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Budget 2017: Urgent Need To Focus On Education Sector

The tuition fees across educational institutions have increased substantially in the recent years and bundling the tuition fees exemption under all-encompassing section 80C with a total deduction of Rs. 1.5 lakh has not really incentivised higher studies. To encourage middle class households to pursue academic dreams, a separate section under the Income Tax Act should be provided

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An investment in knowledge pays the best interest - Benjamin Franklin

India is the second most populous country in the world right now and will soon overtake China to occupy the first spot. Should we feel happy or be worried about this development? The answer to this question primarily depends on the speed & effectiveness of the reforms conceptualized & implemented in the education sector. While the government have been taking various initiatives, there are still a number of areas of improvement in the overall education system.

The public sector investment in education sector as a per cent of GDP has been hovering around 4 per cent for the last so many years. As per a 2012 study conducted by UNESCO, countries such as United States, France, Germany & Australia who boast of a relatively developed education infrastructure have higher public sector investment as compared to India. It is clearly evident that a number of countries have realized the benefits that will be reaped by its citizens if adequate focus & investment is made in this sector.

Given the massive investment requirements of the sector to meet the growing demands of ever increasing population, the budgeted expenditure is clearly not enough. In addition, there are a number of roadblocks which dissuade private & foreign investment in this sector.

Given the above background, the expectations from the Finance Minister are not very different from the last few years. Finance Minister may consider the following agenda items:

" Increasing public expenditure: In line with the Kothari Commission's recommendation to increase public expenditure to 6 per cent of the GDP, the government is requested to announce a higher budgetary allocation this year. The funds can specifically be devoted towards improvement of physical infrastructure, research & development, teacher training & adoption of technology for improved learning outcomes.

" Separate deduction for tuition fees: The tuition fees across educational institutions have increased substantially in the recent years and bundling the tuition fees exemption under all-encompassing section 80C with a total deduction of Rs. 1.5 lakh has not really incentivised higher studies. To encourage middle class households to pursue academic dreams, a separate section under the Income Tax Act should be provided.

" Re-examine withdrawal of service tax exemption: The negative list of service tax was pruned down and the service tax exemption on renting immovable property by an educational institution was withdrawn. The government should consider restoring the service tax exemption the same. Similarly, service tax levy should also be withdrawn from auxiliary education services such as transportation, canteen, etc. provided by educational institutions directly to students. Budget 2017 and the proposed GST regime should provide such exemptions to the education sector to avoid increase in education costs and encourage lower dropouts & higher enrolments.

" Removing roadblocks from foreign & private investment: The government has been actively promoting India as an ideal FDI destination for a number of sectors. We request the FM to provide clarity on government's stand on attracting foreign & private investment in this sector through regulatory interventions.

" Other sectoral interventions: Investment in development of education leadership & faculty is the need of the hour. A roadmap for effective utilisation of funds under the mandatory CSR proviso can also be suggested.

It is my modest request to the Honorable Finance Minister to consider the above requests in the forthcoming budget. I am certain that the benefits which will accrue to the nation through such reforms will outweigh the costs in the long term.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


Tags assigned to this article:
Union Budget 2017-18 education service tax unesco

Rohin Kapoor

The author is Director with Deloitte Haskins and Sells LLP

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