Opinion Think

Fund Students and not Schools!

Instead of viewing budget private schools as illegitimate providers, policymakers must unleash the competitive market process and resulting innovations required to take Indian education into the 21stcentury.

This is the final piece in a series of three articles discussing the phenomenon of low-cost private schooling in India. You can read the first two articles here and here.

The need for literate workers during the industrial revolution prompted churches and governments across Europe to be involved in running schools at home and in colonies across the world. Commenting on the limited intellectual capacity and the nature of education produced by Indians, Macaulay, wrote, “A single shelf of a good European library was worth the whole native literature of India and Arabia.” Convinced of their intellectual superiority, the colonial government set about educating a class of natives who were, “Indian in blood and colour, but English in taste, in opinions, in morals and in intellect.” In came the English Education Act, 1835, and the emergence of a public education system focused on teaching a western curriculum using English as medium of instruction.

Yet the emergence of public education was not the emergence of formal education in India – independent schools existed prior to British rule. A study of the Madras Presidency from 1835 found that 97% of funding for schools came from school fees. Subsequent governments have gradually increased access to public education for all communities, although the quality of education provided has remained poor. The approach of encouraging independent actors to provide education separate from the state has been championed by thinkers who radically disagree on other issues. Here is Marx (1875):

Elementary education by the state is altogether objectionable. Defining by a general law the expenditures on the elementary schools, the qualifications of the teaching staff, the branches of instruction, etc., and, as is done in the United States, supervising the fulfillment of these legal specifications by state inspectors, is a very different thing from appointing the state as the educator of the people! Government and church should rather be equally excluded from any influence on the school.

In the last decade, the debate on primary education in India has seen participation from two opposing groups— one argued that there is nothing wrong with the public school system, and all we need to do is to pump in more money. The other contended that there is something fundamentally wrong in the way incentives are designed for private schools.

The costs of bad public policy on Indian education

While the Right to Education (RTE) requires schools to pay teachers as per the Seventh Pay commission, a majority of private schools pay teachers far below public schools. Despite this, teacher-related requirements are the most expensive component for a private school. Teacher quality and retention are both concerns, as teachers “leave for a minimal increment to their competitor. This fear has led to almost negligible investment in the teachers’ pedagogical growth and skills development.” Instead of focusing on qualifications, the primary education crisis in India requires that teachers be present and engaging with students. As a practical solution, Nagarajan suggests that “systems could require teachers meet certain basic requirements to protect students, while not mandating full accreditation.” The Philippines, for example, have relaxed the condition that all teachers be certified by the central body at the time they start teaching, requiring only that they are on track to clear their exam within 5 years.

The complex and expensive process of registration results in private schools spending years in limbo, waiting to obtain all the necessary licenses and permissions, leaving the schools at risk of harassment and closure. A 12-state study of public sources by the National Independent Schools Alliance showed that 9,382 private schools had received an official threat to close down, 7,898 had received notices to close and 3,332 had closed down as a result of non-compliance with recognition norms. The threat of closure ultimately affects families most acutely, as the parent suddenly has to find a new school for the child. Kingdon observes that it would be “useful if policy on how to utilise, support and regulate private schools can take into account these realities, in order to avoid unintended counterproductive effects such as the closure of the low-fee private schools which may be successfully imparting learning but which lack the resources to fulfil the demanding infrastructure and other conditions of government recognition.”

The recognition process for private schools is so stringent that only 6.4% of government schools would have been compliant with the RTE Act 2009, were they not exempted by Section 8 of the Act. Given that almost 80% of private schools’ charge fees lower than government schools’ per pupil expenditure, Kingdon points to “the serious difficulty that such low-fee private schools must face in mustering the resources to comply with the infrastructure norms of the RTE Act without public subsidy.” Zeitlyn and Harma find that, “government school buildings were generally far superior to the bulk of low fee private schools.” Despite this, they observed that “government schools had virtually no teaching activity.” In budget private schools (BPS) on the other hand, “there was always an air of seriousness and discipline, with children sitting in orderly rows.” Upon further investigation, it was found that BPS emphasised on keeping “standards relatively high in order that parents will see some benefit in paying fees.”

