Budget 2018: Why education and skills development may continue to languish

Despite promises to the contrary, successive governments have failed to raise the allocation to the sector. This year is unlikely to be any different

India’s growing economy requires a world-class competent workforce to effectively function in the knowledge economy. Of the total working population, only about 10 per cent possesses vocational and technical education and training. The corresponding ratio in countries like China, Korea and others, with which India has to compete in the global market, is over sixty per cent.
 
The workforce is therefore woefully unproductive due mainly to the abysmal state of India’s education system, which churns out millions of adults equipped only for menial work. Its graduates go on to toil in small and micro enterprises that operate in the informal sector, which employs over 90 per cent of the entire workforce. And, we have a large pool of ‘unemployable graduates’, which causes huge waste of resources.
 
The reason for the unacceptably low quality of education or deficiency in entrepreneurial training is grossly inadequate investment in education and skills development. And, the promises made by the Narendra Modi government during the past four years to increase budgetary allocations and to formulate new education policy have been belied.
 
It is unlikely that in the ensuing financial year, 2018-19, which faces the twin challenge of rising fiscal deficit and concerns about winning the forthcoming elections, funds would be made available to improve the performance and accountability responsiveness of education system. Consider the following:
 
Allocation of budgetary resources for educational development hovers around 3.7 per cent of gross domestic product (GDP). Successive Central governments, including Modi's, have made oft-repeated commitments to allocate at least six per cent of GDP, which have never been realised.
 
Realising that the Central government was unable to fulfil the Constitutional obligation of ensuring ‘universalisation of education’ for children up to fourteen years due in part to paucity of financial resources, an ‘education cess’ has been collected since 2004 from income tax payers to augment funds for investment in education. But, the funds thus collected have not been utilised.
 
The education cess comprises two per cent ‘primary education cess’ and one per cent ‘secondary and higher education cess’. The primary education cess is used to meet part of expenditure on Sarva Shiksha Abhiyan (SSA) and Mid Day Meal (MDM) Schemes. The secondary and higher education cess funds are directly allocated through budgetary provisions. Unfortunately, the collection of these cesses is not fully utilised.

On the basis of a written reply to a Lok Sabha question raised by the then Union Human Resource Development Minister, Smriti Zubin Irani on May 9, 2016, the following is observed:

i)   Of the total collection of ‘Primary Education Cess’, only 61 percent was utilised for financing elementary education, which is accounted for, in part by Sarva Shiksha Abhiyan (SSA) and Mid Day Meal (MDM) schemes, at 41 and 20 percent, respectively. As much as 39 percent of the Cess amount has not been utilised by the Central Government for the purpose for which it is was collected from the taxpayers.

ii)  The trend in allocation of funds for primary education shows that the Central Government’s budgetary outlays for SSA and MDM are increasingly substituted by the collection of ‘primary education cess’. This therefore belies the national expectation that the additional funds collected through the instruments of ‘cess’, over and above the normal Income Tax rates, would supplement and compliment the shortfalls in financial resources for realising the Constitutional obligation to provide quality education for all. In fact, of the total expenditure of Rs 468.56 billion (Rs 46,856 crore) on primary education in 2013-14, the share of primary education cess in that year was as high as Rs 339.02 billion (Rs 33,902 crore), which is 72.4 percent. Similarly, the corresponding actual expenditure to cess collection ratio for 2014-15 was 78.7 percent. Clearly, rather than augmenting additional resources for primary education, the collection of cess is substituting the normal budgetary allocation.
 

 
As regards, utilisation of one per cent of ‘secondary & higher education cess’ is concerned, accruals from the cess were to be utilised for promotion of ongoing schemes for secondary and higher education, mainly for expansion of facilities to improve access and quality of teaching, research and innovation. However, this has not happened.

On the basis of the findings of the Comptroller and Auditor General (CAG), it is observed that even though Rs 78.85 billion (Rs 7,885 crore) was collected through the research and development cess during FY97 to FY17, only Rs 6.09 billion (Rs 609 crore or 7.73 per cent) was utilised towards the objectives of levying the said cess.

