The Union Budget presented to Parliament lacks clear thrust and direction. It’s replete with obfuscations and populist giveaways and glosses over inadequate funding for infrastructure and India’s abundant human capital. It’s unlikely to deliver growth, inclusivity or sustainable development. Dilip Thakore reports
Preceded with great expectations and hype with television news anchors edgy with excitement, the Union Budget 2013-14 — the last full budget of the Congress-led United Progressive Alliance (UPA-II) government — presented to Parliament and the people by finance minister P. Chidambaram on February 28 just a month ago — seems like a faded dream. Although a “simple, straightforward and reasonably short” budget speech was promised, by the end of the 95-minute exercise the finance minister, whose star is riding high within the Congress party bedeviled by runaway corruption and unapologetic nepotism which are likely to cost it dear in the General Election scheduled for next summer (2014) , none of these objectives was achieved.
The Union Budget 2013-14, whose goal as articulated by Chidambaram was “higher growth leading to inclusive and sustainable development”, is neither simple nor straightforward. On the contrary it lacks clear thrust and direction, is replete with obfuscations and populist giveaways, and glosses over inadequate funding for infras-tructure and human capital develop-ment. It’s unlikely to deliver higher growth, inclusivity or sustainable development. If one ignores the jokey comments plastered all over the dailies and ephemeral commentaries of the talking heads of television, and reads Chidambaram’s latest budget speech — fine print spread over two pages in the pink papers — it becomes clear that its prime objectives are to maintain subsidies in the pre-election year and rein in the fiscal deficit to prevent a meltdown of the rupee, which will shoot up the country’s import bill and high current account deficit (imports minus exports) and usher in an era of hyper-inflation.
Therefore considerable financial jugglery and sleight of hand have been done to maintain the fiscal deficit this year at 5.2 percent of GDP and reduce it to 4.8 percent next year. To show this is possible, Budget 2013-14 projects that revenue receipts (mainly direct and indirect taxes) will rise by 19 percent to Rs.10.56 lakh crore. Capital receipts (to fund infrastructure and plan expenditure) — mainly through market borrowings of Rs.5.5 lakh crore — are expected to rise by 10.5 percent to Rs.6.08 lakh crore to fund the total budget expenditure of Rs.16.65 lakh crore ($306 billion).
On a careful reading of these num-bers, it becomes quite obvious the expectation of garnering revenue receipts of Rs.10.56 lakh crore is built on shaky premises, if not wishful thinking. For one, it’s doubtful whether economic growth of 6.1-6.7 percent which is necessary for revenue receipts to increase by 19 percent, is possible.
In 2012-13, revenue receipts fell short of the budgeted Rs.9.35 lakh crore by 7 percent to Rs.8.71 lakh crore. Despite Chidambaram’s platitudes to the effect that “doing business in India must be seen as easy, friendly and mutually beneficial”, his Budget speech didn’t mention any initiatives to improve the ease of doing business in India. Therefore it’s difficult to envisage a sudden spurt of entrepreneurial activity or industrial investment which raises the rate of economic growth from the current year’s 4.5 percent to 6.1-6.7 percent in 2013-14. Moreover it’s pertinent to note that almost 30 percent of the Union government’s budgeted expenditure of Rs.16.65 lakh crore is funded by market borrowings (Rs.5.5 lakh crore). And continuous dependence on market borrowings to fund government expenditure has taken its toll on the Centre’s finances with interest payout in 2013-14 budgeted at Rs.3.70 lakh crore, not far short of this year’s market borrowings (Rs.5.5 lakh crore).
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Comments T.V. Mohandas Pai, chairman of the Bangalore-based Manipal Global Education Pvt. Ltd, India’s premier higher education multinational with universities in Malaysia, Nepal, Dubai and the West Indies: “Our fiscal deficit of 5.2 percent of GDP at the Centre and 2.5 percent in the states is creating high inflation, rising interest rates, resulting in a major share of tax revenues being eaten up by interest payouts. During the past five years the Union government has borrowed over Rs.22.75 lakh crore compared to around Rs.8.5 lakh crore in the previous five years. The high fiscal deficit is leading to a high current account deficit causing stress on our foreign exchange reserves. High inflation has led to reduced savings, reduced investment, lesser growth and lesser jobs. Without adequate debt-free resources it’s not possible to increase investment in education.”
According to Pai, a former chartered accountant and hitherto finance director of the blue-chip Infosys Technologies Ltd for over a decade, government debt should be continuously retired, and non-plan subsidies (budgeted at Rs.2.33 lakh crore in 2013-14) should be sharply reduced to release resources for investment in developing the country’s abundant human capital. “Simultaneously education policies should be liberalised so that citizens have a choice of schools and universities for their children. The poor majority also has the right to send their children to education institutions of their choice. They should not be forced into bad quality government institutions because they are too poor to pay fees,” adds Pai.
