Pawan Agarwal

1
Financing and Management of Higher Education in
India

• Pawan Agarwal
• 26 November, 2008

2
Why it concerns?

• We dont have the money.
• Therefore, we have to think?

3
Who should pay?

• Arguments
• Higher education as a right
• Public versus private purpose
• Social versus private returns
• Externalities
• Consensus
• Both public and private funding of higher
  education
• Higher education free at the point of use
• System where no bright student from a poor family
  is denied access?

4
Three levels

• How higher education in financed in the country?
• How institutions are funded?
• How student finance their higher education?

5
Public Expenditure
6
Government spending

• Social sector spending gt 25 of govt. expenditure
• Education spending nearly half of social sector
  spending
• Higher education spending 20 of education
  spending
• Significant increases in higher education
  spending by the Central Govt.
• 3-times increase over past 3 years
• 9-times increase in outlay for 11th Plan over
  10th Plan

7
Central funding mainly for.

• 40 New Technical Institutions
• 5 Indian Institutes of Science Education and
  Research,
• 35 Brand Institutions (8 IITs, 7 IIMs 20 IIITs)
  
• 30 Central Universities
• 16 in uncovered states
• 14 world class in other states
• 370 colleges in backward districts
• One time grant for existing universities and
  colleges (partly)
• Overall meagre compared to what is needed
• Nothing for operational expenses

8
Central and State Share

• Most of Public funding comes from the States.
  Central funding lop-sided.
• Households contribute almost half of all present
  expenditure on HE.

9
Funding

• Majority of institutions not eligible for central
  funds
• Those who get central funds, the amounts are very
  small
• Large number of institutions get no public funds
  at all

10
Overall Funding

• In terms of GDP ?
• Low and decreasing in terms of per student
  funding
• In absolute terms increasing with Central Govt.
  increase very significant
• Central funding is limited and its spread is
  uneven

11
Funding of public institutions

• Expenditure
• Primarily Salaries
• Little expense on library, laboratory and other
  academic expenses
• Declining per student expenses
• Capital expenses from govt. grant
• Exceptions IITs / IIMs

• Revenue Stream
• Govt. appropriation / Tuition fee
• Self-financing courses / distance education
  programs
• Deficit financing basis (mostly on historical
  cost basis)
• Little or no endowment
• Exceptions
• IIMs, IITs and a few other premier institutions

12
Funding of private institutions

• Revenue Stream
• Mainly Tuition fee
• No endowment
• Create surplus
• Exceptions
• Few institutions under religious Trusts

• Expenditure
• Salaries
• Reasonable expense on library, laboratory and
  other academic expenses
• Capital expenses from surplus
• Surplus mostly plough back

13
Tuition fee policies Duality

• General higher education low / very low fee
  levels
• Professional areas high / very high fee levels
• Highly decentralized
• Universities determine their own fee structure
• Private colleges fee determined at the provincial
  level
• Fee regulation in private institutions
• Gaps in regulation routine judicial
  interventions and likely (unlikely) central
  legislation
• Quasi-market with its failures due to information
  asymmetry

14
Fee levels

• Full cost recovered in all professional programs
• Low in Central Universities Agriculture
  Universities and State universities in Bihar, UP
  etc.
• High / Very high in most other states

15
Student financial support

• Most efficient mode of public funding
• Student grants for poor students small amount,
  multiplicity of schemes, cumbersome procedures
  and leakages
• Student loans started picking up from 2003
  cover 2-3 (compare UK-85, US 77) still
  cater to relatively rich
• Income contingent government guaranteed loans
  third party servicing / student clearinghouse

16
Financing arrangements

• Average as percentage of GDP
• Private funding is believed to be small
• Low student based funding
• Small central spending small number gets a
  bigger slice of overall public funding

• High in terms of relative effort (around 90)
• More than half private funding
• Largely institutional funding
• Large number of institutions are starved of funds
  

17
Conclusion

• There are limits to increase in public spending
  on higher education
• Significant increase by the Central Government is
  welcome, but not enough
• Increased public spending would not itself ensure
  better and inclusive higher education
• Need to do more.

18
Four important things.

• For public institutions - shift to performance
  based funding creating incentives for good
  performance
• Put in place substantially funded Student
  financial aid programs for poor students
• Rationalize tuition fees in public institutions
• Provide good private institutions access to
  public research funds

19

• Thank you