu andKashmir, Himachal Pradesh, Rajasthan, Maharashtra, Haryana and Kamataka, all ofwhich had an increase of more than forty percent. As discussed in Sections 4.1 and 4.2above, the analysis in this section also substantiates the fact that Rajasthan demonstratedan increased financial commitment to elementary education during this decade. Whilethe percentage of revenue expenditure spent on the sector by Karnataka remained lowerthan many states, the proportion of GSDP spent and real spending nevertheless increasedconsiderably. Maharashtra also demonstrated an increased financial commitment tothis sector. Not only did real spending increase by 45 percent, the proportion of revenueexpenditure spent on the sector also rose to 10 percent. Himachal Pradesh had a highestpercent increase in real expenditures. Madhya Pradesh, Andhra Pradesh and WestBengal stand out as having demonstrated a particularly low (and decreasing over thedecade) degree of financial commitment to the sector with respect to all indicatorsconsidered. The analysis of real expenditures above reaffirms this fact as well. The

16 Figures for Jammu and Kashmir, Punjab, and Uttar Pradesh are for 1996-97 since 'actuals' for 1997-98were not available.

17 Figures for Jarmnu and Kashmir, Punjab, Uttar Pradesh, all North Eastern states except Assam and allunion territories are budget estimates. Figures for all other states are actuals for 1997-98. These aresummed to arrive at the all India figure.

26

discussion on linkages with enrollment rates in Section 4.4 below shows the impact ofthis in terrns of low enrollment growth rates.

4.33 Real spending per student is a good reflection of how state expenditure has keptpace with enrollment increases. Real spending per student by all states/union territoriesincreased from Rs.282.6 in 1991-92 to Rs.335.2 in 1997-98- a 18.6 percent increase. AsFigure V and Table 13 illustrate, all states with the exception of Madhya Pradesh spentmore (in constant prices) per student in 1997-98 when compared to 1991-92.

TABLE 13: REAL SPENDING PER STUDENT ON ELEMENTARYEDUCATION (R./year)

STATE 1991-92 1997-98"' Percent ChangeReal Spendingper Student

JAMMU & KASHMIR 263.4 483.1 83.4HIMACHAL PRADESH 434.7 667.6 53.6

KERALA 379.9 480.7 26.5ASSAM 295.8 370.5 25.3

GUJARAT 317.9 393.4 23.8KARNATAKA 281.8 342.7 21.6

==AHARASHTRA 288.5 345.1 19.6INDIA 282.6 335.2 18.6

HARYANA 289.4 342.7 18.4ORISSA 301.3 356.1 18.2

TAMIL NADU 301.6 354.7 17.6UTTAR PRADESH 242.1 284.6 17.6

PUNJAB 256.9 298.4 16.2WEST BENGAL 183.3 196.8 7.3

RAJASTHAN 340.3 359.2 5.6BIHAR 334.4 352.9 5.6

ANDHRA PRADESH 227.9 239.4 5.1MADHYA PRADESH 256.9 230.9 -10.2

4.34 Amongst the states discussed above which substantially increased theirinvestment in elementary education, Himachal Pradesh, Karnataka and Maharashtraalso increased real spending per student. The growth in real spending per student as wellas the absolute amount spent per student in real terms was very low in Andhra Pradesh,Madhya Pradesh and West Bengal; again emphasizing the decreasing financialcommitment discussed earlier. While real spending increased substantially in Rajasthan,real spending per student grew little. However, this state had a higher than average surgein enrollments during the same period. Thus the state's success in increasing enrollmentsmust be noted. The highest level of real expenditure per student in 1997-98 was in

IB Figures for Janmmu and Kashmnir, Punjab, Uttar Pradesh, all North Eastern states except Assam and allunion territories are budget estirates. Figures for all other states are actuals for 1997-98. These aresummed to arrive at the all India figure.

27

Himachal Pradesh. The lowest level of real expenditure per student was in WestBengal.

4.35 Boxes 1 and 2 below briefly explore financing of elementary education inAndhra Pradesh and Kamataka. These serve as illustrative examples of how governmentfinancing of this sector has changed over the decade in specific states.

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BOX 1: NOTE ON ANDHRA PRADESH'S FINANCING OF ELEMENTARYEDUCATION IN THE 1990s

* The proportion of total revenue expenditure as well as GSDP spent by AndhraPradesh on elementary education has fallen over the past decade.

