India’s investment in education

Sushama Yermal

Budgetory allocations to education
Education, an important service under the social sector, is on the concurrent list of legislative responsibilities as per the Indian constitution, shared by the union and state governments. Preparing a policy outline and monitoring the overall status is done at the national level, while most of the routine matters including recruitment, administration, and assessment are managed at the state level along with local government bodies. Funding of educational services comes from both the central and state governments. This article looks at educational expenditure in India and how well the union budget and other resources contribute to meet the same.

The share of finances allotted to each department/ministry is expressed as a percentage of the whole budget as well as that of the national gross domestic product (GDP). Since following the curve for all the years post independence is cumbersome, it is easier to understand the historical trends of allotments to a given sector or department in India by looking at percentages through the five year plans.

From Reference 12

Over the 35 years from 1951 to 1985, the budget outlay for education went down from 7.8 per cent to 3.5 per cent even though the monetary sum itself numerically increased.

In 1964-66, the Kothari Commission anticipated the percentage of education expenditure to go up from 2.9 per cent of the annual budget at that time to 6 per cent by the year 1985-86, estimating an annual increase of 10 per cent in the educational budget. The new education policy of 2021 also recommends that 6 per cent of the budget every year be set aside for education to achieve better schooling among the youth. But the funds allocated to education have remained much lower than this percentage through the years, ranging from 2 to 4 per cent.

Total educational expenditure
In addition to the union budgetory outlay, states and union territories also make budgetory allocations to education. Comparatively, the budgetory outlay for education by the states is about three times the contribution by the centre.

From Reference 11

Looking at more recent data, the same ratio of contributions continues, expressed as per cent of GDP. The central budget itself sets aside a considerable part to be distributed to the states.

From Reference 3

The Fourteenth Finance Commission (FFC) had tabled its report with a recommendation of increasing the states’ share in the divisible pool of central taxes from 32 per cent to 42 per cent every year5. In a spirit of strengthening cooperative federalism in the country, the union government accepted this recommendation. But this has been accompanied by a reduction in the union government’s plan grants to states. This change has happened in view of enhanced ‘untied’ resources available with the states. However, in this changed structure, the overall adequacy of budgetary resources for school education, to a large extent, will be dependent on how much priority is accorded by the states to this sector in their budgets.

Contribution by other departments, such as Ministry of Culture, Ministry of Labour and Employment, Ministry of Minority Affairs, etc., to education is significant too, adding more or less 1 per cent to the kitty of central and state departments of education.

Additional funding by local governments and private sources (including fees) amounts to 20 to 40 per cent of the total educational expenditure. Though fees and other voluntary contributions come from private sources, it is accounted by and spent on education as per the governmental rules and procedures and they form part of public expenditure in India11.

From Reference 11

It is interesting to observe the trends of educational funding in comparison to other areas of the social sector. As the table below shows, education, sports, and arts and culture together have accounted for almost half of the budgetory share over the decades.

Percentage of government expenditure on education by every country varies widely ranging from less than 1 per cent to more than 10 per cent of the GDP, but the world average of educational spending is at 4.1 per cent, still higher than our current central budgetory outlay for education. Another way to understand educational funding is to look at the total annual expenditure on education in comparison to the GDP. This includes local, regional, national government funding as well as transfers from international sources to the government. From this point of view, the total educational expenditure in India has gone up from 11 per cent to 16 per cent of the GDP in the last 20 years and has varied over the previous years too.

From Reference 2

Current budget
The demand note from the Ministry of Education for the year 2023-24 estimates an expenditure of Rs. 68,804.85 crores for literacy and school education. This amount has been allocated fully in the budget allotment for the upcoming financial year, though the total grants requested was higher than this figure. The present allocation is Rs. 5,355.48 crores more than the educational budget presented for the current financial year, which was later revised to Rs. 59,052.78 crores, bringing the difference to Rs. 9,752.07 crores.