But with the UPA-II government patently unwilling to slash wasteful expenditure, subsidies and giveaways in a pre-election year, in Budget 2013-14 allocations for the social sector (health, education, water, sanitation, nutrition and social security for marginalised citizens) have risen only nominally, and if adjusted for inflation, have perhaps declined. As per the usual budgetary practice, provision for the education of the country’s 480 million children — the world’s largest child population — is grudging. While paying lip service to education as a “high priority” of UPA-II, the finance minister intoned: “I propose to allocate Rs.65,867 crore to the ministry of human resource develop-ment, which is an increase of 17 percent over the RE (revised expenditure) of the previous year. The Sarva Shiksha Abhiyan (primary education for all) and Right to Education Act are firmly in place. I propose to provide Rs.27,258 crore for SSA in 2013-14,” thus conven-iently obfuscating the fact that the budgeted (but not fully spent) allocation of the HRD ministry in 2012-13 was Rs.61,472 crore. Therefore the increase in the allocation for education is not 17 percent but a mere 7.1 percent. More-over, the allocation for SSA/RTE is partly out of the HRD ministry’s total allocation, not in addition to it with the 2 percent education cess imposed in 2004 contributing most of it.
To be fair, within the constraints of having to reduce the fiscal deficit (critical for controlling inflation) and having to provide subsidies to industry, agriculture and vote banks in a pre-election year, the finance minister has nevertheless managed to provide token increments for early childhood nutrition and care (ICDS), the mid-day meals scheme, secondary, higher and medical educ-ation, and continue with the past practice of making Rs.100 crore grants to selected institutions of tertiary education (see box p.77). But he hasn’t been able to break with the tradition of a niggardly provision for developing the nation’s vast and high-potential child and youth population of 550 million.
Dr. Parth Shah, former professor of economics at Michigan University and currently president of the Delhi-based Centre for Civil Society (CCS), ranked India’s top think tank in the University of Pennsylvania’s global Go-to-Think Tank Index (see EW cover story March), and which is leading a national ‘Fund Students Not Schools’ campaign advo-cating the education vouchers system, is unimpressed by Budget 2013-14. He is disappointed that Chidambaram hasn’t followed up a promise he made when he was finance minister in 2007 to match budgetary outlays with out-comes. “The Results-Framework Docu-ment (RFD) of the department of school education and literacy for the year 2012-13, lists items like building of elementary schools, addition of kitchens, hiring of teachers, implementation framework for RMSA, etc. All these are outputs, not outcomes! It tells us how the money and time of the department was spent, not what impact that money and time had on education and literacy. The finance minister still has an opportunity to get all the ministries to prepare genuine outcome reports before he releases the funds allocated in Budget 2013-14. He has another opportunity to make history, and may not get it again,” says Shah.
Yet if individuals like Pai and Shah who are aware of the rot in the country’s public education system are unimpressed by Chidambaram’s bud-getary provision for developing India’s human resource pool, it’s because despite the trumpeted 17/19 percent increase in the Centre’s outlay for education, it’s nowhere near commen-surate with the needs of the country’s huge population of children and youth. Curiously, the ministry’s over-hyped dream team led by the recently appointed HRD minister Dr. Pallam Raju has remained tight-lipped about Budget 2013-14. Instead, Raju keeps dodging interview requests from Education World, notwithstanding — perhaps because of — our well-established reputation as the country’s premier educ-ation news and analysis publication.
According to the Delhi-based think tank Centre for Budget and Governance Accountability (CBGA), after all the getting and spending, the national (Centre plus states) outlay for educa-tion in the new millennium averages 3.5 percent of GDP and aggregated 3.31 percent in the year ended March 31, 2013. That’s way below the 6 percent of GDP recommended by the Kothari Commission over half a century ago in 1966, and also below the 5.7 percent of GDP expended by the US and 5.3 percent, UK. And, it must be noted that the national incomes of these nations are several multiples of India’s and their populations far smaller. Therefore their per-child expenditure is enormous by Indian standards.
Although it’s politically incorrect to say so, the saving grace of Indian education is the country’s estimated 80,000 (200,000 according to the Union HRD ministry which counts the prim-ary, secondary and higher secondary sections of schools as separate instit-utions) private schools (out of a total 1.30 million), which according to some estimates host 40 percent of school-going children and are the privileged havens of India’s middle and elite classes.