. The proportion of total revenue expenditure spent on elementary education in A.P.fell from 7.68 percent to 5.86 percent. The proportion of GSDP spent onelementary education fell from 1.2 percent to 1.06 percent.

* Real plan expenditures by the state on elementary education have fluctuatedconsiderably over the decade in Andhra Pradesh. They rose until 1993-94 afterwhich they fell until 1995-96, at which time they rose again until 1997-98.

. The share of centrally sponsored schemes and external funds in elementaryeducation plan expenditures is hi'gh in Andhra Pradesh relative to other states. Infact, in 1996-97, the total central funds allocated to Andhra Pradesh under CSSwere greater than the state's own plan expenditure, which has been very low overthe decade. (Bashir, 2000).

. Government real spending per student rose slightly in Andhra Pradesh fromRs.227.90 in 1991-92 to Rs.239.43 in 1997-98. However, it rose by far less than thenational average.

* In fact, Andhra Pradesh's nominal spending per student in elementary school wasthe lowest of all major states except West Bengal in both 1991-92 and all statesexcept West Bengal and Madhya Pradesh at the end of this period, in 1997-98.

. Enrollments in the elementary sub-sector rose by 7 percent during this period inAndhra Pradesh. The national average rise in enrollment (across states) in theelementary education sub-sector during this period was 9 percent. Hence themodest increase in real spending per student in Andhra Pradesh cannot be attributedto an unusual surge in enrollments.

* A considerable proportion of enrolled children in Andhra Pradesh go to privateunaided schools. The estimates vary from 2.7 percent of enrolled children inGrades I-VUI (Sixth Educational Survey, NCERT) to 10.2 percent of enrolled six tofourteen year olds (NCAER Survey: 1994).

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BOX 2: NOTE ON GOVERNMENT OF KARNATAKA'S FINANCING OFELEMENTARY EDUCATION IN THE 1990s

* The proportion of total revenue expenditure as well as GSDP spent by Karnatakaon elementary education has risen over the past decade.

* The proportion of total revenue expenditure spent on elementary education inKamataka rose from 9.4 percent to 9.52 percent. This is still, however, below theproportion spent by eight other major states. The proportion of GSDP spent onelementary education rose considerably from 1.56 percent to 1.72 percent.However, the proportion of GSDP spent on education as a whole declined slightly.Thus the increasing share of GSDP spent on elementary education seems to havebeen financed by reallocation within the education sector (away from highereducation).

. The real growth rate of plan expenditure in Karnataka was over 16 percent p.a.during the 1990s. This substantial growth coupled with relatively high planexpenditure at the start of the decade has made Karnataka one of the states withthe highest level of plan expenditure on elementary education (Bashir, 2000).

* Karnataka is one of the seven states which have hired a significant number ofadditional teachers from the state's plan funds (Bashir, 2000).

. Government real spending per student rose from Rs.281.80 in 1991-92 toRs.342.65 in 1997-98 in Kamataka. In fact, it rose by greater than the nationalaverage.

* The increase in real spending per student occurred despite a substantial increase inenrollment in the elementary sub-sector during this period in Karnataka.Enrollment rose by 15 percent. The national average rise in enrollment in theelementary education sub-sector during this period was 9 percent. Hence theincrease in real spending per student in Kamataka can be attributed to an increasein total real spending in the sub-sector rather than a decrease in enrollment.

* A considerable proportion of enrolled children in Karnataka go to private unaidedschools. The estimates vary from 3.4% of enrolled children in Grades I-VIII(Sixth Educational Survey, NCERT) to 9.6% of enrolled six to fourteen year olds(NCAER Survey: 1994). Both surveys report these figures to be close to thenational average.

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4.4 EXPENDITURES AND ENROLLMENTS

4.41 The above discussion focuses on government expenditure on elementaryeducation. It is crucial to link expenditures with educational outcomes in the variousstates in order to answer the following question - do more children go to school in statesthat spend more on elementary education? Gross Enrollment Ratios (GERs) are typicallyused (in the absence of information on net enrollment) as indicators of enrollment statusin the states. Unfortunately, it is problematic to use GERs available from governmentdocuments. The changing proportions of overage and underage children included in theGERs makes it difficult to draw any systematic causal linkages between expenditures andoutcomes. For all states except Rajasthan, the GER was lower at the end of the decadethan at the beginning. The GER could fall, for example if the number ofunderage/overage children attending primary school declines. It could also fall, on theother hand, if the drop out rate of children of the appropriate age group rises. It could fallif the cohort of school going aged children rises. The reasons for this decline are notclear. GERs have thus not been used in the analysis here.

