India’s urban population has grown by 32% from 2001 to 2011 as compared to 18% growth in total population of the country.[1] As per Census 2011, 31% of the country’s population (377 million people) live in cities, and contribute to 63% of the country’s GDP.[2] The urban population is projected to grow up to 600 million by 2031.2 With increasing urban population, the need for providing better infrastructure and services in cities is increasing.[3] The government has introduced several schemes to address different urban issues. These include the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Smart Cities Mission, Heritage City Development and Augmentation Yojana (HRIDAY), Pradhan Mantri Awas Yojana – Housing for All (Urban) (PMAY-U), and Swachh Bharat Mission (Urban).
Last week the Ministry of Urban Development released the next batch of winners under the Smart Cities Mission.[4] This takes the number of smart cities to 90. The government has also announced a few policies and released data indicators to help with the implementation of the urban schemes. In light of all this, we discuss how the new schemes are changing the mandate of urban development, the fiscal challenge of implementing such schemes, and the policies that are trying to address some of these challenges.
Urbanisation in India
The Jawaharlal Nehru National Urban Renewal Mission (JnNURM), launched in 2005, was one of the first urban development schemes implemented by the central government. Under JnNURM, the central government specified certain mandatory and optional reforms for cities, and provided assistance to the state governments and cities that were linked to the implementation of these reforms. JnNURM focused on improving urban infrastructure and service delivery, community participation, and accountability of city governments towards citizens.
In comparison, the new urban schemes move beyond the mandate that was set by JnNURM. While AMRUT captures most of the objectives under JnNURM, the other schemes seek to address issues around sanitation (through Swachh Bharat), affordable housing (through PMAY-U), and technology innovation (through Smart Cities). Further, the new schemes seek to decentralize the planning process to the city and state level, by giving them more decision making powers.2 So, while earlier, majority of the funding came from the central and state governments, now, a significant share of the funding needs to be raised by the cities themselves.
For example, under the Smart Cities Mission, the total cost of projects proposed by the 60 smart cities (winners from the earlier rounds) is Rs 1.3 lakh crore.[5] About 42% of this amount will come from central and state funding towards the Mission, and the rest will be raised by the cities.[6]
The new schemes suggest that cities may raise these funds through: (i) their own resources such as collection of user fees, land monetization, property taxes, etc., (ii) finance mechanisms such as municipal bonds, (iii) leveraging borrowings from financial institutions, and (iv) the private sector through Public Private Partnerships (PPPs).[7]
In 2011, an Expert Committee on Indian Urban Infrastructure and Services (HPEC) had projected that creation of the required urban infrastructure would translate into an investment of Rs 97,500 crore to Rs 1,95,000 crore annually.[8] The current urban schemes are investing around Rs 32,500 crore annually.
Financial capacity of cities
Currently, the different sources of revenue that municipal corporations have access to include: (i) tax revenue (property tax, tax on electricity, toll tax, entertainment tax), (ii) non-tax revenue (user charges, building permission fees, sale and hire charges), (iii) grants-in-aid (from state and central governments), and (iv) debt (loans borrowed from financial institutions and banks, and municipal bonds).
While cities are now required to raise more financing for urban projects, they do not have the required fiscal and technical capacity.8,[9] The HPEC had observed that cities in India are among the weakest in the world, both in terms of capacity to raise resources and financial autonomy. Even though cities have been getting higher allocations from the centre and states, their own tax bases are narrow.8 Further, several taxes that cities can levy are still mandated by the state government. Because of their poor governance and financial situation, cities also find it difficult to access external financing.8,7
In order to help cities improve their finances, the government has introduced a few policies, and released a few indicators. Some of these are discussed below:
Policy proposals and data indicators
Value Capture Financing (VCF): The VCF policy framework was introduced by the Ministry of Urban Development in February 2017.[10] VCF is a principle that states that people benefiting from public investments in infrastructure should pay for it. Currently when governments invest in roads, airports and industries in an area, private property owners in that area benefit from it. However, governments recover only a limited value from such investments, constraining their ability to make further public investments elsewhere. VCF helps in capturing a part of the increment in the value of land due to such investments, and use it to fund new infrastructure projects.