Contrary to popular, especially Left opinion, private schools are not patro-nised only by India’s relatively well-off middle and elite households. According to CCS, there are over 400,000 private low-budget schools operating in the country’s proliferating urban slums and rural habitats. These mainly primary schools run by edupreneurs of modest means levying fees of Rs.100-400 per month — eulogised by Dr. James Tooley, professor of education at Newcastle-upon-Tyne University in his seminal book The Beautiful Tree (2009) — are increasingly being preferred by low-income households because they provide English learning and their low-paid teachers actually teach.
Unfortunately they are facing the threat of closure because under s.19 of the Right to Free and Compulsory Education Act, 2009, all private schools countrywide have to adhere to stiff infrastructure and teacher-pupil ratio norms. A short three-year window period was given to private schools to upgrade their infrastructure — without any special loans or grants scheme — and closed on March 31. Under s.19 (5) non-compliant schools shall be ‘derec-ognised’ with severe penalties (Rs.10,000 per day) imposed upon their promoter/owners if they refuse to close them down.
Inevitably in the iniquitous society shaped by post-independence India’s Soviet-inspired socialists, these stringent infrastructure and teacher-pupil ratio norms are not applicable to the country’s 1.28 million Central and state government schools defined by crowded classrooms, multi-grade teaching, lack of electricity, drinking water and toilets, chronic teacher truancy, woeful learning outcomes and sub-nationalist language chauvinism. The intent seems to be to force children from poor but ambitious households back into regressive government schools. According to the Annual Status of Education Report 2012 released earlier this year by the highly-respected Mumbai-based NGO Pratham, which surveys primary chil-dren’s learning outcomes in 605 districts of rural India, over 53.2 percent of class V children in mainly government schools cannot comprehend class II textbooks and 46.5 percent can’t solve simple two-digit subtraction sums.
In the circumstances although the consensus of opinion within Indian academia is that the State cannot be substituted as the predominant provider of education, the lack of interest in human capital development exhibited by the leadership of all major political parties, necessitates a political initiative to reduce the role of the State (government) in education. Quite clearly, with more than half the population eking out miserable lives below the poverty line, it is not advisable or politically feasible for government to abdicate the education space in favour of for-profit education entrepreneurs. However, there is a strong case for adopting and adapting the American charter schools model in India with experienced education NGOs such as Pratham, Akanksha, Barefoot College, KISS, Save the Children and Parikrma Foundation etc given leases and licences to run government — especially state government — schools, with government conferring grants equi-valent to current per student expenditure. It’s incontrovertible that NGOs would do a far better job of improving learning outcomes in public education.
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According to Madhav Chavan, promoter-director of Pratham (estb. 1994) which provides supplementary educa-tion to over 30 million children in 17 states across India, and publishes the Annual Status of Education Report (ASER), the 17/19 percent increased outlay for education in 2013-14 is mostly “window-dressing”, with no special effort made to increase the budgetary allocation for education. Nevertheless Chavan believes there is a change in the official mindset, with government now having accepted that its role is to “provide for rather than itself provide school education” to children of underprivileged households.
“The Twelfth Plan document strongly advocates public-private partnerships to meet the quality needs of bottom-of-the pyramid children, and even the RTE Act mandates a greater role for private schools in public education. Therefore it’s only a matter of time before the Central and state governments see the logic of inviting village panchayats, school monitoring committees estab-lished under the RTE Act, reputable NGOs, and even teachers’ unions to manage and administer government schools with the state and municipal governments contracting with them to run schools within the boundaries of current per school budgets. However, or this to happen state governments must transparently indicate its per institution expenditure, rather than statewide averages,” says Chavan.
Awareness that unwieldy and incorrigibly corrupt government bureaucracies are ill-equipped to deliver quality education is dawning not only upon the public which is deserting govern-ment schools en masse, but also upon the minority of sentient individuals within government itself. This is evidenced by the alacrity with which the Central and state governments have embraced the idea of public-private partner-ships (PPP), to provide long-neglected vocational education and training (VET) countrywide. With only 2-3 percent of school and/or college-leavers receiving formal VET as against 20 percent in China, 60 percent in the US, and 80 percent in Germany, the Centre has belatedly become aware of the vital importance of VET for India’s 550 million children and youth. In his budget speech, Chidambaram reiterated the 12th Plan (2012-2017) target of skilling 50 million people and 9 million this fiscal.
For this purpose, in 2009 the govern-ment encouraged the establishment of the Delhi-based National Skill Develop-ment Corporation (NSDC) as a public-private partnership between the Central government and representative organi-sations of Indian industry, with a corpus of Rs.1,000 crore to fund private sector companies and firms providing VET countrywide. Significantly, the India Inc representative organisations (CII, FICCI etc) own the majority 51 percent stake in NSDC.
