Can India's education budget fund increased spending in new policy?

Good public education is a fundamental right in India, and there is a strong correlation between public investment in education, child development and empowerment.

The government’s Draft New Education Policy released May 2019 suggests increasing spending on education from 10% of total government expenditure to 20% by 2030. However, there is no funding available for such an increase in India’s current education budget.

Further, since 2015, government spending on school education has actually decreased after correcting for inflation, according to an analysis of state and central education finances over the years.

Good public education is a fundamental right in India, and there is a strong correlation between public investment in education, child development and empowerment. For instance, states that spent more on education, such as Himachal Pradesh and Kerala, scored higher on the empowerment index, which takes into account attendance levels at primary, upper primary, secondary and senior secondary levels, as well as indicators linked with gender equality such as sex ratio at birth and early marriage.

*Year: Average expenditure on school education for the period 2012-13 to 2018-19

**Note: This is computed by the Centre for Budget and Policy Studies taking six indicators (four relating to education and 2 relating to empowerment, sourced from National Sample Survey Office’s 71st round and National Family Health Survey, 2015-16, respectively)

Central government’s education budget reduced since 2014

Even as the government promises an increase in spending on education, the share of the union budget allocated to education fell from 4.14% in 2014-15 to 3.4% in 2019-20, the period during which the Bharatiya Janata Party headed the central government, according to budget documents from 2014 to 2020. In the 2019-20 budget, the share of the union budget allocated to education remains at 3.4%, which means that, this financial year, the government is not allocating more money to education as the new education policy would require.

It is not only the share that has declined; in case of school education, the budget has decreased in absolute terms. Total money allocated to school education reduced from Rs 38,600 crore in 2014-15 to Rs 37,100 crore in 2018-19, based on the budget’s revised estimates.

Business Standard

American experience suggests that an educated workforce may be overrated

This isn't to belittle the value of higher education; a tight labour market won't reduce the need for degrees for engineers or lawyers.

Business Standard : A tight labor market shows the true value of education – and we’re seeing now that college has been overpriced. For many workers, it’s not worth the time or the money.

In the depths of recession employers added years of experience and additional degrees into hiring requirements – "the barista with a master's degree" – not necessarily because that experience or education was important to do the job, but just because employers had the luxury of being more picky. As the labor market has improved, those requirements have been loosened, presumably without much impact to productivity.

This reality is at odds with the conventional wisdom for the rise in American economic inequality over the past few decades, which says that technology, globalization and education have segmented society into winners and losers depending upon whether someone is a manufacturing worker in the Midwest or a knowledge worker in a coastal city. That conventional wisdom argues that rising inequality has been for structural rather than cyclical reasons.

But as the past few years have shown, we're in an environment where employers are relaxing education requirements and those with the lowest wages (and presumably the least education) are getting the biggest raises. So maybe something has changed and now the link between education and inequality isn't as robust as it used to be, or maybe the theory wasn't right to begin with.

When unemployment was higher, it was plausible to think that more workers needed more education to earn more and to make the economy more productive. But years of very low unemployment have shown a different path, as millions of workers get that higher pay without having to spend years and tens of thousands of dollars on degrees that employers only "require" when they have leverage over workers.

This would be significant because education is one of the big four budget items – along with housing, health care and transportation – that are burdens for workers to pay for, and that policymakers have had difficulty addressing. To the extent the US could spend less on education, we could free up resources to tackle something else.

This isn't to belittle the value of higher education; a tight labor market won't reduce the need for degrees for engineers or lawyers. But as in other areas related to labor markets, maybe we've miscalculated how much is appropriate. Just as the Federal Reserve overestimated the level of the unemployment rate at which inflation becomes a concern, and deficit hawks have underestimated the level of the federal budget that's manageable without leading to higher inflation and interest rates, America may have overestimated how educated its workforce needs to be in order to thrive in a modern economy.