4.42 This paper uses growth rates in total enrollments in Grades I to VIII over the pastdecade as an indicator of the progress made by a state in enrolling more children inelementary school.19 Figure VII plots the percentage increase in total real expendituresby state governments on elementary education and the percentage increase in elementaryeducation enrollments over the past decade as a scatter diagram. Each point represents astate. As the figure illustrates, states where real spending rose more were the ones, ingeneral, where enrollments grew faster. In fact, when the percentage increase inenrollment over the decade is regressed on percentage increase in real spending onelementary education by states, it is statistically significant at 10 percent. Thus thechanges in spending were a significant determinant of changes in enrollment in states inthe 1990s. The trend line in Figure VI displays this positive relationship.

TABLE 14: STATE GOVERNMENT EXPENDITURES AND ENROLLMENTGROWTH

Percentage growth in real Percentage growth in enrollmentstate spending High Low

High Haryana, Jammu & Assam, Gujarat, HimachalKashmir, Kamataka, PradeshMaharashtra, Orissa,

RajasthanLow Bihar, Madhya Pradesh Andhra Pradesh, Kerala,

Punjab, Tamil Nadu, UttarPradesh, West Bengal

4.43 The table above classifies states according to growth in real spending onelementary education and growth in enrollments. The majority of states demonstrate theclose relationship between financing and enrollments. In fact, as discussed earlier in this

19 MHRD. Selected Educational Statistics, Various Years.

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chapter, Himachal Pradesh, Karnataka, Maharashtra and Rajasthan have substantiallyincreased their financial commitmcnt to elementary education over the decade (in termsof the indicators discussed such as proportion of GSDP and revenue expenditure spent onthe sector, total nominal and real expenditures etc.). The effects on enrollment areevident. Rajasthan, a traditionally educationally backward state, had the highest spurt inenrollments (45 percent increase over the decade).20 Of course the results here must beinterpreted in the context of the existing status of elementary enrollments at the beginningof the decade in the particular states. As mentioned earlier in the chapter, there is goodreason for enrollment increases (and to some extent spending increases) to be low inKerala and Tamil Nadu since these states are closer to universal elementary enrollmentsand have lower fertility rates.

4.44 The low growth rate of enrollments in Himachal Pradesh is surprising since recentreports (including the PROBE report) have cited Himachal Pradesh as significantlyincreasing enrollments in recent years. In the data used here, total enrollments grewsubstantially until 1995-96 after which they seem to have mysteriously fallen. The aboveanalysis is also limited by the fact that other factors affecting enrollment are not takeninto account here. That school enrollments grew by 29 percent in Madhya Pradeshdespite a lower than average real expenditure growth rate may be explained by a host ofother factors which are beyond the scope of the simple regression analysis used here.Also, as mentioned earlier, there is higher spending by lower levels of government (suchas the village panchayats in some states and this is not captured in the expenditure figurescited in this paper. In fact, Madhya Pradesh is an example of such a state. Nevertheless,the strong relationship between financing of elementary education and outcomes such asenrollment evident here highlights, from the policy perspective, one of the main reasonsfor states such as Andhra Pradesh continuing to have relatively low enrollment rates.

4.45 According to World Bank staff estimates, three quarters of children who are outof school live in Andhra Pradesh, Bihar, Madhya Pradesh, Rajasthan, Uttar Pradesh andWest Bengal. Of these seven states, the preceding discussion highlights Rajasthan ashaving demonstrated greater financial commitments to elementary education in the1990s. On the other hand, Andhra Pradesh, Madhya Pradesh and West Bengal had lowgrowth in real expenditure on elementary education and also decreased their spendingrelative to GSDP and total revenue expenditure. As can be seen in Table 14 above,Andhra Pradesh and West Bengal did have low enrollment increases.

4.46 While acknowledging that there are limitations to the financial data used here andthat there are several dimensions besides financing that affect enrollment rates, the aboveanalysis points to the critical need to spend more on this sector, particularly in theeducationally backward states, to improve capacity and quality and attract students toschool.

2 0 The high growth rate of enrollments in Bihar needs to be investigated further since this is notcorroborated by field experiences.

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CHAPTER FIVE: HOW SIGNIFICANT IS THE FINANCIAL CONTRIBUTIONOF HOUSEHOLDS TO ELEMENTARY EDUCATION?