The different instruments of VCF include: land value tax, fee for changing land use, betterment levy, development charges, transfer of development rights, and land pooling systems.10 For example, Karnataka uses certain value capture methods to fund its mass transit projects. The Mumbai Metropolitan Region Development Authority (MMRDA), and City and Industrial Development Corporation Limited (CIDCO) have used betterment levy (tax levied on land that has gained in value because of public infrastructure investments) to finance infrastructure projects.
Municipal bonds: Municipal bonds are bonds issued by urban local bodies (municipal corporations or entities owned by municipal bodies) to raise money for financing specific projects such as infrastructure projects. The Securities and Exchange Board of India regulations (2015) regarding municipal bonds provide that, to issue such bonds, municipalities must: (i) not have negative net worth in any of the three preceding financial years, and (ii) not have defaulted in any loan repayments in the last one year.[11] Therefore, a city’s performance in the bond market depends on its fiscal performance. One of the ways to determine a city’s financial health is through credit ratings.
Credit rating of cities: In September 2016, the Ministry of Urban Development started assigning cities with credit ratings.[12] These credit ratings were assigned based on assets and liabilities of the cities, revenue streams, resources available for capital investments, accounting practices, and other governance practices.
Of the total 20 ratings ranging from AAA to D, BBB– is the ‘Investment Grade’ rating and cities rated below BBB– need to undertake necessary interventions to improve their ratings for obtaining positive response to the Municipal Bonds to be issued. By March 2017, 94 cities were assigned credit ratings, 55 of which got ‘investment grade’ ratings.[13]
Credit ratings indicate what projects might be more lucrative for investments. This, in turn, helps investors decide where to invest and determine the terms of such investments (based on the expected returns).
Earlier this month, the Pune Municipal Corporation raised Rs 200 crore through the sale of municipal bonds, to finance water supply projects under the Smart Cities Mission.[14] The city had received an AA+ credit rating (second highest rating) in the recent credit rankings assigned by the central government.
Other than credit ratings, the Ministry of Urban Development has also come up with other data indicators around cities such as the Swachh Bharat rankings, and the City Liveability Index (measuring mobility, access to healthcare and education, employment opportunities, etc). These rankings seek to foster a sense of competition across cities, and also help them map their performances year on year.
Some financing mechanisms, such as municipal bonds, have been around in India for the last two decades, but cities haven’t been able to make much use of them. It remains to be seen whether the introduction of indicators such as credit ratings helps the municipal bond market take off. While these mechanisms may improve the finances of cities, the question is would more funding solve the cities’ problems. Or would it require municipal government to take a different approach to problem solving.
[1] Census of India, 2011.
[2] Mission Statement and Guidelines, Smart Cities, Ministry of Urban Development, June 2015, http://smartcities.gov.in/writereaddata/SmartCityGuidelines.pdf.
[3] Report on Indian Urban Infrastructure and Services, March, 2011, The High Powered Expert Committee for estimating the investment requirements for urban infrastructure services, http://icrier.org/pdf/FinalReport-hpec.pdf.
[4] “30 more smart cities announced; takes the total to 90 so far”, Press Information Bureau, Ministry of Urban Development, June 23, 2017.
[5] Smart Cities Mission, Ministry of Urban Development, last accessed on June 30, 2017, http://smartcities.gov.in/content/.
[6] Smart City Plans, Last accessed in June 2017.
[7] “Financing of Smart Cities”, Smart Cities Mission, Ministry of Urban Development, http://smartcities.gov.in/upload/uploadfiles/files/Financing%20of%20Smart%20Cities.pdf.
[8] “Report on Indian Urban Infrastructure and Services”, March, 2011, The High Powered Expert Committee for estimating the investment requirements for urban infrastructure services, http://icrier.org/pdf/FinalReport-hpec.pdf.
