India's Sarva Shiksha Abhiyan (Education for All) Scheme is the biggest education financing programme of its kind in the world. This presentation addresses the major problems currently facing the financing of the system's, and proposes a new "grand bargain" to make the system work better for all Indians.

1. education for allFINANCING INDIA’s ELEMENTARY EDUCATION Harvey Campos, SuchadaDejtrakul, Jonathon Flegg, Shirish Jain, SmitaJha, Mohammad Nazri, Ai Ming Ong, PatraPradeep, Metta Rama Rao

2. Presentation Outline

3. Education in Context

4. Roles of State and Centre

5. Centre-State Shared Financing Source: CEPR 2011

6. Education For All Sarva Shiksha Abhiyan (2001)

8. India’s main scheme for financing elementary education.

9. aims to achieve universal elementary school enrolment and retention for children aged 6-14 years old.

10. also aims to bridge the gap in educational outcomes between regions, social groups and gender.

11. ademand-driven policy to strengthen decentralisation and contextualisation of education at the district, block and panchayat-level.

13. SSA Achievements Over 98% of children have access to a primary school within 1 km of their home. The gender gap has reducedfrom 90 girls per 100 boys in 2000 to 93 girls in 2008. Transition rates from primary to upper primary school rose from 75% in 2002 to83% in 2009. Annual drop-out rates fell from 10% in 2004 to 8.6% in 2008. Many states are either approaching universal primary enrolment or have already achieved it. Source: DISE 2011

14. Resources But Not Outcomes Compared to resources spent, there is little to show at primary level in terms of learning achievement. Achievement in Rural India Impact of 5 yrs of schooling on the child in 2005 not different vis-à-vis 2010. Close to only 53% children in grade 5 can read text book of standard 2 and only 36% can solve simple division problem. Evidence of students migrating to private schools or being enrolled in both private and public schools. Source: PRC 2011

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18. Fiscal Capacity: State-Centre Ratio STATES CENTRE * 90:10 centre-state ratio exception for NE States. Politically Disputed and Uncertain Contribution Ratio Source: CEPR 2011

19. Fiscal Capacity: State-Centre Ratio STATES CENTRE * 90:10 centre-state ratio exception for NE States. Politically Disputed and Uncertain Contribution Ratio Source: CEPR 2011

20. Fiscal Capacity: State-Centre Ratio STATES CENTRE * 90:10 centre-state ratio exception for NE States. Politically Disputed and Uncertain Contribution Ratio Source: CEPR 2011

21. Fiscal Capacity: The Problem Contra. Boadway (1997) and Bagchi and Chakraborty(2004), unequal fiscal capacity between states is clearly a problem of vertical equity. Distributing tax burdens fairly across people with different abilities to pay. While Tiebout’s (1956) assumption of “government services generate no externalities” might be true in other sectors, a clear argument for positive national externalities from universalising literacy and elementary education.

22. Financial Misallocation: The Problem States are not required to allocate according to the original district demand-assessment. At the district-level there is a weak link between financial allocation and demand. Misallocation is also caused by uncertain and delayed disbursals.

23. Financial Misallocation: Tamil Nadu Inter-district misallocation within Tamil Nadu Source: TNSSASD 2011

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25. Fiscal Capacity: Consequences

26. Financial Misallocation: Consequences

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29. Likely to result in states systematically under-investing.

30. Incompatible with overall national agenda of encouraging greater fiscal autonomy of states.

32. Greater revenue would still require education to be made a fiscal priority at the state-level (issue of political priorities).

33. Some reversal of the over-consumption of education in poorer states during 2002-06 might be legitimate.

35. Data is readily available, and may be a more accurate reflection of education quality than demand-assessment.

37. Attendance does not accurately reflect demand, as poorest districts are characterised by large student absenteeism.

38. A proposal with merit, but is not administratively feasible.

40. Fiscal Capacity: Preferred Solution

41. Fiscal Capacity: Equalisation Grants Equalisation grants are a way of compensating for the inherent differences between states in fiscal capacity. To not induce perverse incentives in reduced fiscal effort by states, we must not use actualstate-level revenue and expenditure for estimating fiscal capacity and need. Fiscal capacity is the potential revenues that can be obtained from the state’s tax base if an average level of effort is applied to that base. Fiscal need is the level of expenditure required to cover all its responsibilities at a standard level of service provision. Source: Martinez-Vazquez and Boex2000

42. Fiscal Capacity: Equalisation Grants Source: Bagchi and Chakraborty2004

43. Financial Misallocation: Solutions

44. Financial Misallocations: Vouchers What is a voucher? A SSA certificate issued by the State Government which parents can apply toward tuition at any accredited school.

