Interim Budget 2024: Towards Big Leap In Education In The Leap Year

India has seen 14 interim budgets and with time, the distinction between interim budgets and a non-election year budget has been diminishing. Pre-election budgets need to refrain from making big bang announcements as these may alter voter sentiments. But, for a budget-starved nation like India, drawing distinction between populist and an appropriate announcement may not be easy. Interim budget 2019 saw a whopping 73 per cent increase in allocation to agriculture. Some termed it as populist while many found it to be a requirement. Distinctions diminishing, expect the fifteenth being presented on 1 February 2024, to have game changing allocations. Budgets under Modi government have not been discrete annual events, instead these seem to form a continuous stream along a longer-term vision and thus ensures connectivity with the previous as well as the future ones. This leaves little freedom for making big changes from what has been envisaged in the previous ones. However, the pandemic did largely disrupt the schema though, quick recovery ensured the fiscal strategy converging back to the envisaged contours. Hence, interim, or not, the budget will follow the narrative set in the previous budgets. Past budgets are characterised by heavy emphasis on capital expenditure. Capex has been increasing consistently as it rose 4 times from around Rs 2.5 trillion in 2014-15 to Rs 10 trillion in 2023-24. India’s economy faced ‘Twin Balance Sheet’ problem in 2014 that required the government to step up capex and recapitalise banks. In 2024, balance sheets of banks as well as corporate sector look quite healthy and thus expect a change in fiscal strategy in this budget.  

Committing on education complements capex

Capex should match spending on human resources lest it gives negative marginal product. Scarcity of human resource exists at all levels in Higher Education Institutions (HEIs). Implementation of NEP 2020 requires large amount of knowledge resource capable of integrating academics with industry. The Faculty Student ratio (FSR) needs substantial improvement. Attracting brilliant minds to academic careers requires substantial increase in compensation and other incentives. India fares low on FSR as compared to competing nations. As per the QS Asia University Rankings 2024, Peking University is ranked 1 with score of 100 in this list. IIT Bombay, the list-topper among institutions from India is ranked 40 with score of near 67. Difference of 39 ranks is significant and needs to be bridged soon. Peking University scores 97.5 on FSR while IIT Bombay scores mere 14.8. Such low FSR adversely impacts academic outcomes yielding inadequate skill building and low productivity.  IIT Bombay’s score of 9.3 regarding relevance of research measured through ‘Citations per paper’, is dwarfed by 97.4 of Peking University. Such big difference in relevant research blunts the innovative edge of the nation. International collaborations rely on perception created by interested institutions. Perception paves the way to internationalisation of skill building and outcomes. The report shows Chinese institutions heavily outscoring the Indian counterparts on indicators related to internationalisation. Peking University’s scores on ‘International Students’, ‘International Faculty’, ‘Inbound Exchange Programme’ and ‘Outbound Exchange Programme’ are 58.5, 77, 56.5 and 99.9 respectively while IIT Bombay secured meagre scores of 3, 11.1, 2.1 and 4.1. Competing in the global world requires bridging such wide gaps. Substantial fiscal support from the central government is the asking of the day.  

Is there room for higher allocation to education

NDA’s first budget allocated Rs 68,728 crore to education. This constitutes 3.8 per cent of the total expenditure of the budget and mere 0.6 per cent of the then GDP Rs 113.55 trillion. Advanced nations spend around 6 per cent of the GDP on education and the same is recommended by NEP 2020. Current GDP of around Rs 300 trillion translates into Centre plus states spending of nearly Rs 9 trillion on education. Recent appointment of Prof Arvind Panagariya, an academician, as chairman of the 16th Finance Commission is as an indication towards education being emphasised in the grants to states. Budget 2024 may well be a stepping stone. Budgets 2022 and 2023 saw an allocation of Rs 1.04 trillion and Rs 1.18 trillion respectively to education. Assuming Centre’s share to be 25 per cent of the Rs 9 trillion, budget 2024 will have to allocate Rs 2.25 trillion. Looks unlikely as it means 100 per cent increase which seems daunting and dissuading. In 2019 agriculture got 73 per cent rise then why not education this time? A look at tax collections indicates adequate fiscal room. Direct Tax collection, net of refunds, is Rs. 14.70 trillion, 19.41 per cent higher than the corresponding period of last year. 80.61 per cent of the total budget estimates of direct taxes for FY 2023-24 have already been collected and a full fourth quarter revenue will accrue. GST collections till December is Rs 14.97 trillion is almost equalling the entire indirect tax collection estimate of Rs 15.37 trillion. Full fourth quarter revenue is yet to be added. A whopping surplus awaits on revenue front. Considering a surplus of nominal 15 per cent on the targeted Rs 33.61 trillion receipts, government gets Rs 5 trillion additional revenue. Rs 1.18 trillion out of this makes 100 per cent increase to education budget. Even a 50 per cent increase i.e. Rs 0.59 trillion represents at big leap in the leap year. Hope the FM just does it!

About the author

The author of the article is Director - PGDM and Professor - Managerial Economics & Statistics, Great Lakes Institute of Management, Gurgaon.

Dr VP Singh

Guest Author The author is Director - PGDM and Professor - Managerial Economics & Statistics, Great Lakes Institute of Management, Gurgaon