[9] Fourteenth Finance Commission, Ministry of Finance, February 2015, http://finmin.nic.in/14fincomm/14fcrengVol1.pdf.
[10] Value Capture Finance Policy Framework, Ministry of Urban Development, February 2017, http://smartcities.gov.in/upload/5901982d9e461VCFPolicyFrameworkFINAL.pdf.
[11] Securities and Exchange Board of India (Issue and Listing of Debt Securities by Municipalities) Regulations, 2015, Securities and Exchange Board of India, July 15, 2015, http://www.sebi.gov.in/sebi_data/attachdocs/1436964571729.pdf.
[12] “Credit rating of cities under urban reforms begins”, Press Information Bureau, Ministry of Urban Development, September 6, 2016.
[13] “Credit Rating of Urban Local Bodies gain Momentum”, Press Information Bureau, Ministry of Urban Development, March 26, 2017.
[14] “Pune civic body raises Rs200 crore via municipal bonds”, LiveMint, June 19, 2017, http://www.livemint.com/Money/JOOzaSTKnC6k1EZGeFh8LJ/Pune-civic-body-raises-Rs200-crore-via-municipal-bonds.html.
The National Education Policy (NEP) 2020 was released on July 30, 2020. It will replace the National Policy on Education, 1986. Key recommendations of the NEP include: (i) redesigning the structure of school curriculum to incorporate early childhood care and education, (ii) curtailing dropouts for ensuring universal access to education, (iii) increasing gross enrolment in higher education to 50% by 2035, and (iv) improving research in higher education institutes by setting up a Research Foundation. In this blog, we examine the current status of education in the country in view of some of these recommendations made by the NEP.
Universal access to Education
The NEP states that the Right to Education Act, 2009 has been successful in achieving near universal enrolment in elementary education, however retaining children remains a challenge for the schooling system. As of 2015-16, Gross Enrolment Ratio was 56.2% at senior secondary level as compared to 99.2% at primary level. GER denotes enrolment as a percent of the population of corresponding age group. Further, it noted that the decline in GER is higher for certain socio-economically disadvantaged groups, based on: (i) gender identities (female, transgender persons), (ii) socio-cultural identities (scheduled castes, scheduled tribes), (iii) geographical identities (students from small villages and small towns), (iv) socio-economic identities (migrant communities and low income households), and (v) disabilities. In the table below, we detail the GER in school education across: (i) gender, and (ii) socio-cultural identities.
Table 1: GER in school education for different gender and social groups (2015-16)
|
Level |
Male |
Female |
SC |
ST |
All |
|
Primary (I-V) |
97.9% |
100.7% |
110.9% |
106.7% |
99.2% |
|
Upper Primary (VI-VIII) |
88.7% |
97.6% |
102.4% |
96.7% |
92.8% |
|
Secondary (IX-X) |
79.2% |
81% |
85.3% |
74.5% |
80% |
|
Senior Secondary (XI-XII) |
56% |
56.4% |
56.8% |
43.1% |
56.2% |
Sources: Educational Statistics at Glance 2018, MHRD; PRS.
Data for all groups indicates decline in GER as we move from primary to senior secondary for all groups. This decline is particularly high in case of Scheduled Tribes. Further, we analyse the reason for dropping out from school education. Data suggests that the most prominent reason for dropping out was: engagement in domestic activities (for girls) and engagement in economic activities (for boys).
Table 2: Major reasons for dropping out (Class 1-12) for 2015-16
|
Reason for dropping out |
Male |
Female |
|
Child not interested in studies |
23.8% |
15.6% |
|
Financial Constraints |
23.7% |
15.2% |
|
Engage in Domestic Activities |
4.8% |
29.7% |
|
Engage in Economic Activities |
31.0% |
4.9% |
|
School is far off |
0.5% |
3.4% |
|
Unable to cop-up with studies |
5.4% |
4.6% |
|
Completed desired level/ Class |
5.7% |
6.5% |
|
Marriage |
|
13.9% |
|
Other reasons |
5.1% |
6.2% |
Note: Other reasons include: (i) timings of educational Institution not suitable, (ii) language/medium of Instruction used unfamiliar, (iii) inadequate number of teachers, (iv) quality of teachers not satisfactory, (v) unfriendly atmosphere at school. For girl students, other reasons also include: (i) non-availability of female teachers, (ii) non-availability of girl’s toilet.
