Navigating Public Expenditure on Education: Challenges and Directions

Education systems don’t run on good intentions alone – they run on budgets. Yet in country after country, the money promised to education on paper rarely matches what actually reaches classrooms, teachers, and students. This gap between what governments plan to spend on education and what they actually spend is one of the most persistent and consequential challenges in education policy. Understanding public expenditure on education – how much is allocated, how it is distributed, and how far actual spending falls short – is essential to grasping why universal education remains an unfinished goal for much of the world.

What is public expenditure on education? 🔗

Public expenditure on education refers to government spending – at national, state, and local levels – on all forms of education, from early childhood care to higher education. This includes teacher salaries, infrastructure development, school meals, scholarships, and administrative costs. It is typically expressed as a percentage of a country’s Gross Domestic Product (GDP) or as a share of total government spending, both of which serve as key benchmarks for comparing educational investment across countries and over time.

The UNESCO Global Education Monitoring (GEM) Report has long recommended that governments allocate at least 4-6% of GDP to education and direct 15-20% of their total public expenditure towards the sector. These benchmarks, reaffirmed in the Education 2030 Framework for Action, serve as the global standard against which countries measure their commitment to education.

The persistent gap: planned allocation vs. actual spending 🔗

One of the most critical issues in education finance is the difference between budgeted allocations and actual expenditure. In many countries, especially developing economies, the amount allocated in the annual budget is often not fully spent by the end of the fiscal year. This underutilisation stems from delays in fund releases, bureaucratic bottlenecks, weak institutional capacity at the implementation level, and poor monitoring mechanisms.

India offers a clear illustration of this pattern. Analysis of recent Indian education budgets shows that actuals frequently fall 10-15% short of Budget Estimates, with revised estimates adjusted downward before the financial year even closes. Schemes like Samagra Shiksha – the flagship integrated school education programme – have historically seen unspent balances, even as the need for resources on the ground remains acute. This gap is not just a fiscal inefficiency; it directly translates into delayed school construction, unfilled teaching positions, and incomplete rollout of learning programmes.

India and the 6% GDP target 🔗

India’s case is particularly instructive. The goal of spending 6% of GDP on education is not new – it was first recommended by the Kothari Commission in 1966 and was echoed again by the National Policy on Education 1968. Decades later, the National Education Policy (NEP) 2020 reaffirmed this target as a priority. Yet the country has consistently fallen short. India’s education spending has hovered between 3% and 4% of GDP over the past decade, with the Union Budget 2025-26 allocating ₹1.28 trillion – a 6.5% increase over the previous year, but still well below the 6% GDP threshold.

The structural challenge is compounded by how responsibility is shared between the central government and the states. Research published in the Journal of Development Policy and Practice shows that while states together bear about 3% of GDP in education spending, the Union government contributes barely 1%. Moreover, the central government’s share of total educational expenditure actually declined from 24.9% in 2014-15 to 17.7% in 2019-20 – a trend that places increasing fiscal pressure on states, many of which already have strained finances.

How funds are distributed across levels of education 🔗

Public education budgets are not spread evenly across schooling levels. How a government distributes its education spending – between primary, secondary, and higher education – reveals much about its priorities and its commitment to equity and universal access.

Elementary and school education: the foundation 🔗

In India, school education consistently receives the larger share of the Ministry’s budget. According to PRS India’s budget analysis, the Department of School Education and Literacy accounted for 59% of the Ministry of Education’s total allocation, with the highest single expenditure head being Samagra Shiksha at 33% of the Ministry’s budget. Complementary programmes like the PM POSHAN (mid-day meal) scheme further reinforce school attendance and retention, particularly among disadvantaged groups.

The investment in elementary education has, over time, contributed to near-universal enrolment at the primary level. India’s Gross Enrolment Ratio (GER) at the primary level had approached 100% by 2018-19. The Right to Education (RTE) Act, 2009, which made free and compulsory education a fundamental right for children aged 6-14, was a key legislative driver of this achievement. However, as enrolment data from PRS India reveals, the GER drops sharply to 77% at the secondary level and to 50% at the senior secondary level – a clear indication that retaining students beyond primary school remains a significant challenge, one that cannot be addressed without sustained and targeted resource allocation at these higher school levels.

Secondary education: the neglected middle 🔗

Secondary education occupies an uneasy position in public expenditure frameworks. While elementary education has benefited from dedicated, high-profile programmes, and higher education commands attention through universities and IITs, secondary schooling often receives proportionally less focus in policy discussions and funding mechanisms. Research on Indian education expenditure trends confirms that investment in secondary education has remained relatively stable rather than growing, even as the student population at this level has expanded. This stagnation is consequential: studies published in Humanities and Social Sciences Communications note that near-universal primary school attendance has not been replicated at the secondary and higher secondary levels, with dropout rates rising sharply, particularly among girls from lower-income households.