45. Financial Misallocation: Vouchers

46. Two Unique Mechanisms of Vouchers No other solution deals with the issue of why increasing resources in India do not enhance outcomes. The competition between schools introduces a quality upgrading mechanism that should improve other issues, such as teacher absenteeism. Like other educational transfer schemes, such as Mexico’s Progresa Program, vouchers might appear to very poor families to partially offset the benefits of keeping their children in the labour market.

47. Equalisation and Vouchers Together A voucher scheme funded through federal SSA equalisation grants has both efficiency and equity advantages. The reforms are compatible if vouchers are mandated from the national-level, but administered from the state-level. This also maintains the state’s functional control over education service delivery. Students in states with a greater fiscal gap will benefit from high value vouchers, including the currently unenrolled children and girls.

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49. Equalisation Grants: Constraints Getting the formulas/indicators for fiscal capacity and fiscal need right. to ensure no premium on “remaining poor”. Coordination with India’s other equalisation grant schemes to ensure no “over-equalisation”. Ensuring the reform process is not blocked or captured by parochial interests within Parliament. the challenge of political economy.

50. Voucher Scheme: Constraints Dealing with the likely initial “demand-shock”, particularly in districts with low resource capacity. Lag in infrastructure construction and attracting new teachers. Increased overall financial resources to potentially incorporate a large number of unenrolledchildren within the system. States having the capacity to implement such a scheme. Potential for corruption at the local-level. Establishing a uniform accreditation standard (presumably nation-wide). Overcoming special interests and popular uncertainty in introducing the reform. Again, the problem of political economy.

51. Presentation Outline

52. Educational “Grand Bargain”? While certainly ambitious, we believe there is the opportunity for a “grand bargain” among India’s federal and state political elite. All Indians benefit from a functioning, national, education system, that operates with minimal uncertainty.

53. QUESTIONS?

55. 2004. “Towards a Rational System of Centre-State Revenue Transfers in India: An Exploration” (Working Paper 16). National Institute of Public Finance and Policy.

56. Boadway, R.

57. 1997. "The Economics of Equalization: An Overview" in R. Boadwayand P. Hobson (eds.) Equalization: Its Contribution to Canada's Economic and Fiscal Progress. John Deutsch Institute, Queen's University. Canada: Kingston, Ontario.

58. Centre for Policy Research (CEPR)

59. 2011. “Analysis of State Budgets: Elementary Education”. Retrieved from: http://www.accountabilityindia.in/ .

60. Direct Information System for Education (DISE)

61. 2011. “DISE Flash Statistics”. Retrieved from: http://www.educationforallinindia.com/disepublications.htm .

62. Jha, P. and Parvati, P.

63. 2009. “Education for All Mid Decade Assessment: The Challenge of Public Finance”. National University of Educational Planning and Administration: New Delhi.

64. Lee, V. and Wong, E.

65. 2002. “Education Voucher System”. Retrieved from: http://www.legco.gov.hk/yr01-02/english/sec/library/0102rp06e.pdf/

66. Martinez-Vazquez, J. and Boex, J.

68. 2011. “SarvaShikshaAbhiyan: A Programme for Universalisation of Elementatry Education”. Retrieved from: http://ssa.nic.in .

69. Mukherjee, A. N. and Sen, T. K.

70. 2007. “Universalising Elementary Education: an assessment of the role of the SarvaShikshaAbhiyan”

71. PrathamResource Centre (PRC)

72. 2011. “Annual Status of Education Report 2010 (Rural)”. Retrieved from: http://www.asercentre.org/ .

73. Sharma, R. N. and Sharma, R. K.

74. 2004. History of Education in India. Atlantic: New Delhi.

75. Tamil Nadu SSA State Directorate (TNSSASD)

76. 2011. Tamil Nadu Education for All Annual Work Plan and Budget (2010-2011). Retrieved from: http://www.ssa.tn.nic.in/Downloads.htm .

77. Tiebout, C.

78. 1956. “A Pure Theory of Local Expenditure”. Journal of Political Economy 64: 416-424.

79. United Nations (UN)

80. 2011. “Millennium Development Goals Indicators: Country Level Dataset”. Retrieved from: http://mdgs.un.org/unsd/mdg/Data.aspx .

81. UNESCA

82. 2008. ‘The Role of Sub-National Jurisdictions in Achieving the Millennium Development Goals‘. Retrieved from: http://www.uneca.org/prsp/portlouis/documents/Concept%20note %20subnational%20jurisdictions-08-07-08.pdf .