Sources: Educational Statistics at Glance 2018, MHRD; PRS.
The NEP recommends strengthening of existing schemes and policies which are targeted for such socio-economically disadvantaged groups (for instance, schemes for free bicycles for girls or scholarships) to tackle dropouts. Further, it recommends setting up special education zones in areas with significant proportion of such disadvantaged groups. A gender inclusion fund should also be setup to assist female and transgender students in getting access to education.
Increasing GER in Higher Education to 50% by 2035
The NEP aims to increase the GER in higher education to 50% by 2035. As of 2018-19, the GER in higher education in the country stood at 26.3%. Figure 2 shows the trend of GER in higher education over the last few years. Note that the annual growth rate of GER in higher education in the last few years has been around 2%.
Figure 1: GER in Higher Education (2014-15 to 2018-19)
Sources: All India Survey on Higher Education, MHRD; PRS.
Table 3: Comparison of GER (higher education) with other countries
|
Country |
GER (2017-18) |
|
India |
25% |
|
Brazil |
51% |
|
China |
49% |
|
Indonesia |
36% |
|
South Africa |
22% |
|
Pakistan |
9% |
|
Germany |
70% |
|
France |
66% |
|
United Kingdom |
60% |
Sources: UNESCO; PRS.
The NEP recommends that for increasing GER, capacity of existing higher education institutes will have to be improved by restructuring and expanding existing institutes. It recommends that all institutes should aim to be large multidisciplinary institutes (with enrolments in thousands), and there should be one such institution in or near every district by 2030. Further, institutions should have the option to run open distance learning and online programmes to improve access to higher education.
Foundational literacy and numeracy
The NEP states that a large proportion of the students currently enrolled in elementary school have not attained foundational literacy and numeracy (the ability to read and understand basic text, and carry out basic addition and subtraction). It recommends that every child should attain foundational literacy and numeracy by grade three.
Table 4 highlights the results of the National Achievement Survey 2017 on the learning levels of students at Grade 3 in language and mathematics. The results of the survey suggest that only 57% students in Grade 3 are able to solve basic numeracy skills related to addition and subtraction.
Table 4: NAS results on learning level of Grade-3 students
|
Learning level (Grade 3) |
Percentage of students |
|
Ability to read small texts with comprehension (Language) |
68% |
|
Ability to read printed scripts on classroom walls such as poems, posters (Language) |
65% |
|
Solving simple daily life addition and subtraction problems with 3 digits (Mathematics) |
57% |
|
Analyses and applies the appropriate number operation in a situation (Mathematics) |
59% |
Sources: National Achievement Survey (2017) dashboard, NCERT; PRS.
To achieve universal foundational literacy and numeracy, the Policy recommends setting up a National Mission on Foundational Literacy and Numeracy under the MHRD. All state governments must prepare implementation plans to achieve these goals by 2025. A national repository of high-quality resources on foundational literacy and numeracy will be made available on government’s e-learning platform (DIKSHA). Other measures to be taken in this regard include: (i) filling teacher vacancies at the earliest, (ii) ensuring a pupil to teacher ratio of 30:1 for effective teaching, and (iii) training teachers to impart foundational literacy and numeracy.
Effective governance of schools
The Policy states that establishing primary schools in every habitation across the country has helped increase access to education. However, it has led to the development of schools with low number of students. The small size of schools makes it operationally and economically challenging to deploy teachers and critical physical resources (such as library books, sports equipment).
With respect to this observation, the distribution of schools by enrolment size can be seen in the table below. Note that, as of September 2016, more than 55% of primary schools in the country had an enrolment below 60 students.