“Although the target of 9 million formally certified VET graduates this year is a stiff one and is unlikely to be achieved, the government’s national skills development programme has got off to a good start. NSDC has developed good project assessment and evalu-ation skills and is generously funding professional VET providers. We ourselves have received NSDC funding and our interaction with the corporation is excellent,” says Siddharth Chaturvedi, director of strategy and operations of AISECT (estb.1985), a Bhopal-based IT training and educational services education conglomerate (which includes Dr. C.V. Raman and AISECT universities) with 8,000 franchisee centres in 27 states and three Union territories.
According to Chaturvedi, an alumnus of NIT, Bhopal and the S.P. Jain B-school, Mumbai with work experience in ITC and IBM, AISECT’s mission is “to reach out to the remotest corners of India and promote ICT-based training and services to empower people, generate employ-ment for youth and unfold entrepre-neurship-based initiatives”. Thus far, AISECT has formally certified over 1 million students in its skills enhance-ment programmes, and generated over 10,000 entrepreneurs across India.
With Central and State Governmentable to do preiousimprove education standards in their schools, unable to combat corrup-tion in education or take on entrenched control-and-command education bur-eaucrats and academic pundits, and demand accountability from teachers (1.25 million government schools teachers countrywide are absent every working day), it makes sense for government to cede the education space to NGOs, trusts, societies and private edupreneurs. Consequently the Union budget’s allocations for education are on hold, if not declining.
"The main thrust in the Union Budget 2013-14 is on reduction of the fiscal deficit which is projected to fall from 5.2 percent of GDP in 2012-13 to 4.8 percent in 2013-14. But this objective is sought to be achieved through expenditure compression rather than increased revenue mobilisation. Therefore in 2013-14, the expenditure of the Centre on social sectors — health, education, water and sanitation, nutr-ition, and social security for marginalised sections of the population — aggr-egates a mere 2 percent of GDP with the country’s total annual expenditure on these sectors adding up to 7 percent of GDP. This is far behind the average social sector outlays not only of developed OECD countries which average 14 percent of GDP, but also of many developing nations. The Union government’s total allocation for the social sector at Rs.213,699 crore is 1.9 percent of GDP, which is slightly higher than the 1.7 percent recorded in 2012-13. But we need to bear in mind that the total public spending on education — Centre plus states — at 3.31 percent of GDP in 2012-13, as per the Economic Survey, is far short of the level of 6 percent recommended by the Kothari Commission in 1966,” says Subrat Das, executive director of the Delhi-based Centre for Budget and Governance Accountability (estb. 2005), one of India’s top think tanks.
The on-the-ground reality is that years of profligacy and policy paralysis in government has slowed investment and economic growth which in turn has hit the government’s tax revenue (accor-ding to Chidambaram, India’s tax-GDP ratio at 9.9 percent is “the lowest for any large developing country”). This is reflected in Budget 2013-14, with the finance minister being forced to focus on containing the fiscal deficit and freezing social sector outlays.
“Chidambaram’s Budget 2013-14 has left no one in any doubt that his government’s focus now is entirely on reviving economic growth. The budget is forthright in its encouragement of investment, especially in infrastructure projects. By far, its most effective provision is the offer of a 15 percent investment allowance to all companies that invest more than Rs.100 crore in plant and machinery, provided they do so within the next five years. This is bound to kickstart investment in large projects. I can’t say whether it has done enough for education. I haven’t studied it from that perspective. But education in India needs much more than funding. It needs a new attitude from the government towards private schools and universities which would allow them to grow with government setting detailed standards for libraries, faculty etc,” says Prem Shankar Jha, former editor of the Economic Times and Financial Express, and arguably the country’s most readable economist-columnist.
Quite clearly, despite a global consensus that according top priority to nurturing human capital is the prerequisite of national development, India’s major political parties including the Congress, BJP, CPM and the clutch of family mafias masquerading as political parties, have no inclination to engineer the radical overhaul that the country’s obsolete education system urgently requires. They are content to let the country’s 1.28 million schools, 31,000 colleges and 611 universities limp along and conduct classes as usual.
In the circumstances, it is incumbent upon all right-minded citizens intent upon saving generation next from the swamp of corruption, neglect and iniquity in which it is mired to look for alternative political formations. The newly-promoted (by your editors) Children First Party of India’s prime objective is to transform India into a children-centric nation. Check out the manifesto of CFPI (www.childrenfirst.in) which has drawn up a lib-lav-lab blue-print to equip all schools countrywide with a library, laboratory and lavatories for a start (see box p.82). Admittedly, the success of a new political party seems a long shot, if not mission impossible, in a country suffering mass Stockholm syndrome. But desperate situations necessitate desperate remedies.