The lack of a robust market in education

As the primary education sector is limited to operate on a not-for-profit basis, BPS are restricted to tuition fees and donations for income. School fees are constrained by the capacity of parents to afford fees, and limits decided upon by state-based fee committees. Santosh notes that “the vast majority of private schools’ charge very little and function in disadvantaged areas, already bearing the weight of extra compliance costs under the RTE.” Poor regulation hinders competitive market processes, creating a large supply deficit and “the unintended consequence of lowering the standards of private schools”. Donations are an unreliable basis on which to scale the operations of a school, and Mishra points out that, “if for some reason the funds were to dry up, a school may find itself in trouble.”

The unstructured nature of the current market and limits on sources of income leads to limited private investment in education, with investors pointing to poor returns and minimal impact. A lack of funds makes it difficult to improve quality, by limiting teacher salaries, and investments in better administration and technology. Unlike elite private schools which feature many aggregators, the majority of BPS are run by sole entrepreneurs. Discussing the challenges involved in creating a chain of BPS in Gujarat, Sodha explains that,

The best option to move forward was to create a set-up of an educational services’ company alongside an educational trust.The services company would buy the land and build the buildings; the trust then rents these from the company. The education services company designs the assessments, creates curriculum workbooks, conducts teacher recruitment, teacher training, fees collection and so on. The trust again pays for these services. We figured that creation of this somewhat complex model was the only legal way to move forward paying due taxes on profit generated through services.

Spending on education is significant across income groups, with average household expenditure at Rs 9,675 per month. With the education market expected to expand to Rs 11,88,000 crores by 2020, parents are looking at private schools to educate their children, but supply is unable to meet demand.

Policy Goal: Fund students not schools!

Instead of viewing them as illegitimate providers, policymakers must reimagine current regulation and create a larger role for BPS, unleashing the competitive market process and resulting innovations required to take Indian education into the 21stcentury. Studies on primary education from across the developing world have “found that when interventions provided more-of-the-same educational inputs without changing pedagogy or accountability, they consistently had insignificant effects on students’ performance.” With so much as stake, governments should look to utilize limited public resources efficiently, with investment focused not on building schools, but ensuring that children are learning, thus shifting the focus from provision to financing of primary education.

A look across our western border provides a useful perspective on how enabling regulation can facilitate growth of the private sector. 10 years after the Pakistan Education Act II (2004) was passed, the Punjab Education Foundation (PEF) paid for almost 1.6 million children to receive education in privately run schools, and is estimated to reach 2.8 Million children by 2019. PEF signs public-private partnership contracts with individuals to provide education to children from poorer families and underserved areas. Salman notes two advantages of working with individuals from the community: “the motivation of school owners to enrol and retain out-of-school children”, and using “school owners as community mobilisers to convince parents to send their children to school.”

Evidence from across developing countries on Direct Benefit Transfer (DBT) experiments in primary education using cash transfers and vouchers is encouraging. When compared to students attending public schools, those children attending private schools with the help of cash transfers are 65% more likely to attend school and report significantly lower dropout rates. The Andhra Pradesh School Choice Project, the largest DBT experiment in Indian primary education, found that schools with students receiving a voucher achieved learning outcomes higher than or equal to those in government schools, at only one third the cost. Exploring how DBT can be used to influence school and parent behaviour, Shah proposes a model which “combines the benefits of a voucher and a cash transfer, i.e., money to cover school fees with an additional stipend to discourage child labour or early marriage.” Section 12 (1) (C) of the RTE Act, which requires that 25% of enrolment in private schools consists of children from poorer families, can be implemented through DBT as a significant test case in examining the benefits of funding primary education across India.

This is the third in a series of three articles discussing the phenomenon of low-cost private schooling in India: 1) The Rise of Budget Private Schools in India; 2) What is behind the private school revolution in India?


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About the author

Srijan Bandyopadhyay

Srijan has worked in the education and public policy space, and has a strong commitment to liberal ideas. He has worked for over 5 years with Centre for Civil Society, and recently compiled the Report on Budget Private Schools in India, 2017 which documented research, policy, practice and global trends relevant to the low-cost private school sector in India. He is a student of political philosophy and political economy, and is interested in classical liberalism, the history of liberalism in India, and the application of liberal principles to contemporary Indian political thought.