BUDGET SERIES- Sector Focus on Higher Education

7th August, 2024

By Tara Panjwani, UKIBC

Following national elections in June this year, India’s Finance Minister Nirmala Sitharaman presented the coalition government’s highly anticipated first Union budget for 2024-25 which has set a hopeful tone and been met with cautious optimism by experts.

What is clear to see from the outset is that this budget is significantly redistributive and diversified with priority being given to stimulating inclusive economic growth through ramped up allocations for rural development, agriculture, small businesses, skilling and jobs.

In the education sector, there have been several positive developments.

The national education budget, covering both school and higher education, has received one of the largest allocations in many years with total funding of around £12 billion, an increase of around £1 billion over last year and constituting 2.5% of the total year’s national spending allocation.

For HE specifically, the budget increased by 8pct over last year’s budget estimates but was 16% lower than the revised spending estimates for 2023-24.

With the aim of continuing to build world class institutions, the budget announced increased funds to select higher education institutions including a 28pct increase in the grant for central universities as well as a push for setting up new IITs through public-private partnerships.

At the same time a cut of over 50 per cent has been made to the University Grants Commission (UGC), the domestic higher education regulator, to realign funding and disburse it directly to the central universities. This reduction may also indicate the government’s intention to finally establishing the Higher Education Commission of India (HECI), a single regulator for all HE institutions in the country, the plan for which was first announced back in 2018.

Given India’s gross expenditure on R&D is currently less than the global average, it was encouraging to see the increased allocation of 25% for academic and research collaborations in science, engineering and technical education as well as the announcement of the operationalisation of the Anusandhan National Research Fund (NRF) to the tune of £10billion. Both initiatives underscore the government’s commitment to enhancing the country’s R&D ecosystem and will provide a much-needed boost to unlocking more research and innovation partnerships between UK and Indian universities and corporates.

The increase in financial provision for teacher training (from £4.5million to £10million) as well as for digital learning initiatives will go a long way in improving the quality of education delivered in India, building capacity as well as promoting more Transnational Education (TNE) with international universities.

One of the main highlights of this Budget is a renewed emphasis on employability and job creation to addressing the crippling skills gap in the country.

To meet the demands of a growing workforce, the Indian economy needs to create nearly 8 billion jobs annually in the non-farm sector until 2030. However, only 4pct of its young workforce aged 15-29 is formally skilled, underscoring an urgent need for future-ready skill development programmes.

Accordingly, the Finance Minister introduced a new package of 5 key initiatives aiming to facilitate employment, skilling and other opportunities for 41 million youth over a 5-year period with a total fiscal allocation of £18.7 billion pounds.

This multifaceted scheme includes incentives for the private sector in creating additional jobs in the manufacturing and service sectors, paid internship opportunities in 500 top companies to 10 million youth over 5 years, encouraging young people to join the formal economy, efforts to facilitate the participation of young women in the workforce (which currently stands at only 25 per cent), and upgrading the 1000 Industrial Training Institutes across the country to align their course content with industry needs.

The Budget has also promised a monetary boost of 50% for the National Apprenticeship Training Scheme which together with the abovementioned internship plan will allow students to gain valuable industry skills and will promote greater interface opportunities between industry and higher education institutions. These two initiatives are of particular interest to UK universities as they represent an excellent career pathway for their Indian graduates and potentially help secure jobs in the UK.

Other welcome steps include the abolition of the Equalisation Levy of 2% (which impacted online education-providing firms and digital companies) as well as a new education loan scheme which aims to help young people from marginalised sections of society to enrol in, HE in domestic institutions.

In summary, Budget 2024-25 with its focus on pivotal areas such as skill development, employment and education, is a promising step in the journey towards making India a knowledge-driven economy.

We look forward to an impactful outcome through effective execution, monitoring, financial management and regular coordination between the various ministries.

For more details write to Tara Panjwani, Higher Education

Tara.panjwani@ukibc.com