‘The State shall endeavor to provide within a period of ten years  from the commencement  of this Constitution, for  free and compulsory education  for all children  until they complete the age of 14 years’

(Part IV (45) the Directive Principal of State Policy)

Educated young population is the nation’s only biggest asset. India being a young economy, with over 30% of population in the age group of 0-14 (Census, 2011), the economic growth and development in future will rest upon the fact that how educated, skilled and trained this population is. Education is an accelerator to economic growth. If we desire to productively use this young population in future than investment in their education is to be done today. Albeit; the current levels of public investment in education remains derisory both at the centre and state level. This will limit the opportunities for growth and change.

Present paper attempts to highlight the supply side of the problem in education. It tracks the trends in public expenditure on education in reference to the vast population in the age groups of 0-14 and 15-30. The paper further examines how inadequate investment in education can deprive the nation to reap the fruits of demographic dividend.

Keywords: Education, Public Expenditure, Demographic Dividend, Human Development


Dr Hitesh Bhatia

Assistant Professor (Economics), School of Business and Law,Navrachana University, Vadodara

Ms Nikita Mehta

Assistant Professor (Finance), School of Business and Law,  Navrachana University, Vadodara

Published in: Contemporary Researches in Education, Edited by Dr.Asha J.V. and Naseerali M.K.


India is expected to remain one of the most productive nations by the year 2050. With over 20% of population in the age group of 0-14 years and another 30% of population in the age group of 15-30 years, India will be home to the largest labour force in the World. However, whether India will be able to reap the advantage of being the most productive nation will depend upon its quality of labor force (Bhatia, Hitesh 2010). The quality of the labour force can only be improved through adequate investment in its education, skill development and training (investment in health is another aspect of quality of labor force). Due to lack of political liaison between the centre and state governments the desired levels of investment in education is hardly seen (Kumar, Jayant & Hitesh Bhatia, 2009). In India the responsibility of investing in education keeps on shifting back-and-forth between the centre and state.

In spite of the global financial crisis and recessionary fears during the last few years, India has continued to remain one of the leading and fastest growing economies in the World. India’s economic growth rate leaped from Hindu growth rate of 3.5% during early 90’s to a robust average of over 9% by 2009. This has endowed the central government with adequate resources for expenditure. India’s annual budgetary expenditure has seen exorbitant rise through the last decade, from over three lakh crores to a massive over fifteen lakh crores (Union Budget, 2012). This should have provided enough opportunity to the central government to spend reasonably well over the most primary areas of human development i.e. education (and health). But on the contrary the budgetary allocation over education has remained almost stagnant during the last decade. Though the overall social sector spending has seen some rise but its efficiency and execution remains under doubt. This is evident from the fact that India ranks diffidently at 134 out of 182 countries in UNDP’s conventionally appreciated Human Development Index (HDI) for 2011. India’s HDI value is low not only in comparison to the developed countries but also against other developing economies like Brazil, Sri lanka, Thailand, Philippines, Indonesia and South Africa. A lot of these economies are economically, politically or socially in a much distress than India, still they have managed to score better than India. This is a serious matter of disgrace for the second largest growing economy in the world.

It would be interesting to note that growth rate of India’s HDI value for 1980-1990 and 2000-2011 are almost same at 18%. It means that even during the high growth rate year’s country was unable to trickle down the benefits towards the improvement of human development. Among other reasons, it is the quality of education and its delivery mechanism which has left India with such a poor performance in terms of Human Development even during the years of high growth rate.

The mean years of schooling in India is almost 50% less than South Africa, Philippines and Sri-Lanka this clearly highlights the defect in India’s education system as a whole. The mean year of schooling for SC, ST and OBC is further worse at less than 3 years (India HDR, 2011). For years academicians and policy makers have easily shifted the focus on the demand side of the problem, by highlighting the drop-out rates and stating that due to poverty people are unwilling to send their children to schools and would prefer them to work. However the fact remains that government and policy makers have incessantly ignored the supply side of problem in education. Government’s expenditure on education both at the centre and state level has remained catastrophically low. This has largely been an obstacle towards providing quality education to all.



Post world-war II almost all major nations have used public spending as a tool to boost two of the most fundamental sectors for human development i.e. education and health. Investment in both has resulted to the high growth of several countries including china, which till few decades back had almost the similar rate of growth as India.

India, however has failed to seize this opportunity to switch its huge population into an asset. Education allows individuals to make right choices and take decisions which are economically fruitful. Unfortunately in India a large section of society remains deprived of both. Six decades of economic planning has not been able to provide quality school education to all across the socio-economic groups, religion, gender and geographical region. Quality education is neither free nor cheap. Thus the basic determinant of education is its funding. Huge monetary investment is required for acquiring infrastructure, trained and well paid teachers, adequate amenities, modern teaching aids and updated technology. In absence of these inputs, expecting quality and productive workforce for any economy remains a myth.

Tracing central government expenditure on education during the high growth years gives shocking figures. Expenditure on education as a percentage of GDP and Total Government Expenditure since 2001 has marginally increased by just 0.2 and 1.1 percentage respectively. It is important to note that during the same period total GDP of India increased by over three times and Total Government Expenditure has increased by over four times. In comparison to this the expenditure on education has not been given due weight. As a matter of fact education expenditure as a percentage of total social sector spending has drastically fallen by over 5 percentage points.

Declining trend in public spending on education as a proportion of GDP shows that less priority is given to education by the central government in a progressive economy. Not only the allocation on education is inadequate but even this has not been utilized fully.  A similar trend is visible even for the states.