5.1 The previous chapters have focussed on government financing of elementaryeducation by both the central government and the various state governments. In addition,however, households also spend a considerable amount on the education of their children.It is thus important to analyze the trends in household financing of elementary educationas well.

5.1 ENROLLMENT IN PRIVATE SCHOOLS

5.11 In recent years, growing numbers of children are being enrolled in private schools(both aided by the government and unaided). Parents spending on sending their childrento unaided private schools is one manifestation of the private financing of elementaryeducation. In addition, parents often spend a considerable sum on children who areenrolled even in government and aided schools. A large proportion of this expenditure ison books and uniforms. It is interesting to also investigate the role of private financingfor children attending government schools.

5.12 Table 15 below summarizes the data for the proportion of children enrolled inprivate elementary schools. Data from three different sources are used. Unfortunately,there is considerable variation in the figures quoted in these different sources.Nevertheless, the data are indicative of the fact that a non-trivial proportion of childrendo attend private school. In particular, the NSSO and NCAER survey data indicate that7.4 percent and 9.8 percent of children, respectively, went to private unaided schools.2 1

The states with the highest proportion of children in private unaided schools were UttarPradesh, Haryana, and Punjab according to both surveys. The NCERT data (from theNCERT 6th educational survey for 1993) shows a higher proportion of children in privateunaided schools in Uttar Pradesh but an all India average of only 3.6 percent. Overall 8.4percent of children were in private aided schools according to the NSS. The wasparticularly high in Kerala (41.2 percent). It is not clear why the figures for enrollment inprivate aided schools in particular differs considerably among the three surveys.

21 The NCAER data are for 1994 while NSSO data are for 1995/96.

33

TABLE 15: ENROLLMENTS IN PRIVATE SCHOOLS22

STATE PRIVATE AIDED PRIVATE UNAIDEDNCERT NCAER NSS NCERT NCAER NSS

ANDHRA PRADESH 4.7 1.4 1.8 2.7 10.2 12.9ASSAM 2.0 n/a 1.1 1.1 n/a 0.4BIHAR 1.0 11.5 2.0 0.2 8.7 7.0

GUJARAT 7.8 19.7 1.9 1.2 2.0 0.2HARYANA 0.5 1.8 2.5 2.0 12.9 18.9

HIMACHAL PRADESH 0.7 0.4 2.0 2.1 4.8 2.9KARNATAKA 7.6 4.2 2.8 3.4 9.6 0.9

KERALA 57.7 57.1 41.2 2.1 12.0 7.1MADHYA PRADESH 1.5 12.1 1.8 3.1 3.8 2.7

MAHARASHTRA 19.8 17.9 14.3 2.6 1.5 0.2ORISSA 4.9 21.3 3.7 1.5 4.1 0.9PUNJAB 1.0 1.6 3.5 1.1 19.6 12.4

RAJASTHAN 0.6 3.5 4.3 4.3 3.4 5.7TAMIL NADU 22.2 9.1 13.1 1.0 7.0 2.4

UTTAR PRADESH 9.3 16.5 10.5 13.2 27.2 19.3WEST BENGAL 25.8 78.5 22.4 0.8 1.0 0.6

ALL INDIA 11.1 22.2 8.4 3.6 9.8 7.4

5.13 According to Sipahimalani (1999), who used the NCAER survey data, theproportion of children attending both private aided and unaided schools rises as the percapita income of the household they belong to rises (See Table 16). Nevertheless, evenin the low income brackets of per capita income below Rs.2000 a year, 3.8 percent of sixto fourteen year old children were enrolled in private unaided schools. These figurespoint to the fact that private expenditure on schooling cannot be ignored even for thepoorest section of the population.

22 NCERT and NSS data refer to enrollment in Classes I - VIII. NCAER data refers to proportion ofenrolled 6-14 year olds by type of school.

34

TABLE 16: TYPE OF SCHOOL ATTENDED BY INCOME GROUP2 3

PER CAPITA PERCENT PERCENT IN PERCENT IN PERCENT ININCOME NEVER GOVT PA SCHOOLS PUA(Rs./year) ENROLLED SCHOOLS SCHOOLS

<2000 42.0 44.6 9.6 3.8>=2000 & 35.0 47.5 12.3 5.2

<4000 _ _ _ _ _ _ _ _ _ _ _ _ _ _

>=4000 & 25.1 53.6 13.6 7.6<6000__ _ _ _ _ _ _ _ _ _ _ _ _ _

>=6000 & 19.4 55.3 15.8 9.5<8000 ____1_2_9

>=8000 17.5 53.8 15.9 12.9

5.2 HOUSEHOLD SPENDING BY TYPE OF SCHOOL

5.21 Table 17 summarizes the average spending per student by type of school asreported in the NCAER survey.24 The all India average reveals that parents who sendtheir children to private unaided schools spent more than twice as much than thosesending their children to government school. In states such as Himachal Pradesh andHaryana, households spent over Rs.1000 per year per student even for those enrolled ingovernment schools.