Higher education: growing investment, growing inequality 🔗

Higher education receives about 40-41% of the Ministry of Education’s total budget in India, with significant allocations going to IITs, central universities, and regulatory bodies like the UGC. The Union Budget 2025 announced expansion of IIT infrastructure to accommodate 6,500 additional students across five newer IITs, and introduced five National Centres of Excellence for skilling. While these are important investments, critics point out that elite institutions absorb a disproportionate share of higher education funding, while the vast majority of colleges and universities – particularly in smaller towns and rural areas – remain chronically underfunded.

A notable longer-term trend is that private expenditure on education in India is growing faster than public expenditure, with the ratio of public to private spending declining steadily over three decades. This reflects increasing privatisation, which has far-reaching equity implications – as households are compelled to fill the gaps left by inadequate public funding.

Why this matters for universal education 🔗

The push for universal education – encapsulated in Sustainable Development Goal 4, which calls for inclusive and equitable quality education for all by 2030 – cannot be realised without adequate and well-distributed public funding. The UNESCO GEM Report estimates that to achieve universal pre-primary, primary, and secondary education by 2030, low- and lower-middle-income countries need to spend US$461 billion annually, with an estimated annual financing gap of US$97 billion. This gap is not uniform: low-income countries face a shortfall equivalent to about 50% of their total required spending.

International comparisons further contextualise India’s challenge. A World Bank study noted that India spent 14.1% of its budget on education, compared to 18.5% in Vietnam and 20.6% in Indonesia – countries with broadly comparable GDP levels. Given India’s larger youth population (a higher share of under-19s), the argument for proportionally greater education investment is even stronger.

The implications of underspending are not abstract. Poor infrastructure, teacher shortages – especially in rural and remote areas – low learning outcomes, and high dropout rates at the secondary level are all direct consequences of the funding deficit. As the British Council’s analysis of India’s education budget highlights, the nominal growth in annual education allocations does not always translate into real-terms expansion when inflation is accounted for, and state-level underfunding – driven partly by poor fiscal health and lower tax devolution from the centre – further widens the gap between policy ambition and ground reality.

Challenges in translating allocation into outcomes 🔗

Even when budgets are increased, converting allocations into meaningful educational outcomes involves navigating several structural obstacles.

Inefficient spending is a recurring concern – funds are allocated but not always deployed effectively. Funds may be released late in the fiscal year, leaving implementing agencies with insufficient time to spend them productively. Intra-sectoral imbalances mean that teacher salaries and administrative costs consume a large share of current expenditure, leaving little for capital investment in infrastructure or learning materials. State-level disparities are stark: research on Indian state education finance shows that high-income states like Kerala and Himachal Pradesh have improved spending efficiency, while lower-income states like Madhya Pradesh face stagnation – compounding existing educational inequalities. Furthermore, data gaps persist; the lack of disaggregated expenditure data across ministries and levels of government makes it difficult to track whether money is reaching intended beneficiaries.

The way forward: aligning spending with equity and quality 🔗

Meeting the 6% GDP benchmark is necessary but not sufficient. The quality, targeting, and accountability of education spending matter just as much as the quantity. The NEP 2020 itself emphasises the efficient use of funds and recommends strategic investment in teacher development, foundational literacy, early childhood care, and research infrastructure. Beyond raising overall allocations, there is a need to rebalance spending across levels – investing more substantively in secondary education to address dropout, and ensuring higher education funding does not bypass the bulk of ordinary colleges. Strengthening fiscal federalism so that states receive adequate resources to fulfil their education responsibilities, improving fund utilisation monitoring, and linking budget releases to verifiable outcomes are all critical steps.

Universal education is ultimately a question of political will as much as fiscal capacity. Countries that have expanded access and quality consistently – whether through France’s 19th-century universalisation of public schooling or more recent successes in Vietnam and South Korea – did so by treating education not as a residual budget line but as a primary national investment.

What do you think? If India’s total education spending (combining central and state budgets) is already close to 4.6% of GDP, what specific reforms in fund allocation and utilisation would make the greatest difference in actually achieving universal quality education – and should the focus be on increasing the total budget, or on spending what’s already allocated more effectively? Also, given that secondary education sees the sharpest dropout rates, should future public expenditure frameworks explicitly ring-fence a higher proportion of funds for this level?

References

1. https://www.education-progress.org/en/articles/finance
2. https://en.unesco.org/gem-report/2030-framework-action
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