Table 5: Distribution of schools by enrolment size
|
Strength (Grade) |
Below 30 |
31-60 |
61-90 |
91-120 |
121-150 |
151-200 |
More than 200 |
|
Primary schools (Class 1-5) |
28.0% |
27.5% |
16.0% |
10.3% |
6.3% |
5.6% |
6.4% |
|
Upper primary schools (Class 6-8) |
14.8% |
27.9% |
18.7% |
15.0% |
8.4% |
7.2% |
8.0% |
|
Upper primary schools (Class 1-8) |
5.7% |
11.6% |
13.0% |
12.1% |
10.4% |
13.4% |
33.8% |
Sources: Flash Statistics on School Education 2016-17, UDISE; PRS.
While nearly 80% primary schools had a library, only 1.5% schools had a librarian (as of September 2016). The availability of facilities is better in higher senior secondary schools as compared to primary or upper primary schools.
Table 6: Distribution of schools with access to physical facilities
|
Facilities |
Primary schools (Class 1-5) |
Upper primary schools (Class 1-8) |
Higher senior secondary |
|
Library |
79.8% |
88.0% |
94.4% |
|
Librarian |
1.5% |
4.5% |
34.4% |
|
Playground |
54.9% |
65.5% |
84.3% |
|
Functional computer |
4.4% |
25.2% |
46.0% |
|
Internet connection |
0.9% |
4.2% |
67.9% |
Sources: Flash Statistics on School Education 2016-17, UDISE; PRS.
To overcome the challenges associated with development of small schools, the NEP recommends grouping schools together to form a school complex. The school complex will consist of one secondary school and other schools, aanganwadis in a 5-10 km radius. This will ensure: (i) adequate number of teachers for all subjects in a school complex, (ii) adequate infrastructural resources, and (iii) effective governance of schools.
Restructuring of Higher Education Institutes
The NEP notes that the higher education ecosystem in the country is severely fragmented. The present complex nomenclature of higher education institutes (HEIs) in the country such as ‘deemed to be university’, ‘affiliating university’, ‘affiliating technical university', ‘unitary university’ shall be replaced simply by 'university'.
According to the All India Survey on Higher Education 2018-19, India has 993 universities, 39,931 colleges, and 10,725 stand-alone institutions (technical institutes such as polytechnics or teacher training institutes).
Table 7: Number of Universities in India according to different categories
|
Type of university |
Number of universities |
|
Central University |
46 |
|
Central Open University |
1 |
|
Institutes of National Importance |
127 |
|
State Public University |
371 |
|
Institution Under State Legislature Act |
5 |
|
State Open University |
14 |
|
State Private University |
304 |
|
State Private Open University |
1 |
|
Deemed University- Government |
34 |
|
Deemed University- Government Aided |
10 |
|
Deemed University- Private |
80 |
|
Total |
993 |
Sources: All India Survey on Higher Education 2018-19; PRS.
The NEP recommends that all HEIs should be restructured into three categories: (i) research universities focusing equally on research and teaching, (ii) teaching universities focusing primarily on teaching, and (iii) degree granting colleges primarily focused on undergraduate teaching. All such institutions will gradually move towards full autonomy - academic, administrative, and financial.
Setting up a National Research Foundation to boost research
The NEP states that investment on research and innovation in India, at only 0.69% of GDP, lags behind several other countries. India’s expenditure on research and development (R&D) in the last few years can be seen in the figure below. Note that the total investment on R&D in India as a proportion of GDP has been stagnant at around 0.7% of GDP. In 2018-19, the total expenditure on R&D in India was Rs 1,23,848 crore. Of this, Rs 72,732 crore (58%) of expenditure was by government, and the remaining (42%) was by private industry.
Figure 2: R&D Expenditure in India (2011-12 to 2018-19)
Sources: S&T Indicators Table 2019-20, Ministry of Science and Technology, March 2020; PRS.
Figure 3: Comparison of R&D expenditure in India with other countries (2017)
Sources: S&T Indicators Table 2019-20, Ministry of Science and Technology, March 2020; PRS.
