31 Jan 2020 17:13 IST

Incentivise private players to play greater role in education sector

Education loans, the interest on which ranges between 9.6 and 15%, should be made more affordable

The 2020 Budget is expected to give a much needed thrust to the higher education sector. The system needs to benefit more students, improve infrastructure and, most importantly, upgrade the quality of education.

Budget share for the education sector has, indeed, increased over the years, but it is not sufficient. Education expenditure, which is 4.6 per cent of the GDP, must increase to 6 per cent over the next three years, according to Niti Aayog.

The 2019 Budget allocated ₹94,800 crore for the education sector, an increase of ₹9.8 crore from the 2018 outlay.

Make college loans affordable

It may come as a shocker but a car loan in India is cheaper than an education loan. While the interest rate on a car loan ranges between 9.25 per cent and 10 per cent, for education, it is as high as 15 per cent — ranges from 9.6 to 15 per cent.

Not only is the interest rate high but the maximum limit for unsecured loans given by banks is just ₹7.5 lakh. Though the cost of education has gone up two or three times from the time when this limit was first set, no measures have been taken to make the maximum amount of loan collateral-free. Unaffordable education and, on top of it, expensive education loans, act as barriers to many young students’ dreams.

GST rate must be cut

The education sector in India enjoys a lot of tax exemptions but most of them are limited to pre-schools and higher secondary educational institutes.

Services provided to a higher educational institution, including input or supply of services such as catering, transportation, housekeeping and services relating to admission or conduct of examination fall within the ambit of GST. Additionally, training programmes, camps, yoga programmes, uniforms, stationery, and other non-academic related supplies are taxable. Private institutions, coaching centres, reskilling courses and distance education are taxable at the rate of 18 per cent.

Education must be easily available and affordable, be it at the primary, secondary or higher levels. It is hoped that the Budget will come up with some major GST reductions in the education sector.

Introduction of professional courses

There are certain skills and professions that are in demand but very few corresponding degrees or courses, if at all, are available in the country. Online courses are also not well recognised yet. The government needs to boost them as they can help fill the skill gap. Provisions in this regard will not only help in skill development but will also boost employability.

Scholarships to study abroad

A scholarship is always a better option than an education loan as it saves one from interest and repayment burden. The government should set up scholarship funds for meritorious students to enable them to study abroad in top universities. India needs a huge number of highly skilled people to make up the workforce and the Indian higher education system is not poised to provide this in a short period of time. Using the well-developed education infrastructure abroad can boost the country’s economy.

Incentivise private sector to participate

The participation of the private players in the education sector is very important, if the demand for quality education is to be met. Thus the need to encourage and incentivise them. The Centre should introduce a common regulatory framework for all kinds of higher education institutions. A tax rebate incentive on private funding for not-for-profit education institutes will be a great move.

The borderline

Considered one of the youngest democracies, India has more than 600 million youth and one of their major concerns is education and employability. It is high time the Centre gives due recognition to this and boosts the higher education sector. If this urgent attention is not paid now, the demographic dividend that the country is expecting to benefit from might just turn into a liability.

(The writer is professor, FORE School of Management, New Delhi.)