23 These data are obtained from the NCAER household survey (1994). The table is taken fromSipahimnalani (1999).

24 The household expenditure data is available separately for private unaided and government schools; butnot for private aided schools.

35

TABLE 17: HOUSEHOLD SPENDING PER STUDENT AGED 6-14 IN SCHOOL(RS./STUDENT PER YEAR)

STATE Private GovernmentUnaided

ANDHRA PRADESH 1692 329ASSAM 4533 488BIHAR 1652 529

GUJARAT 2042 431HARYANA 2235 1094

HIMACHAL PRADESH 2766 1548JAMMU & KASHMIR Not available Not available

KARNATAKA 1391 504KERALA 1714 852

MADHYA PRADESH 1114 438MAHARASHTRA 816 507

ORISSA 560 420PUNJAB 2098 911

RAJASTHAN 1289 777TAMIL NADU 1502 470

UTTAR PRADESH 852 492WEST BENGAL 1380 516

Total: States/Union territories 1262 539

5.22 For students going to government schools, it is possible to do a simple analysis ofthe degree of public subsidy provided. Table 18 summarizes the data for per studentspending in 1994/95 by state governments as well as by households for each major state.The data for per student spending by state governments are the same data used for theanalysis in previous chapters (from government budget documents). The data forhousehold spending per student in government school is the same data used above (fromthe NCAER survey in 1994). Thus, while these data are not strictly comparable (sincethe latter is a sample survey), they are indicative of the extent of private spending andpublic subsidy.

36

TABLE 18: EXTENT OF PUBLIC SUBSIDY IN GOVERNMENT SCHOOLS

STATE State Household Total Share of stategovernment government

_ MAHARASHTRA 1410.8 507.0 1917.8 73.6ORISSA 1018.2 420.0 1438.2 70.8

GUJARAT 917.2 431.0 1348.2 68.0ASSAM 946.5 488.0 1434.5 66.0

ANDHRA PRADESH 538.5 329.0 867.5 62.1KARNATAKA 808.4 504.0. 1312.4 61.6

BIHAR 808.9 529.0 1337.9 60.5TAMIL NADU 699.9 470.0 1169.9 59.8

MADHYA PRADESH 606.5 438.0 1044.5 58.1India 705.7 539.0 1244.7 56.7

KERALA 1069.7 852.0 1921.7 55.7HARYANA 653.3 1094.0 1747.3 37.4

RAJASTHAN 893.5 777.0 1670.5 53.5UTTAR PRADESH 519.1 492.0 1011.1 51.3

PLNJAB 730.2 911.0 1641.2 44.5HIMACHAL PRADESH 1223.8 1548.0 2771.8 44.2

WEST BENGAL 380.4 516.0 896.4 42.4JAMMU & KASHMIR 1325.9 Not available 1325.9 Not available

5.23 The final column in the table above calculates the extent of the public subsidyprovided to children in government elementary schools. The share of the stategovernment in financing these children's education is computed by dividing the stategovernment per student expenditure by the total expenditure per student (stategovernment plus household). The average public subsidy provided in the country,according to this calculation, is 56.7 percent. Thus about 43 percent of the educationprovided to children in government elementary schools may be financed by householdsif the assumptions in these calculations are valid.26 This is a surprisingly high figuresince government elementary schools are expected to provide 'free' education. Thisanalysis indicates that public education is, in reality, not provided free. In fact it is only asubsidy provided to households to send their children to government schools.

5.24 These results also raise the question of public provision versus public financing ofelementary education. There are, of course, strong arguments to be made for govenmentfinancing to send children to elementary school. However, it is less clear why theseschools have to be provided and managed by the government. Particularly if parents arepaying a considerable amount anyway, a possible option instead of subsidizing

25 Note that Central Government expenditures are ignored here for the sake of simplicity.

26 This figure is higher than the one cited in Chapter One since the data used here are from the NCAERsurvey while Chapter One uses NSSO data since this is available for higher levels of education as well.Nevertheless the extent of household financing of elementary education is estimated to be in this range ofabout 38 to 43%.