Further, CAG has also observed that the Central government in the last ten years collected Rs 834.97 billion (Rs 83,497 crore) by way of secondary and higher education cess between FY07 and FY17, but funds were not  utilised for fulfiling the commitments made in the Finance Act for promotion of secondary and higher education.

Under Rashtriya Uchatar Shikcha Abhiyan (RUSA), MHRD has taken the initiative to improve access and quality of higher education in the states’ sector. Unfortunately, merely one-fourth of the total allocation has been utilised in the last five years. Clearly, available funds have not been utilised for the purpose for which budgetary allocation was made.

There are 14,000 vocational and technical training institutions functioning in the public and private sector. Lack of resources hampers them from modernisation, including recruitment of trainers, which is why manpower skilling gap is wide. A greater focus on this sector through budgetary support is a must.
 
The government support for the development higher education and research is less than one per cent of GDP. Quality of higher education has to be improved by investing more for modernisation of infrastructure, rather than thinly spreading limited resources on populist programs, such as creation of new universities without operationalising the existing ones.

The issue of shortages of faculty in the university sector, which adversely affects qulity of teaching and research, is indeed very disturbing. In a meeting with the President Ram Nath Kovind on January 6, 2018, the Vice Chancellors of 17 new central universities discussed teething issues faced by them. The central universities set up in several states are facing uneven pace of campus development and faculty shortage.

The situation in the central university in Odisha is disastrous, with about 84 per cent of faculty posts lying vacant. Similarly, central universities in Himachal Pradesh, Haryana and Karnataka have over 60–75 percent of faculty posts vacant.

This fact has also been admitted by Minister of Human Resource and Development, Prakash Javadekar, who revealed that over 53 percent of faculty posts are vacant in central universities and 35 percent faculty positions are vacant in IITs.
 
The question is: will the Central government provide for necessary funds commensurate with requirement for recruitment of faculty and other supporting facilities for quality assurance?
 
The demand for mitigating the burden of accumulated interests on account of education loans has been rising, as the funding for public and private higher education institutions comes from private sources, primarily the tuition fees that students and their families pay, often with the help of loans from financial institutions.

Student loan scheme is extremely popular as evident from the increase in users -- as many as nearly 3.0 million students, most of whom pursue technical, professional and management education avail of loan facility.

According to Indian Bank’s Association (IBA), the total outstanding amount of education loan at end of the fiscal 2016–17 was Rs 676.79 billion (Rs 67,678.5 crore), of which Rs 51.92 billion (Rs 5,191.72 crore) was NPA. The non-performing assets (NPAs) contributed by education have grown from 5.7 per cent to 7.67 per cent at March-end 2017.

A high ratio of outstanding loans or non-recovery of students’ loans is a pointer of inefficient management of loans, which has the potential of not only destabilising the lending banks due to rising NPAs, but also provoking unemployed beneficiaries to demand for loan waivers as given to farmers in different states.

In 2009, the then Finance Minister had extended relief on account of the accumulated interests burden of students’ loans. In view of inability of most beneficiaries to servive loans due to unemployment or underemployment, they might express resentment against the job creation policies that may have political repercussions.

This therefore calls for addressing the issue of education loans to alleviate the burdens of the lending banks and beneficiaries of education loans. It seems unlikely that the government will increase allocation of grants and scholarships to alleviate the burden of students’ loans.

Realizing the criticality of education for overall socioeconomic progress or for reaping the benefits of ‘population dividend’, investment in entreprenurial education and skills development is imperative. In attempts to overcome rising fiscal woes and the need for making populist announcements for catching votes in elections due for this year, it is unlikely that the central government will provide funding support for education development and for realizing the aspirations of youth.

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The author is Former Member, University Grants Commission & Central Information Commissioner

Disclaimer: Views expressed are personal. They do not reflect the view/s of Business Standard.
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