Budget 2019: Educational hopes to boost livelihood

The education sector, in general, is witnessing inflation rate of about 10-12%. - NV Subramanian, Founder and CEO, Payed

NV Subramanian, Founder and CEO, Payed

By NV Subramanian

Whatever may happen, 5th July budget promises to be a different one. Ms. Sitharaman has the onerous task balancing “the best of times, the worst of times” for vast Indian middle class, which seem to be genuinely challenged over the past few years.

Many households are struggling with increasing expenses and flat/declining income growth. According to reports, unemployment has hit a four-decade high of 6.1 per cent in the country. Particularly,  23% of educated urban youth aged between 15 and 29 years are unemployed, hitting the families and aspirations hard. Recently, the International Labour Organisation (ILO) reported that India’s GDP grew four times in the last two decades while real wages only doubled. 

The only fair way to increase income is by increasing productivity. And a majority of Indians understand very well (I’d argue way better than governments!) that productivity & income growth is directly related to: access to quality education (skill or vacation oriented) and arbitrage opportunity (trade & entrepreneurship). 

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Unfortunately, skilling & vocation training provided by Govt. has been questionable: be it state schooling or not-so-successful experiments with Skill India movement (we’re not even hearing much about it nowadays). The only alternative is private education, which is expensive. From primary to secondary to higher education, parents are increasingly finding it difficult to meet the demands of fees and other costs associated with Private education. The education sector, in general, is witnessing inflation rate of about 10-12%, multiple of inflation! The cost of providing education in private institutions in 2014 was about 11 times of that in government schools (NSSO). For higher education, the numbers stood at about three times.

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Moreover, Education fees need to be paid upfront (and not monthly) be it quarterly, semester wise or annually, which affects parents’ cash flow & gets in the way of their savings. To make matters worse, India’s education loan market has shrunk 25% in the past four years. Financing solutions are expensive, cumbersome. Banks typically favour higher value loans and avoid segment of loans below INR 4-lakh (without collateral). The need to enrol in new-age courses leaves students and their parents with little choice: they either pay education fees from their hard-earned savings or opt for loans at high rates of interest.

As an entrepreneur and more so as a parent, here is my wish list of steps from Government in budget 2019 that could help Indian parents & children in boosting their incomes & livelihood: 

  1. Ask private educational institutes to collect fees monthly: Private education could become a lot more affordable (e.g. Rs. 5,000 / month instead of Rs. 60,000 / year) and thereby accessible for parents and students. Market intermediaries and service providers could step in to facilitate seamless execution of this process across cities in India. Our company, Payed, facilitates this, and there could be other players too. 
  2. Increase tax savings on education spends: The IT Section 80C could be amended to allow Parents to claim tax exemption up to spend of INR 1 lakh on their child’s education, including vocational studies, so long as the fees is given to a registered educational entity. Currently, u/s 80C, the taxpayer only gets overall exemption of INR 1.5 lakh, which also includes an exemption for housing, insurance, medical expense and education fees. 
  3. Make interest payment on all education financing tax deductible. Currently, under section 80E, parents and students can claim tax benefits on interest expenses on education loan only for college or vocational education and not for school or coaching/ entrance examination preparation etc. Section 80E should cover school & test preparation as well, so that parents can invest in their children in a holistic manner.
  4. Experiment with School vouchers under DBT: Government could grant a nominal sum (INR 5,000 - 10,000 / year) to select middle-class Indians as School vouchers, which could be redeemed against Education fees / spend. Apart from aiding lives, School vouchers could enable school choice better, and also help funds flow to those Schools, Colleges that are seen by parents & students as providing better outcomes. DBT has ensured benefits flowing directly to intended citizens, school vouchers can take that further.

I am a firm believer in India’s potential, the resourcefulness of Indians and good intent of our government. I look forward to a budget that invests in Indians’ productivity increase through some of these steps. 

(The author is the Founder and CEO of Payed)

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