37

government schools would be to give parents from poorer households a cash subsidy foreducation. They could use this to choose which type of school to send their children to.While this would be a difficult choice to make politically, a further analysis of this issuewould be useful. There was sizeable variation in the degree of public subsidy provided ingovernment elementary schools across states. States with the lowest extent of publicsubsidy were Haryana, West Bengal, Himachal Pradesh, and Punjab. The states with thehighest extent of public subsidy (and thus lower shares of private financing) wereMaharashtra, Orissa, Assam and Gujarat.

5.25 While the discussion above juxtaposes the two sources of financing of elementaryeducation, the same data may also be used to estimate the magnitude of the totalresources devoted to elementary education in government schools. Since education inthese schools is financed by both the state government and households, it is possible toestimate the total amount spent per student. As Table 18 reveals, the total amount spenton average on a student in a government elementary school was Rs.1244.7 a year. This isalmost the same amount spent on a student in a private elementary school.

5.26 Finally, it is also instructive to explore what this money is spent on. Table 19illustrates the proportion of household expenditure spent on different items in all threetypes of schools (these results are taken from Sipahimalani (1999) who uses the NCAERdata for this tabulation). As the table below illustrates, over 75 percent of householdexpenditure was spent on books and stationary in government schools. While thisproportion was high in private unaided schools as well, high proportions were also spenton fees and private coaching.

TABLE 19: ENROLLMENT AND PER STUDENT HOUSEHOLDEXPENDITURE IN RURAL INDIA BY SCHOOL TYPE

GOVERNMENT PRIVATEUNAIDED

Percentage of children enrolled 69.0% 9.8%Average household expenditure per student Rs.346 Rs.1262

Proportion of expenditure on books and stationary 76.3% 47.0%Proportion of expenditure on exam and tuition fees 12.6% 34.5%

Proportion of expenditure on transportation 1.5% 6.0%Proportion of expenditure on private coaching 7.9% 9.2%Proportion of expenditure on board and lodging 1.7% 3.3%

Proportion of per capita income devoted to per student 14.1% 24.6%expenditure

5.27 This discussion elucidates the significance of private financing of elementaryeducation in India. It suggests that the role of household spending might usefully betaken into account in all policy decisions regarding elementary education. At present, itis usually ignored.

38

CHAPTER SIX: CONCLUSIONS AND POLICY RECOMMENDATIONS:WHERE DO WE GO FROM HERE?

6.1 The overall picture of elementary education financing in the 1990s presents causefor concern. The GOI, together with the state governments, has repeatedly expressed itscommitment to education and attaining the goal of spending 6 percent of GDP oneducation by 2002. In reality, rather than increasing the share from 3.65 percent at thebeginning of the 1990s, the share has fallen to 3.48 percent in 1996/97. When comparedwith international norms, India spends a lower proportion of GNP on education thancountries with similar per capita incomes.

6.2 There have been several studies to assess the financial requirements foruniversalizing elementary education. The resources required are estimated to be a realincrease in expenditure of 8 percent a year (World Bank (1997) estimates) for getting all6-10 year olds into primary school in twelve years and an additional 0.7 percent of GDPper year for the next ten years to get all 6-14 year olds into school (Mazumdar Committeereport (1999)). The real increase in GOI and state governments' total expenditureon elementary education was 5.3 percent a year over the period 1991-92 to 1996-97and then rose to 5.8 percent a year when 1997-98 expenditures are taken intoaccount.27 The World Bank report (1997) states that the resources required touniversalize primary education by 2007, discussed above, would be met if thegovernment expenditure reached the target of 6 percent of GDP. This assumed that GDPwould grow at a rate of 5 percent per year and primary education would receive aconstant share of the education budget; both realistic assumptions. In fact, the totalproportion of GDP spent on education by the Government of India and all stategovernments collectively has fallen in the 1990s. The proportion of GDP spent bygovernment on elementary education has also declined over the past decade.Considering the gap between current enrollments and attainments, and the goal ofuniversalizing elementary education, this is clearly not enough.2 8

6.3 While the Government of India has, in fact, spent an increasing proportionof GDP on elementary education (from 0.05 percent in 1991-92 to 0.16 percent in1997-98), states have collectively spent a falling proportion (from 1.52 percent in1991-92 to 1.28 percent in 1997-98). In addition, the Government of India has takenincreasingly greater responsibility for financing plan expenditures on elementaryeducation over the decade. Government of India funds include donor funds forelementary education. The proportion of total plan expenditures by governments

27 Actual expenditures are used for all states except Goa, Jammu and Kashmir, Punjab, Uttar Pradesh, allNorth - Eastern states (except Assam) and all union territories for which budget estimates are used in theabsence of availability of actual expenditures.

