Institute for Social and Economic Change
Working Paper: 506
Is Public Education Expenditure Pro-Cyclical in India?
This paper examines the cyclicality of public education expenditure of Indian states using recent data and advanced estimation techniques. The empirical results suggest that public education expenditure is pro-cyclical with respect to states’ GSDP. Expenditure on higher levels of education shows a relatively higher degree of pro-cyclicality than lower levels of education. Economic downturns seem to have hampered public investment on education and more specifically public investment on higher levels of education across Indian states, as pro-cyclicality of education expenditure is symmetrical. On the other hand, the fiscal transfers from the sUnion government are not enabling the state governments to protect the expenditure levels of the education sector during economic downturns. Hence, there is a need for incorporating relevant instruments in the intergovernmental transfer system that enables the states to provide minimum levels of public services such as education and healthcare.