According to the study conducted by RBI on states’ finances, aggregate social sector expenditure to total expenditure for all states has been marginally higher since 1990 after falling for almost a decade and then rising gradually.  This is strange; because post reforms the growth rate of economy has been highest since independence, moreover the states also have been able to score a record growth rate since 2000. The average expenditure of all states on major social heads like education, health, family welfare, water supply, housing and nutrition has almost remained same during last three years. This clearly indicates the lack of focused attention states have paid towards growth and distribution of merit goods.

The ‘study’ further reveals that despite improved fiscal performance of major states during the last decade, proportion of expenditure on education in total expenditure continued to decline. Indeed; conventionally rich states like Maharashtra, Gujarat, Karnataka, Haryana, Punjab and Andhra are spending considerably low, less than 15% on education, sports, youth affairs combined[1].   Against this the poor states like Chhattisgarh, Bihar, Uttaranchal, Rajasthan, West Bengal and U.P is spending nearly 20% (RBI, 2012).

The combined expenditure of central and state governments on social sector as a percentage of GDP has improved marginally by less than 2% in over a decade. This is in spite of the robust economic growth since late 90’s. Education must get budgetary allocation of minimum 6% of GDP was recommended way back in 1966 by the Kothari Commission, against this abysmally low allocation on education is a complete unjust to the most important pillar of human development.





India for now is enjoying its demographic dividend and will continue to do so for couple of more decades (Kapila, Uma 2009). With over 20% of total population in the age group of 0-14 and over 60% of population in the age group of 15-64 and median age less than 30 years by 2025, India will continue to remain one of the youngest economies in the world. This shall provide India with a special window of opportunities for business, investment, human development and faster rate of economic growth during the next few decades.  To reap the fruits of demographic transition India needs to up its investment in education, training and skill development infrastructure. Especially education of those who currently are in the age group of 0-14 is most crucial kernel towards reaping the fruit of development in future. This will not only raise the productivity levels but will also make them more competitive in international markets.

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[1] State government allocates resources collectively on Education, Sports and youth affairs.

The proportion of old age population in India will remain much less compare to that in rest of the world. Especially countries like Japan and other European economies which are known as ageing economies. India with large workforce can provide for various goods and services demanded in these ageing economies. But for that India need to have large scale investment in education not just at school level but in vocational and skill based learning too.

Currently only 37% of total children among 0-14 years of age are enrolled in schools. Less than 40% of Indian schools provide education beyond primary level and the dropout rate at all levels is of about 40%. If these figures were not alarming consider this, there is no regulatory framework for pre-school education in India and no standard curriculum. With meager presence of government schools, the private sector owns majority of pre-school market which is valued at $1 billion and is growing at the rate of 50% per annum. The major players in this segment are Euro-Kids, Kid Zee Tree House, Bachpan and Kangaroo kids among others. The deficit is not only at the pre-school level but even at the secondary and higher secondary levels too. According to some estimates 68% of children at higher secondary level i.e. standard 9-12 are currently not enrolled in schools. NCERT estimates that India has a overall deficit of 25000 schools in 2010.


Almost all the major states have failed to utilize its total allocated funds on providing education under the prestigious Sarva Shiksha Abhiyan (SSA). The above table shows that till recently hardly 30% of the funds have been used by the state governments under SSA. For the last year 2010-11 majority of funds approved have remained unused by the respective state governments this clearly shows less priority given to education across the states and the centre. The similar trend is seen in case of appointment of teachers under SSA, across the states nearly 50% positions have remained vacant in spite of being sanctioned by the governments themselves. The India Human Development Report (2011) highlights the fact that around 9% of schools in India are one class room schools, while 23% are of two class rooms. The condition of primary schools is extremely worse with over 50% of them are run in one or two class room buildings.



The education sector in India has been deprived of its due share, even after five decades since when Kothari Commission on Education recommended 6% allocation of GDP and GSDP on education both at the centre and state respectively.  High dependence on market oriented educational system is visible as the public expenditure on education as a proportion of total expenditure has remained stagnant over the decade and as  proportion of social sector expenditure has declined by 5%.

Such a small level of investment has made the country ignore the high degree of positive externalities of education. The government programs financed through modest public expenditure lack political determination and conviction, thus fail to make any substantial difference in eradicating vulnerability. Host of schemes launched more with a po[shc_shortcode class=”shc_mybox”]

litical interest against social concern often lead to multiple coverage, targeting the present deprivation but ignoring the future development of capabilities.  Investment in education which could well have been an opportunity to change and economic growth is today turning out to be an obstacle. To turn it into an opportunity

Human resource investment policy is an essential part of overall sustainable economic growth model. Hence cohesive education program is required to target the poor and vulnerable groups so that they get economic independence which allows them to increase social capabilities and live on. Government needs to increase participation in primary schooling and to improve the quality of instruction so as to pull human resource assets however for higher education it should provide required incentives to the private sector.




  • Bhatia, Hitesh (2011), Business Opportunities for India: – In Ageing Economies, International Journal Of Business Economics & Management Research, ZIRAF, Vol.1 Issue 2, Haryana.
  • Centre for Budget and Government Accountability, (2011) Reclaiming Public Provisioning Priorities for the 12th Five Year Plan
  • Education Commission (1966) Education for Development: Report of the Education Commission 1964-1966 (Kothari Commission). New Delhi: Government of India
  • Economic Survey, various issues, Government of India
  • Human Development Report. (2011) UNDP
  • India Human Development Report (2011) Institute of Applied Manpower Research, Planning Commission, Oxford University Press.
  • Kapila, Uma (2009) Indian Economy Since Independence, Academic Foundation, 2009
  • Kumar, Jayant & Hitesh Bhatia, (2009) Unorganized Workers in India: A Perspective towards.
  • RBI, (2012) Study of State’s Finances Report
  • Thornton, Grant (2010) Education in India: Securing the demographic dividend UK
  • Union Budget,(2012) Ministry of Finance, Government of India


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