Public expenditure on education: A study of inter-state variations in India

Economic development of a country is mainly determined by social and economic factors and it has been documented that where there is social development, economic development is good. Education is recognized as an engine of social and economic development. Investment in education enhances labour productivity, income generation, poverty reduction, human resource development etc. India is in the forefront among the developing nations and its major challenges are unemployment, inequality and poverty. All these obstacles are largely due to low level of public expenditure on education in India. These can be reduced with the help of providing better education facilities. Against this background, this paper has made an effort to examine the variations in the trend of public expenditure on education in the post-liberalization period in India and analyses statewise various effects of education on macro economic aspects. For the purpose of this study, data obtained mainly from Reserve Bank of India (RBI) data base, Economic Survey, Government of India – Ministry of Human Resources Development (MHRD) and Five Year Plan documents have been used. The study observed that investment in education has greater impact on GDP in the post-liberalization era than in the pre-liberalization era in India. States with low performance in education are socially and economically backward. The analysis clearly showing that there is widespread disparities among the Indian states due variations in the size of investment in education.