SUMMARY AND CONCLUSIONS

Research on household expenditures on education in India is very limited; and research on the determinants of household expenditure is virtually non-existent. But the importance of studies on household expenditures on education is increasingly felt, particularly in the context of dwindling public budgets for education and the formulation of alternative policies on financing education, more specifically on the scope for cost recovery in education. Public policies are being formulated based on thin research evidence. The present study is a modest attempt to fill this major gap in research in Economics of Education in India.

Using the data collected in the Human Development in India (HDI) survey conducted by the National Council of Applied Economic research (NCAER) in 1994, the present study attempts to examine:

• the extent of household expenditure on education by different groups of population;

• the elasticity of household expenditure on education to changes in o household income on the one hand, and

o government expenditure on education on the other; and

• the determinants of family expenditures on education.

The household data of the NCAER are supplemented by the data collected from official sources on government expenditure on education, SDP, etc. and other sources such as the NCERT. The study deals with rural India.

First, based on extensive tabulation of the descriptive statistics drawn from the rich household level data, a few ‘stylized facts’ are highlighted on the quantum, distribution and nature of household expenditure on education in rural India. Then, a model of household expenditure function is estimated, concentrating, however, on education only, to examine the determinants of household expenditure on education. Using the estimates on household expenditures on education generated at the state level data and using data collected from secondary sources, first an analysis of state level is attempted which serves as a preliminary investigation providing valuable insights into the problem, and helping in formulating the model to be estimated from the large data set relating to the households. A long array of figures and tables are generated, that yield some important results on the size and nature of household expenditures on education and their determinants, some of which have confirmed general hunches, some have questioned the general presumptions, some have provided new insights, and a few of them are really startling.

• There is nothing like ‘free’ education in India. Household expenditures on education are sizeable; households from even lower socio-economic background—Scheduled Castes, Scheduled Tribes, low income groups, households whose primary occupation

is not high in the occupational hierarchy—all spend considerable amounts on acquiring education, including specifically elementary education, which is expected to be provided by the State free to all.

• Important items of household expenditures consist of books, uniforms and fees. Even in the case of government primary and upper primary schools, students seem to be paying huge amounts of fees—examination and other fees.

• Households do not discriminate much against spending on girls’ education.

• Substantial differences exist in household expenditures on children attending government schools, government-aided schools and private schools. Expenditure in the private schools is the highest, followed by government-aided schools and government schools in that order. The levels of household expenditures on education in private schools show more variation, than in case of other schools.

• Low-income groups spend a higher proportion of their income on education than the rich.

• That the rich spend higher amounts than the poor and middle-income groups on education is found to be true in a majority of the states. The wealth effect is somewhat consistently true in many cases—whether it is analysed by gender, or by type of schools or by any other characteristic.

• There are substantial differences in household expenditures between several states as well. But these variations are not related to economic or educational levels of the state.

• As both household income and also school supply side factors are found to be very important and statistically significant, one can state that both phenomena— willingness to pay and compulsion to pay are important in India.

• Household expenditures are found to be nearly unitary elastic (the coefficients are a little less than unity) to government expenditures on education. If government increases its expenditure on education, the households might feel enthusiastic and may willingly contribute to education, though less than proportionately.

• The OLS estimates of the regression analysis helped in identifying major determinants of household expenditures on education.

o Household characteristics, particularly household income and the educational level of the head of the household are important determinants of household expenditures on education.

o Demographic burden of the household (size of the household) is a very important determinant of household expenditure on education.

o Caste and religion are also important, but there are quite a few exceptions—among groups of population and also states.

o Generally, gender is believed to be a very significant determinant of household expenditures on education. This is not necessarily true in all cases.

o Occupational variables (occupation of the head of the household) do not show any clear and meaningful pattern in their influence on household expenditure on education. Probably, the variables may have to be more appropriately defined.

o School related variables chosen—the incentives such as mid-day meals, uniforms, textbooks and stationery, etc., and the availability of school within the habitation—are quite important in many cases. But the pupil- teacher ratio is not statistically significantly and meaningfully related to household expenditures.

o Type of school that the child goes to—government, government-aided or private—is one of the most important determinants of household expenditure.

o The level of development of the village is an important determinant of household expenditures on education.

o Obviously, the higher the level of education that the child is enrolled in, the higher is the amount that the household has to spend on his/her education.

Instead of recapitulating other results, a few implications may be noted here. A couple of important policy implications emerge clearly and loudly.

• The coefficients of elasticity clearly show that government expenditures and household expenditures do not substitute each other; on the other hand, they complement each other. So if the government wishes to mobilise household finances for education, it is important that the government increases its own allocation to education considerably. Conversely, and more clearly, if government budgets on education are reduced, household expenditures may also decline resulting in severe under investment in education.

• Second, provision of schools, particularly primary and upper primary, within the rural habitations and also provision of school incentives such as mid-day meals, textbooks, uniforms, etc., would reduce the need for household expenditures considerably and thereby the demand for education could be enhanced. Mid-day meals is perhaps the most important of them all. It may be important to improve the efficiency of the mid- day meals programme. Further, all the three incentives matter not only in primary education, but also in upper primary education.

• Further, since the Constitution, and the 93rd Amendment to the Constitution that makes elementary education a fundamental right of every child in India requires the government to provide free elementary education to all, there is need for the government to abolish all kinds of fees in primary and upper primary schools.

Finally, before this study can be concluded, a couple of important caveats of the study may be noted:

The study is based on cross sectional evidence. Some may rightly feel that the dynamics of household investment decision making in education cannot be captured by the evidence provided by cross sectional surveys. But unfortunately, time series data on household expenditure on education in India are not available.

Even though neither the demand for education is analysed, nor the demand function estimated, probably ‘effective demand’ for education is analysed by considering household expenditures. Nevertheless, it should be admitted that the study has concentrated exclusively on household expenditures on education. Closely related dimensions, including participation and non-participation in schooling are not examined here.

Third, the specification of the expenditure functions here is constrained by the availability of data. It is not claimed that the model attempted here is a complete model. There is scope for improvement of the model with inclusion of several other household, policy related and contextual variables.

The NCAER/HDI survey has been exclusively used for a major part of the study. Since no other studies are conducted on similar lines as attempted here, using any other survey, the results could not be contrasted with any other. Further research, say based on the NSSO data, might validate our findings. A comparative analysis of the rural and urban segments in the country may be possible on the basis of NSSO data.