Money for Nothing
By Yamini Aiyar and Anit Mukherjee, 21 Jan 2010

Elementary education policy in India is, as economist Lant Pritchett characterizes it, in a ‘Big Stuck’. Stuck because despite money being poured in to the system – funding for elementary education has had a five-fold increase since the launch of the Sarva Shiksha Abhiyaan (SSA) in 2001 - outcomes remain poor. As the Annual Survey of Education Report reminds us year after year, about half of India’s children in standard five cannot read a standard two level text book and far fewer can do basic mathematics. Getting out of this morass requires a system overhaul that creates a performance based, accountable delivery system.

How can this be achieved? A crucial step towards creating an accountable system is to ensure accountability in financing. With the imminent implementation of the Right to Education Act (RTE) which is set to significantly expand education finance –the RTE will cost the exchequer Rs. 43600 crores - ensuring accountability is critical.

First principles of public accountability require that expenditures must adequately reflect citizens’ interests and priorities. When it comes to basic services, citizens’ interests are best captured locally at the point where services are delivered. This means greater local autonomy and discretion, particularly in resource allocation.

The current system of education financing allows little room for autonomy. Schools have no discretion over funds that arrive tied to rigid norms determined by the center and states. These norms also determine the quantum of funds schools receive resulting in a mismatch between school needs and funds received. For example, a school with 1000 students receives just about two and a half times more money than a school that has 100 students. And if a school wants to spend more on teacher materials than painting walls – the norms simply won’t allow it.

Autonomy apart, accountability also requires transparency and predictability in fund flows. After all, you need to know how much money is due and when it willarrive in order to make plans and hold the system to account. This is one of SSA’s greatest weaknesses. Between October and December 2009, an army of 25,000 Indian citizens joined the Annual Survey of Education Report to ask over 12,000 schools how much money arrived, when it arrived and how much was spent. The survey found that by October – half way through the financial year - more than 50 percent of the schools surveyed reported not receiving SSA funds. These findings are also reflected in macro level data- 63 percent of SSA funds in 2008-09 were spent in the second half of the financial year.

Delays are due to many reasons – delays in releases from the state governments, delays in process as the funds travel through the different administrative layers. And often they are a result of administrative lethargy. Here’s an interesting story - in some schools in Sehore, Madhya Pradesh, funds had not reached till mid-November. The reason, the State government was converting to an electronic system so that funds could be transferred at the click of a button and delays avoided. A noble cause that took an inadvertent amount of time to implement because local banks had capacity for 4 digit electronic transfers and this particular transfer required 10 digits. No interim measures were put in place to ensure money reached while these kinks were being sorted out and the schools suffered.

Whatever the cause, delays proliferate because of the lack of transparency in the system. ASER data indicates that in many schools even the head master is not aware of the different grant components, when they should arrive and what they ought to be spent on. In the absence of information, schools, parents and children are disempowered as they lack the tools to make plans and demand accountability for delayed and unpredictable fund flows.

Resolving these problems and ensuring accountability in educational finance requires systemic reforms in the way educational delivery systems are designed. Crucially, the system will need to ensure genuine local autonomy. One way of doing this is to move away from ‘tied’, norm based funding to the provision of block grants calculated on the basis of the number of children enrolled and attending schools. Local autonomy must be accompanied with a process for collection and dissemination of real time information on fund flows and expenditures. This will ensure greater transparency and enable citizens to monitor processes and demand accountability.

Education policy in India today is at a crossroads. There is a clear consensus that improved education holds the key to India’s future and the passage of the RTE stands testimony to this. Now as bureaucrats take to their drawing boards to develop rules and guidelines for the implementation of the RTE, the focus must shift to getting the design right. Only then can we begin to unstuck the ‘Big Stuck’.

(Yamini Aiyar is with Accountability Initiative, Centre for Policy Research. Anit Mukherjee is with National Institute of Public Finance Policy. Both institutes work in partnership with ASER to strengthen accountability in education finance through a project called PAISA)