28 One caveat to keep in mind is the relatively new practice of hiring para teachers at a lower salary whencompared to regular teachers. The mnarginal cost of educating children will thus be lower in states wherethis practice has begun. This paper does not account for the impact of these lower salaries on expendituresrequired for universalization. However some crude calculations reveal that even if all new teachers thatwere hired were para teachers at one third the salary given to regular teachers, the real increase inexpenditure needed to universalize primary education would be about 6.8- 7 percent a year.

39

accounted for by central government spending rose from 29.2 percent in 1991-92 to 52.1percent in 1997-98. This spending has been focussed on a few Centrally SponsoredSchemes.

6.4 States vary in their commitment to elementary education. States that haveunambiguously demonstrated an increasing financial commitment to elementaryeducation in the past decade are Himachal Pradesh, Karnataka, Maharashtra andRajasthan. Total real spending increased by more than 40% in all four states between1991/92 and 1997/98 - amongst the highest increases in the country. The proportion ofrevenue expenditure spent on elementary education rose over the decade in all thesestates. While the rate of increase was the highest in Rajasthan and Maharashtra, theincrease was more modest in Karnataka.29 It must also be kept in mind that eight statesspent a higher proportion of revenue expenditure on elementary education than Karnatakain 1997-98 despite this increase. Rajasthan and Kamataka also had amongst the highestincreases in the proportion of GSDP spent on elementary education. While thisproportion actually fell slightly in Maharashtra, the state had one of the highest increasesin GSDP over the decade. Real spending per student also rose by more than 20 percent inHimachal Pradesh, Maharashtra and Kamataka - amongst the highest increases in thecountry. While the increase was small in Rajasthan (5.5 percent), the huge surge inenrollments in this state may account for this.

6.5 At the other extreme of the spectrum (i.e. where the least increases inexpenditure on elementary education occurred) are Madhya Pradesh, AndhraPradesh and West Bengal. These states had the smallest real increases in expenditureon elementary education over the decade. Real spending per student also rose byamongst the lowest rates in the country in these three states. In addition, all three statesdecreased their spending on elementary education relative to GSDP and total revenueexpenditure.

6.6 The preliminary analysis here suggests that a strong relationship betweenstate government financing and enrollment increases exists. In general, highergrowth in state government spending was correlated with higher growth in totalenrollments in the states. This underscores the importance of increasing financing toachieve the desired objective of universalizing elementary education particularly in theeducationally backward states.

6.7 Finally, the study explores the role of private or household expenditure onelementary education. In recent years, growing numbers of children are being in enrolledin private unaided schools. In 1995-96, the National Sample Survey stated that 7.4percent of children in Classes I - VIII attended private unaided schools. Also, parentsoften spend a considerable sum on children who are enrolled-even in government schools.The total amount spent on average on a student in a government elementary school in1994 was Rs. 1244 (the sum of government and household spending). This is almost thesame amount as was spent by households on a student in a private unaided elementaryschool. Wnile the education of children in government elementary schools is certainlypublicly subsidized, this is not a 100 percent subsidy. In fact, about 43 percent of the

29 This information is not available for Himachal Pradesh.

40

total cost of providing and accessing government elementary schools is spent byhouseholds. It is critical that government policymakers recognize the role of householdsin financing elementary education and the effects which the required private expendituresmay have on constraining demand for education by the poor. This is essential to be ableto prioritize and target public spending on this sector to provide free or very cheapeducation to the poorest households.

6.8 The studies which estimate the resources required to achieve universalization ofelementary education point to the need for higher rates of growth in real expendituresthan have emerged in the past decade. While a few states have substantially stepped upresources for elementary education, many of the educationally backward states need tosubstantially increase investments. The central government, households andespecially individual state governments have to increase their pooled resources inorder to make universalization a goal that can be achieved in the near future.

41

REFERENCES

Bashir, Sajitha. Government Expenditures on Elementary Education in the Nineties.Report submitted to the European Commission. New Delhi, January 2000.

