Financing of Higher Education in India PDF

Golden Research Thoughts ORIGINAL ARTICLE ISSN:- 2231-5063 FINANCING OF HIGHER EDUCATION IN INDIA Abstract:-...

Golden Research Thoughts ORIGINAL ARTICLE ISSN:- 2231-5063 FINANCING OF HIGHER EDUCATION IN INDIA Abstract:- Education is central to the Human Resources Development and empowerment in any country. India's recent economic success is due to a large extent to educational investment. The main sources of finance of Indian Higher education is the government and the private that includes household, firms, community, charitable trusts etc. The Government of India introduced Education Loan Scheme through the commercial banks of India for the purpose of completing higher education. For accelerating public expenditure, the Central Budget 2004 introduced a cess of 2% on major central taxes for elementary education and Budget 2007 a cess of 1% for secondary and higher education. In this context, there is an urgent need for enhanced use of education loan to augment resources for higher education within an appropriate framework. Keywords: Financing , Higher Education , Human Resources Development , human history. Muktaram Baburao Shinde Ph.D. Scholar in Commerce. www.aygrt.isrj.net  FINANCING OF HIGHER EDUCATION IN INDIA. INTRODUCTION :- Education has continued to evolve, diversify and extend its reach and coverage since the dawn of human history. Every country develops its system of education to express and promote its unique socio- cultural identity and also to meet the growing challenges with the changing times. There comes a time in history when a new direction has to be given to revitalize an age-old process. Education is essential for all and is fundamental to their all round development, material and spiritual. Education is central to the Human Resources Development and empowerment in any country. National and State level policies are framed to ensure that this basic need of the population is met through appropriate public and private sector initiatives. While government endeavours to provide primary education to all on a universal basis, higher education is progressively moving into the domain of private sector. With a gradual reduction in government subsidies higher education is getting more and more costly and hence the need for institutional funding in this area. ROLE OF HIGHER EDUCATION IN INDIAN ECONOMY: Before the 1990s, India's higher education system had only loose ties to the economic development. In fact, the rapid growth of higher education in 1950s and 1960s had brought unemployment and a brain drain, economic problems that were unexpected and unwelcome. In more recent decades, however higher education has engaged with and served the Indian economy in many ways. The human capital represented by the highly skilled workforce it has produced made significant contribution to India's service industry 1980-2000 and supports the country's increasingly important role in the global and knowledge economies. India's recent economic success is due to a large extent to educational investment. The social economic rate of return arguably underestimates the contribution of higher education. In other words, we need to review the contribution of higher education, especially to global and knowledge economies, which favor creativity and innovation. The brain drain, for example, was once viewed as an economic loss in India. However, Indians who left their country for overseas have, in the new world economy, often contributed to their country's growth in ways that were once unforeseen, including the development of IT expertise, industries, trade and markets for services. FINANCING OF HIGHER EDUCATION: The main sources of finance of Indian Higher education is the government and the private that includes household, firms, community, charitable trusts etc. The long term trends in financing show that higher education is increasingly becoming a state funded activity with about three-quarters of the total expenditure being borne by the government. However, on account of several factors including the new economic policies adopted since the 1990s, state funding to education in general and higher education in particular, has been declining in real terms. Further, the mushroom growth of private institutions, particularly in areas of management, engineering, computers, etc, have raised the issues of access, equity, quality and regulation. STUDENT FINANCING FOR EDUCATION: Student loan financing is not a new phenomenon in India. Just after independence, a scheme of student loans was started under which educational loans were advanced to displaced students from East and West Pakistan through the Social Welfare and Rehabilitation Directorate, New Delhi. Another such scheme was the interest-free scheme of educational loans i.e. National Loan Scholarship Scheme introduced long back in 1963. This National Loan Scholarship Scheme was run through the state governments. Under this scheme, interest free loans were provided to meritorious students for pursuing post-Matric education. But the scheme had to be stopped in the year 1991 due to bad recovery of loans and economic crisis facing Government of India at that time. The rate of return of this government-sponsored Indian scheme of educational loans was minimal (merely 6%) and it had to be discontinued. Indian experience is not different from the world. During the period 1977-78 and 1990-91, the recovery rate of student loans varied between 8 percent and 15 percent for India as a whole. Almost in all the countries the state supported education loan schemes were plagued with bad recovery of loans and were stopped under the times of financial stringency. Consequently, the higher education sector witnessed cut in