To boost research, the NEP recommends setting up an independent National Research Foundation (NRF) for funding and facilitating quality research in India. The Foundation will act as a liaison between researchers and relevant branches of government as well as industry. Specialised institutions which currently fund research, such as the Department of Science and Technology, and the Indian Council of Medical Research, will continue to fund independent projects. The Foundation will collaborate with such agencies to avoid duplication.
Digital education
The NEP states that alternative modes of quality education should be developed when in-person education is not possible, as observed during the recent pandemic. Several interventions must be taken to ensure inclusive digital education such as: (i) developing two-way audio and video interfaces for holding online classes, and (ii) use of other channels such as television, radio, mass media in multiple languages to ensure reach of digital content where digital infrastructure is lacking.
In this context, we analyse: (i) the availability of computer and internet across households in India, and (ii) ability to use computer or internet by persons in the age group of 5-14. As of 2017-18, the access to internet and computer was relatively poor in rural areas. Only 4.4% of rural households have access to a computer (excludes smartphones), and nearly 15% have access to internet facility. Amongst urban households, 42% have access to internet.
Table 8: Access to Computer and Internet across households (2017-18)
|
Access to ICT |
Rural |
Urban |
Overall |
|
Households having computer |
4.4% |
23.4% |
10.7% |
|
Households having internet facility |
14.9% |
42.0% |
23.8% |
Note: Computer includes desktop, laptop, notebook, tablet. It does not include smartphone.
Sources: Household Social Consumption on Education (2017-18), Ministry of Statistics and Programme Implementation, July 2020; PRS.
Table 9: Ability to use Computer and Internet across persons in the age group 5-14 (2017-18)
|
Ability to use ICT |
Rural |
Urban |
Overall |
|
Ability to use computer |
5.1% |
21.3% |
9.1% |
|
Ability to use internet |
5.1% |
19.7% |
8.8% |
Note: Ability to use computer means to be able to carry out any of the tasks such as: (i) copying or moving a file/folder, (ii) sending emails, (iii) transferring files between a computer and other devices, among others. Ability to use internet means to be able to use the internet browser for website navigation, using e-mail or social networking applications.
Sources: Household Social Consumption on Education (2017-18), Ministry of Statistics and Programme Implementation, July 2020; PRS.
Public spending on education to be increased to 6% of GDP
The recommendation of increasing public spending on Education to 6% of GDP was first made by the National Policy on Education 1968 and reiterated by the 1986 Policy. NEP 2020 reaffirms the recommendation of increasing public spending on education to 6% of GDP. In 2017-18, the public spending on education (includes spending by centre and states) was budgeted at 4.43% of GDP.
Table 10: Public spending on Education (2013-2018)
|
Year |
Public expenditure (Rs crore) |
% of GDP |
|
2013-14 |
4,30,879 |
3.84% |
|
2014-15 |
5,06,849 |
4.07% |
|
2015-16 |
5,77,793 |
4.20% |
|
2016-17 |
6,64,265 |
4.32% |
|
2017-18 |
7,56,945 |
4.43% |
Sources: 312th Report, Standing Committee on Human Resource Development, March 2020; PRS.
Figure 4: Comparison of public spending on Education in India with other countries as % of GDP (2015)
Sources: Educational Statistics at Glance 2018, MHRD; PRS.
In the figure below, we look at the disparities within states in education spending. In 2020-21, states in India have allocated 15.7% of their budgeted expenditure towards education. States such as Delhi, Rajasthan, and Maharashtra have allocated more than 18% of their expenditure on Education for the year 2020-21. On the other hand, Telangana (7.4%), Andhra Pradesh (12.1%) and Punjab (12.3%) lack in spending on education, as compared to the average of states.
Figure 5: Budgeted allocation on Education (2020-21) by states in India
Note: AP is Andhra Pradesh, UP is Uttar Pradesh, HP is Himachal Pradesh and WB is West Bengal.
Sources: Analysis of various state budget documents; PRS.
For a detailed summary of the National Education Policy, see here.