The department of higher education is separately allocated a sum of Rs. 44094.62 crores.

The final figure may be available only after any possible revisions of the allocations, but the allocation amounts to 2.9 per cent, a stature that has remained the same for the past seven years in spite of a raise by Rs. 8,621.75 crores from last year’s total (central) outlay for education.

Of the outlay for school education, as usual major portions are ear marked for (a) fund transfer to states and union territories for centrally sponsored schemes like samagra shiksha and mid-day meal (b) funding autonomous bodies like the Kendriya Vidyalaya Sangathan and Navodaya Vidyalaya Samiti1.

Funding needs of education in India
Similar to many services of the social sector, it is no surprise that several studies have reported salary of personnel as the largest portion of total educational expenditure. Evidently, it is important to employ quality teachers and to pay them well. Funding is also necessary to maintain and expand infrastructural facilities and ensure availability of adequate resources to make the process of teaching-learning effective. Distribution of outlay for various components of the educational enterprise still shows that the budgetary plan covers only salaries and cursory support/encouragement to selected few among students.

According to a study published in 2009, at the repeatedly mentioned coveted outlay of 6 per cent GDP, the education budget isn’t by itself sufficient even to pay starting level salaries to teachers at the primary and secondary schools. Under all reasonable scenarios and maximal favourable assumptions, the feasible salary that can be paid to schoolteachers remains substantially less than the recommendations of the Sixth Pay Commission. It may need 15 per cent of the GDP over a sustained period just to be able to pay teachers.

The proportion of the salaries of teachers in the total school budget is substantially lower in government schools than in private schools, at an average of about 70%. Considering the cost of teachers’ training, inspection costs and other departmental staff, the final available amount may be 60% to 65%. This share of spending on teachers’ emolument represents a very liberal assumption in favour of the teacher, since the remaining share of 35% is to cover all capital expenditure on school infrastructure building and maintenance, all school administrative and supervisory officers, curriculum planning set up including the District Institutes of Education and Training and State Councils of Educational Research and Training, provisions of free textbooks, and annual examination, etc8.

Further support of this bleak view comes from state education finances report 2020, which states that ‘teacher training’ and ‘quality’ have the least priority in school education finances. The share of education finances dedicated towards ‘teacher training’ has been extremely low and was less than or equal to 1 per cent for six states during FY 2016-17. The situation was similar in FY 2017-18, except for Tamil Nadu, which spent 5 per cent of the total school education funds on ‘teacher training’. The proportion of school education finances dedicated towards ‘quality’ initiatives including ICT infrastructure, ranged between 1 per cent and 3 per cent. Similarly, the share going into ‘monitoring and inspection’ of schools also ranged between less than 1 per cent and 3 per cent.

Table: Distribution of total school education expenditure across functional areas in 6 states

In ASER (Annual State of Education Report) 2009, a new component PAISA was introduced to understand money. Like the other components of ASER, the first step was at the ground level. In every sampled village in the country, a government primary school was visited. Questions were asked about how much money came to the school, when it came and how it was spent. Interestingly, many teachers in schools did not know how much is to come and what they can do with it. The PAISA component of ASER was the first time a national attempt was made to understand fund flows at the ground level7.

The situation is far from encouraging when coupled with the fact that the existing number of teachers is not really enough for the student population. The Tapas Majumdar Committee in 1999 recommended the student-teacher ratio to be 30:1, which is higher than the norm of 18 to 25 in most low and middle income countries like Argentina, Brazil, China, Egypt, Indonesia, Malaysia, Sri Lanka, and Thailand9. Currently the ratio in government schools in India is around 36 (in 2006-07) declining from 41 in the year 2003-0410. The ratio is expected to improve over the years. As the usual budgetary allocation itself is barely sufficient to retain the teachers already in service, it is not clear how the additionally required teachers can be employed and paid.

