An autonomous research institute under the Ministry of Finance


Centre-State Spending on Elementary Education: Is it Complementary or Substitutionary?

Publication date

Sep, 2020


NIPFP Working Paper No. 320


Sukanya Bose, Manasi Bera and Priyanta Ghosh


The objective of this paper is to empirically address the question of Centre-State relation in financing elementary education.  The idea of financial concurrency in financing education and the experience of various centrally sponsored schemes provides the historical context for the analysis. The empirical question focuses on the impact of SSA’s central grants on States’ spending behaviour. Is the relationship complementary or substitutionary? The paper also explores the impact of the 13th Finance Commission’s grants for elementary education.  The results indicate that the central grants for SSA (and the 13th FC grants) has a complementary impact on State’s spending, though the incremental effect varies across states. The results are particularly pertinent for the 16 focus States, which have large additional financial requirements. It is important to restore financial concurrency between the Centre and the States, for universalization of elementary education of an equitable quality, a task that is far from over. We also argue for a specific purpose grant by the 15th Finance Commission based on equalisation principle.

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