A recent report by the National Institute of Fiscal Policy and Research (NIFPR) released in July 2017 reveals that economically backward states like Bihar, Jharkhand and Odisha spend less than half of the desired requirement for each student at the elementary level on an annual basis, when compared to more prosperous states like Tamil Nadu and Uttarakhand.
The NIFPR report estimates requirements for twelve States using the set of norms defined in the RTE Act and other official documents. In the process of doing so, the report created a ‘normative’ frame of reference essential to judge financial adequacy.
There is clear evidence of substantial gaps and under-spending in per student resource requirements. “The obvious implication of these finding is the need for higher allocations with due consideration for equity aspect as the deficit is clearly concentrated in the poorer States of India”, the report reads.
The report sets out to calculate the gap between actual expenditures and ‘ideal’ expenditures on students at the elementary level to provide education for all and achieve the spirit of a right to free and compulsory education.
By calculating this gap, the report concludes that states like Bihar spend only 31 per cent of their what they ought to spend on each student per year. Similarly, Jharkhand and Odisha are spending 44 per cent of the funds they ought to divert to students. This deficit persists in most states such as Madhya Pradesh, which spends a little more than a half of its requirements at 52 per cent.
States with above average per student expenditure are Uttar Pradesh at 78 per cent and Uttarakhand at 91 per cent, yet the prize goes to Tamil Nadu which spends a whopping 108 per cent of its total requirement on students on an annual basis.
Uttar Pradesh performs better than expected, and this could be because of the relatively lower gap between actual and required expenditure due to the prevalence of children in the private unaided sector, which reduces public investment requirements. Another likely reason for the number is the higher pay scale for regular teachers in the state, which conflates the numbers.
The contour map represents the comparison between required and actual expenditure across States.
It can be seen that ‘per student actual expenditure’ lies well within the boundaries of per student requirements. The larger the distance between the red and blue lines, greater the gap. The green line shows the recurrent cost per student in Kendriya Vidyalayas (KVs) in the year 2015-16. At Rs 32,698 expenditure per student in 2015-16, the green line lies outside the other two lines by a large margin , except for Uttarakhand.
Several researchers, according to the report, have noted that the Sarva Shiksha Abhyaan (SSA) treats the better-off States and the backward States equally except the north-eastern or special category States, and all States are to provide equal matching shares under the scheme.
Comparing the per-student expenditure, Geetha Rani notes, “Himachal Pradesh reported the highest per student expenditure of Rs 18,509 and Bihar spent Rs 2,684 in 2010-11. The increase in per-student cost additionally on account of SSA was Rs 2,668 in Himachal Pradesh, while the amount itself was the per student cost in Bihar! The additional per student cost that Bihar could reap was Rs 1,872.
The report concludes by saying that the issue of equalisation needs immediate attention within SSA as well as in the overall framework of Centre-State finances. And careful strategic planning is needed to prioritise public expenditure on elementary education and giving due consideration to equalisation.
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Steve Ovett, the famous British middle-distance athlete, won the 800-metres gold medal at the Moscow Olympics of 1980. Just a few days later, he was about to win a 5,000-metres race at London’s Crystal Palace. Known for his burst of acceleration on the home stretch, he had supreme confidence in his ability to out-sprint rivals. With the final 100 metres remaining,
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]Ovett waved to the crowd and raised a hand in triumph. But he had celebrated a bit too early. At the finishing line, Ireland’s John Treacy edged past Ovett. For those few moments, Ovett had lost his sense of reality and ignored the possibility of a negative event.
This analogy works well for the India story and our policy failures , including during the ongoing covid pandemic. While we have never been as well prepared or had significant successes in terms of growth stability as Ovett did in his illustrious running career, we tend to celebrate too early. Indeed, we have done so many times before.
It is as if we’re convinced that India is destined for greater heights, come what may, and so we never run through the finish line. Do we and our policymakers suffer from a collective optimism bias, which, as the Nobel Prize winner Daniel Kahneman once wrote, “may well be the most significant of the cognitive biases”? The optimism bias arises from mistaken beliefs which form expectations that are better than the reality. It makes us underestimate chances of a negative outcome and ignore warnings repeatedly.
The Indian economy had a dream run for five years from 2003-04 to 2007-08, with an average annual growth rate of around 9%. Many believed that India was on its way to clocking consistent double-digit growth and comparisons with China were rife. It was conveniently overlooked that this output expansion had come mainly came from a few sectors: automobiles, telecom and business services.
Indians were made to believe that we could sprint without high-quality education, healthcare, infrastructure or banking sectors, which form the backbone of any stable economy. The plan was to build them as we went along, but then in the euphoria of short-term success, it got lost.
India’s exports of goods grew from $20 billion in 1990-91 to over $310 billion in 2019-20. Looking at these absolute figures it would seem as if India has arrived on the world stage. However, India’s share of global trade has moved up only marginally. Even now, the country accounts for less than 2% of the world’s goods exports.
More importantly, hidden behind this performance was the role played by one sector that should have never made it to India’s list of exports—refined petroleum. The share of refined petroleum exports in India’s goods exports increased from 1.4% in 1996-97 to over 18% in 2011-12.
An import-intensive sector with low labour intensity, exports of refined petroleum zoomed because of the then policy regime of a retail price ceiling on petroleum products in the domestic market. While we have done well in the export of services, our share is still less than 4% of world exports.
India seemed to emerge from the 2008 global financial crisis relatively unscathed. But, a temporary demand push had played a role in the revival—the incomes of many households, both rural and urban, had shot up. Fiscal stimulus to the rural economy and implementation of the Sixth Pay Commission scales had led to the salaries of around 20% of organized-sector employees jumping up. We celebrated, but once again, neither did we resolve the crisis brewing elsewhere in India’s banking sector, nor did we improve our capacity for healthcare or quality education.
Employment saw little economy-wide growth in our boom years. Manufacturing jobs, if anything, shrank. But we continued to celebrate. Youth flocked to low-productivity service-sector jobs, such as those in hotels and restaurants, security and other services. The dependence on such jobs on one hand and high-skilled services on the other was bound to make Indian society more unequal.
And then, there is agriculture, an elephant in the room. If and when farm-sector reforms get implemented, celebrations would once again be premature. The vast majority of India’s farmers have small plots of land, and though these farms are at least as productive as larger ones, net absolute incomes from small plots can only be meagre.
A further rise in farm productivity and consequent increase in supply, if not matched by a demand rise, especially with access to export markets, would result in downward pressure on market prices for farm produce and a further decline in the net incomes of small farmers.
We should learn from what John Treacy did right. He didn’t give up, and pushed for the finish line like it was his only chance at winning. Treacy had years of long-distance practice. The same goes for our economy. A long grind is required to build up its base before we can win and celebrate. And Ovett did not blame anyone for his loss. We play the blame game. Everyone else, right from China and the US to ‘greedy corporates’, seems to be responsible for our failures.
We have lowered absolute poverty levels and had technology-based successes like Aadhaar and digital access to public services. But there are no short cuts to good quality and adequate healthcare and education services. We must remain optimistic but stay firmly away from the optimism bias.
In the end, it is not about how we start, but how we finish. The disastrous second wave of covid and our inability to manage it is a ghastly reminder of this fact.