Educational finance modelling

Abstract

Education is a key driver for nation s growth and will play a greater role in the current knowledge based global economy. The four major objectives of higher education are: access and equity, relevance, quality and excellence and research1. India has the third largest education system in the world with 700+ universities, 35,000 +colleges and 25 million+ students enrolled every year. However, it is likely that India will struggle to supply the demand of skilled work force required by 2022. It is estimated by ASSOCHAM that 8% year on year (Y-on-Y) GDP growth can generate 240 million jobs in key sectors by 20222. The only sustainable way of social upliftment of a country, is by the education of its citizens. Majority of the upcoming educational institutions will likely belong to the private sector and thus lead to continuous increase in cost of education. Average education funding requirement will increase with increase in cost of education and the gap between organized funding and requirement will widen. Current education funding requirement of India is around USD 9 billion a year and the organized funding through government scholarships, bank loans and private scholarships adds up to around USD 3.5 billion a year3. According to The World Bank estimates, 2007, India spent only 0.76% of its GDP on research and development. This number is very small when compared to other countries (1.40%-China, 2.7%-US and 1.8%-UK). The best policy would align the social and private benefits of attending college, and would find a way to relieve the liquidity and credit constraints that families face.