Another parameter to assess the sufficiency of educational funding is to calculate expenditure per student per year. This is calculated as the ratio between gross figures of total educational expenditure and total number of enrolled students, and not as allocated sum meant only for the welfare of the students. Even though the educational budgetory figures have numerically increased, the percentage both in terms of total budget and in terms of GDP have not been encouraging. As the student population has been increasing year after year, it is easy to see that per student expenditure has been on the decline. According to a report from 2011, GOI releases Rs.950 per child per year under SSA (Sarva Shikshan Abhiyan). There are however some variations. Rajasthan and Chhattisgarh are amongst the higher spenders, at approximately Rs.1,300 per child, while Gujarat and West Bengal are low spenders at Rs.423 and Rs.575 per child per year respectively. As discussed in earlier sections, this sum is used for the overall upkeep of the educational programmes, hence is evidently insufficient to provide a comprehensively healthy ecosystem for learning.

Plenty of in-service faculty development programmes have been conducted but as often sadly reported in the news, let alone students, the teachers themselves do not pass simple tests of arithmetic and language comprehension. Despite a variety of degrees offered, the candidates armed with these are still unable to clear teacher eligibility tests. If any of these aspects are to be addressed sufficiently well, adequate funds will have to be made available specifically for each of these core requirements.

Teachers in India are often burdened with administrative duties and heavy curricular demands in addition to the sad realities of larger-than-ideal student numbers and lower-than-ideal salaries. Combined with lack of clarity regarding policy or implementation due to cascading effects at the departmental hierarchies, teachers end up mechanically completing their tasks and preparing the required reports for students or schools. Instead of complying out of compulsion, teachers should be able to rely on officials of the education department aided by mutual confidence and understanding. Their needs and inputs must be prioritized, encouraging their skills to develop organically. How spending can be decentralized yet made effective and efficient in this context is not clear: it may be good for the departments to seriously seek advice of experts in resource utilization and auditing.

Any reforms envisaged at the policy level need further support in monetory terms for proper implementation, so as to include marginalized populations of the society. The fact that the allocation to education in the central budget has hardly increased, in view of the rising rate of inflation, is indeed a matter of concern since the outlay will only match expenses that are essentially made every year. Any improvements required on the various facets, including recruitment of the best teachers will require funding from other resources. In the years to come, we hope the department of education will be adequately funded, thus boosting the aspiration to achieve better learning outcomes.


  1. Notes on Demands for Grants, GOI, 2023-2024
  2. (India Education Spending 1997-2023. Retrieved 2023-02-09.)
  3. Analysis of budgeted expenditure on education 2018-19 to 2020-21, GOI Ministry of Education; Planning, monitoring and statistics bureau, 2022
  4. Bordoloi M., Pandey S., Irava V., and Junnarkar R. (2020), “State Education Finances”, Accountability Initiative, Centre for Policy Research, Delhi, India
  5. Public financing of school education in India: a fact sheet, Centre for budget and governance accountability and Child rights and you, 2016
  6. Cyclicality of social sector expenditures: evidence from Indian states, Reserve Bank of India occasional papers Vol 34, No 1&2, 2013
  7. Banerji R, Linking outlays to outcomes in Education, Accountability Initiative, Centre for policy research, 2010
  8. Jain P.S. and Dholakia R.H., Feasibility of implementation of right to education act, Economic and political weekly, vol xliv no 25, 2009
  9. Jha, Praveen, Subrat Das, S S Mohanty and S N K Jha: Public Provisioning for Elementary Education in India (New Delhi: Sage), 2008
  10. Mehta, Arun C, Elementary Education in India, Analytical Report 2004 (New Delhi: NIEPA) 2005
  11. The financing of education in India, IIEP research report 12, 1991
  12. NEUPA occasional paper 12, 1985

The author has been a researcher in biology and an educator. She taught at the undergraduate programme of IISc from its beginning. She is now freelancing as an independent advisor to academic institutes and teaching faculty. She can be reached at

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