subsidies and increase in the user- charges. The points in time may differ but story remains the same. Accordingly, new differed-payment-arrangements were offered with the motive of better rate of recovery. Hence, one of the central theoretical and practical rationales for loan programs is to diversify sources of funding for higher education. Most loans are used not for institutional funding, but to limit the government burden for student maintenance. The Government of India introduced Education Loan Scheme through the commercial banks of India for the purpose of completing post-matriculation education. Despite the fact that the current scheme offers no subsidy, about 7 lakh students took out educational loans in 2009 compared with just a few thousand in 2001. From the early 2000, the banking sector's education loan portfolio has been growing at a robust rate of 40 percent a year. Faced with a bulging middle class and large section of population living Golden Research Thoughts | Volume 4 | Issue 2 | Aug 2014 2  FINANCING OF HIGHER EDUCATION IN INDIA. below poverty line, the scheme needs to be softer. Presently, the Ministry of Human Resource Development (MHRD) is working out to provide educational loans to the needy with annual family income below 2.5 lakh at a subsidized rate of interest of 4% (current rate being around 12%). And the Government of India would act as the guarantor for the loan and so there will be no need for any collateral or co-applicant. FINANCING HIGHER EDUCATION IN ELEVENTH PLAN (2007-2012): The government has pledged to rise public spending on education to 6% Gross Domestic Product. For accelerating public expenditure, the Central Budget 2004 introduced a cess of 2% on major central taxes/duties for elementary education and Budget 2007 a cess of 1% for secondary and higher education. In the Eleventh Plan, the Central Government envisages an outlay of about Rs 2.70 lakh crore at current price (Rs 2.37 lakh crore at 2006-2007 price) for education. This is a four- fold increase over the Tenth Plan allocation of Rs 0.54 lakh crore at 2006-2007 prices. The share of education in the total plan outlay will correspondingly increase from 7.7% to 19.4%. Around 50% of Eleventh Plan outlay is for elementary education and literacy, 20% for secondary education, and 30% for higher education (including technical education). Central Government Interest Subsidy Scheme for Economically Weaker Section for Education Loans: Government of India, Ministry of HRD vide letter no. F. 11-4/2010 – U.5 (i) dated 25th May 2010 have formulated a scheme to provide full interest subsidy during the period of moratorium i.e. Course Period plus one year or six months after getting job, whichever is earlier. This scheme is available for loans taken by students belonging to economically weaker sections where annual parental income from all sources is up to & inclusive of 4.5 lakhs under the IBA approved Model Educational Loan Scheme, for pursuing any of the approved courses of studies in technical and professional streams, from recognized institutions in India. Need of Education Loan: There has been increasing recognition in all parts of the world including India of the need to have adequate access at affordable cost to good quality higher education for all eligible members of the society. It is reveal that universal higher education of high quality requires mindboggling resources. Higher education in India, like in many other developing countries, has not been inclusive of poorer sections of society especially from the rural areas. It is a matter of concern that the problem of finance is a major constraint for a significant section of students to pursue higher education. Among the major countries, India has one of the lowest proportions of young persons in the relevant age group who pursue higher education. The study indicates the need for non-government sources of funds for higher education. In this context, there is an urgent need for enhanced use of education loan to augment resources for higher education within an appropriate framework of inclusiveness. CONCLUSIONS: Education is central to the Human Resources Development and empowerment in any country. India's recent economic success is due to a large extent to educational investment. The main sources of finance of Indian Higher education is the government and the private that includes household, firms, community, charitable trusts etc. The Government of India introduced Education Loan Scheme through the commercial banks of India for the purpose of completing higher education. For accelerating public expenditure, the Central Budget 2004 introduced a cess of 2% on major central taxes for elementary education and Budget 2007 a cess of 1% for secondary and higher education. In this context, there is an urgent need for enhanced use of education loan to augment resources for higher education within an appropriate framework. REFERENCES: 1.Annual Report (2013-13) - Department of School Education & Literacy Department of Higher Education Ministry of Human Resource Development Government of India. 2.Harsh Gandhar (2010) - Educational Loan Scheme Of Scheduled Commercial Banks In India: An Assessment - IJBEMR Volume 1, Issue 1 (2010) 3.Jacob John (2013) - Education Loan and Inclusive Growth: India in a Comparative Perspective - Cambridge Scholars Publishing. 4.Piyush Prakash and Shikha Agarwal (2010) -Growth and Financing of Higher Education in India – Shodh Sanchyan, Bilingual journal of Humanities & Social Sciences, Vol. 1, Issue 2, 15 July, 2010. Veronica R. Nyahende (2013) - The Success of Students' Loans in Financing Higher Education in Tanzania - Higher Education Studies; Vol. 3, No. 3; 2013 Golden Research Thoughts | Volume 4 | Issue 2 | Aug 2014 3