Education Spending Plateau: 16th Finance Commission Warns of Fiscal Compression Amid Rising Subsidies

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The 16th Finance Commission has sounded an alarm on India's stagnant education expenditure, which has remained stuck at 2.5% of the country's GDP over the last decade. Despite repeated policy commitments to human capital development, state governments have struggled to allocate a significant portion of their budgets to education. In fact, the report notes that education spending has fluctuated narrowly between 2.2% and 2.5% of GDP from 2011-12 to 2023-24, with no sustained upward shift. The commission's analysis of state budgets reveals a worrying trend: rising subsidies and committed expenditures have reduced states' discretionary spending space, leaving little room for investment in critical sectors like education. The report warns that this fiscal compression could have long-term consequences for India's growth and development. The 16th Finance Commission has called on states to review their spending priorities and ensure that education remains a key area of investment. The commission also recommends that states rationalize their subsidy schemes and prioritize those that effectively target the poor. The report highlights the need for a comprehensive assessment of education spending, including expenditure by all central ministries and departments, as well as all states and Union Territories. Educationist Anita Rampal notes that states like Kerala and Tamil Nadu have performed well in education, but have been unfairly deprived of central funding. She emphasizes the need for closer scrutiny of state-level education spending and adequate funding from the Union pool. The National Education Policy 2020 endorses public investment in education by the Centre and states to reach 6% of GDP. The 16th Finance Commission's report serves as a stark reminder of the challenges ahead and the need for sustained and increased investment in education to achieve this goal.