Subir Gokarn: Extricating education

The emphasis should be on finding the right circumstances for a national scholarship programme.

Education is clearly a priority in the Budget for 2007-08. It offers a 34.2 per cent increase in the allocations for education, taking it up to Rs 32, 252 crore. Resources have been enhanced for all levels of education, from the Sarva Shiksha Abhiyan, which receives over Rs 10,000 crore, to the Rajiv Gandhi National Fellowship Programme, which gets Rs 88 crore to support SC and ST students pursuing M Phils and Ph Ds. It proposes to finance these enhancements by raising the educational cess on all central taxes from 2 per cent to 3 per cent.

The most novel proposal in the Budget is the high school scholarship programme, which intends to provide an annual cash scholarship of Rs 6,000 each to 100,000 students to cover their expenses from Stds. 9-12. A corpus fund of Rs 750 crore will be created for this purpose, the annual interest from which will be used to fund the scholarships. A national test will be conducted to determine the winners.

The motivation for the programme is the apparent spike in the drop-out rate that occurs at the end of Std. 8. Giving deserving students Rs 500 a month for four years presumably tilts the balance away from dropping out at that point and staying on in school for the duration. Undoubtedly well-intentioned and quite possibly efficiency-enhancing, the programme nevertheless puts the spotlight on the some key characteristics that an educational system must possess to make programmes like this work.

Unfortunately, the absence of these in our country is painfully obvious. Therefore, instead of using public resources to prop up a dysfunctional status quo, the emphasis should be on finding the right circumstances for a national scholarship programme to have its full impact. As difficult as it may be to uproot a deeply entrenched system, the crisis that this sector is rapidly approaching provides an opportunity to change. But to take full advantage of this opportunity, a blueprint is required.

Let's begin with the efficiency-enhancing aspects of a scholarship programme. Very simply, for any student who is dependent on public funds for his school education, it removes the compulsion to attend a government school and gives him or her the choice of attending an affordable private one. As a recent report published by the NGO Pratham indicates, the loss of faith in government schools is widespread. Even very poor households look for private schools to send their kids at their level of affordability.

If kids in these households can meet the selection requirements, imagine what Rs 500 a month extra to pay school fees can do to expand their choice of schools; reciprocally, what the schools that they go to can invest in by way of facilities and teaching capabilities.

This is, potentially, a powerful combination of public resources and consumer choice, leading to a desirable outcome in the reliability and quality of educational services. But, a number of constraints need to be overcome for this potential to be realised.

First, there is the issue of scale and the distortions that may arise because of it. A hundred thousand scholarships is a drop in the ocean relative to the potential number of claimants, even if family means are taken into account. As has happened in virtually every academic screening process in this country, an entire industry will emerge around preparing people to take the scholarship test.

Since this is an entirely unregulated market, the price at which this service is provided will equilibrate at a level, which skims a significant percentage of the scholarship amount away. In other words, the people who stand the best chance of receiving the scholarship are the ones who are closest to affording reasonable private schooling on their own anyway.

Then, there is the more fundamental concern about the capacity of private schools to accommodate students with this level of affordability.

Rs 500 a month should theoretically buy reasonable infrastructure and teaching quality, but what is to stop lower-priced schools, which are already in short supply, from simply hiking their prices without corresponding upgrades in their services? Is this a domain in which parents can or will aggressively exercise their rights as consumers or, in the interests of stability, simply accept whatever the school dishes out? If this is the more likely outcome, will scholarships simply become a transfer from the government to school managements without any improvement in quality?

To realise the full benefits of the scholarship programme, the supply of school facilities has to significantly increase. All the new schools that are set up will have to be monitored on service quality. Most importantly, the student must have the right to move from one school to another, with no prospect of financial losses. None of these conditions is commonplace in the Indian education scenario. They have to be at the heart of any reform blueprint.

Beyond these operational issues, there are some important philosophical ones. The first, which I have explored in some previous columns, is the validity of the need for 12 years of schooling. If the government wants to put resources into supporting the educational attainments of kids from poorer households, it must first decide on a realistic educational outcome which the kid can aspire to.

The most important goal, it seems to me, is creating a reasonable set of skills which equip the individual to earn a living, manage his personal affairs (including dealing with the "system") and comply with some basic social norms. Maybe it does take 12 years of schooling to do this, maybe not. The way that the current syllabus is structured and taught, it probably does none of these things. But, this is a question for enquiry and validation. The point is that the timing and duration of the scholarship should reflect the objectives that educational policy sets up for the system.

The crisis emerges from a combination of low capacity, inadequate regulation of providers and one-size-fits-all content that is completely divorced from the requirements of a majority of the students. The combination of public resources and private choice, exemplified by the national scholarship programme, is an entirely appropriate way to deal with the situation. However, its impact will be significantly diluted unless the other causes of the crisis are also simultaneously dealt with. The Budget provides a start but an entirely re-designed policy for the sector has to follow as soon as possible.

The author is chief economist, Crisil. The views here are personal