An autonomous research institute under the Ministry of Finance


Intergovernmental Fiscal transfers and Expenditure on Education in India: State level analysis, 2005 to 2020

Publication date

Mar, 2022


NIPFP Working Paper No. 377


Sukanya Bose, Noopur, A. Sri Hari Nayudu


There is large heterogeneity across Indian states in the public provisioning of education. The intergovernmental transfers with a mandate for equalisation have a role to play so that states can ensure these essential public goods. This study analyses the trends and patterns in intergovernmental transfers for education - school education and higher education, across three finance commission periods (2005-2020) which saw a number of important policy-induced changes in the overall fiscal framework. The 14th Finance Commission's (2015-2020) proposal of higher share of tax devolution to the states and a move towards general purpose transfers has been hailed as a major shift, which has allowed the states larger fiscal space. On the other hand, the central grants on education, particularly school education, have stagnated. Has it translated to an upward trend in spending on education in the 14th Finance Commission period vis-à-vis the earlier decade? Over time, have the public expenditure levels on school and higher education converged across states, which is the objective of equalisation? The answers to both the questions are negative. The study concludes with some policy recommendations, including restoration of financial concurrency through larger allocations on central schemes on education, and a special focus on the states at the bottom.
Key Words: Intergovernmental Fiscal Transfers, Grants, Finance Commission, Centrally Sponsored Schemes, SSA, Mid-day Meal, Education Expenditure
JEL: H52 H71 H75 H77 I21 I22 I25
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