Dreze, Jean and Geeta Kingdon. School Participation in Rural India. Forthcoming,Review of Development Economics, 2000.

Government of India. Ministry of Human Resource Development. Selected EducationalStatistics. Department of Education, Planning, Monitoring and Statistics Division.New Delhi, Various years, 1991-1998.

Government of India. Ministry of Human Resource Development. Analysis of BudgetedExpenditure on Education. Department of Education, Planning, Monitoring andStatistics Division. New Delhi, Various years, 1991-1998.

Government of India. National Sample Survey Organization. Attending an EducationalInstitution in India: Its Level, Nature and Cost. NSS Fifty-second Round. NewDelhi, 1995-96.

Hinchliffe, Keith. India: Education Finance, Federalism and Economic Adjustment.World Bank, New Delhi, 1995.

Kaul, Venita, Suneeta Singh and Kalpana Seethepalli. National Program of NutritionalSupport to Primary Education. Manuscript, 1999.

National Council of Educational Research and Training. Sixth All India EducationalSurvey: National Tables, Volume VI. New Delhi, 1998.

National Institute of Rural Development. Rural Development Statistics, 1998. NewDelhi, 1998.

Probe Team. Public Report on Basic Education in India. Oxford University Press, NewDelhi, 1999.

Shariff, Abusaleh. India Human Development Report: A Profile of Indian States in the1990s. National Council of Applied Economic Research. Oxford University Press,New Delhi, 1999.

Singh, S.K. and S. Rajakutti. "Implementation of Educational Policy in India: The CaseOf Operation Blackboard Scheme in Madhya Pradesh," in Journal of EducationalPlanning and Administration. XII (2); NIEPA, New Delhi, April 1998.

Sipahimalani, Vandana. Household Educational Expenditures and School Choice inRural India: An Empirical Analysis. Ph.D. Dissertation, Yale University, NewHaven, 1999.

Tilak, J.B.G. Financing Elementary Education in India in the 1990s. Paper presented to

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Second National Workshop on EFA: 2000 Assessment, New Delhi, January, 2000.

United Nations Development Program. Human DevelopmentReport. New York, 1999.

World Bank. Entering the 21st Century: World Development Report 1999/2000.Oxford University Press. New York, 1999.

World Bank. Primary Education in India. Washington D.C., 1997.

World Bank. States Database. Poverty Reduction and Economic Management Unit,New Delhi, 1999.

43

ANNEX I

FIGURE 1: PERCENTAGE OF GDP SPENT ON ELEMENTARY EDUCATION BY GOI + ALLSTATES

1.6

191 3 9 - 9 - 5- 6

U..Y

12Ttaul ~ 1299399 45 5699

0 ~ ~~~~~~~YA

FIGURE II: REAL PUBLIC SPENDING PER STUDENT

400 - g i E | | 23 .

350-

100 -

250g - 2"

20 -

100-1

50 -

0-1991 -92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98

YEAR

Figure 111: Spending on education as a percentage of GNP relative to GNP per capita

10 10 20 0 0 0 0 0 0

0~~~~~~~~~~~~~~GPprcpt

FIGURE IV: PERCENTAGE OF GROSS STATE DOMESTIC PRODUCT SPENT ONELEMENTARY EDUCATION (ALL STATES)

1.45 -Em.mE

1.40 - 5 X

aL 1.35 -

LL

a! 1.30 -

ILl

IL1.25 -

1.20 -

1.1591-92 92-93 93-94 94-95 95-96 96-97

YEAR

FIGURE V: REAL SPENDING PER STUDENT BY STATES ON ELEMENTARY EDUCATION

700-

300

200-

100

J ~ ~~ 01997-98

AP A B G H Hp JK K K MP M 0 P R T p BNR S I U A iR AA A E AR A R U A A UR W E

NA S H J R M MS R R A H I N J M TA E NHD D A A A Y AD MH N A HD A S J A I TD S GHE M R R A CE UM A L yE R A S A S L AE T A

AS A N H I T A AS A A B T RS LAH T A A &R A H S H N H

LH K H A AA T N D

R U

STATE

Figure VI: Percentage growth in real state expenditures on elementary education and

enrollments

50-

g S S u g ~~~~~~~~ . g g40 -g|||||

e 3

~~ -zHaryana ~ Maharashtr * Jmmu & Kashmr

20

O0 - diesh

-10

Percentage increase in real expenditure