Executive discretion in regulating private schools in India: Evidence from Delhi

by Bhuvana Anand, Jayana Bedi, Prashant Narang, Ritika Shah and Tarini Sudhakar.

Students in India are increasingly switching to private schools. For 2017, U-DISE data shows that nearly 40% of students are enrolled in private schools. However, the growth in private schools has been sluggish; between 2012 and 2015, annual growth for private schools hovered around 3% and in 2016, dropped to 1.71% (U-DISE 2016-17).

State education departments play a critical role in the governance of private schools. They write and apply rules, recognise schools, conduct inspections, impose penalties, and resolve disputes. Despite this, there is little to no evidence on how they carry out these functions and their impact on the growth and quality of these schools.

We studied three regulatory touchpoints between the state and private schools -- licensing, inspections and fee regulation -- for Delhi, in a recent paper: Challenges of executive discretion in the regulation of private schools, by Anand et. al., in Anatomy of K-12 governance in India, Centre for Civil Society, 2019.

We used government administrative data, field observations and analysis of the regulatory framework. On close examination, we found instances of excesses in executive discretion. While necessary to an extent, the misuse of discretion can negatively affect public welfare: in this case, school, students and parents.
Discretion in state education departments vis-a-vis private schools appeared in the following forms:

1. Overreach in the making of rules;
2. Ad-hoc and arbitrary rule-making;
3. Poor procedural fidelity and administrative opacity; and
4. Opaque, inconsistent and subjective exercise of punitive measures.

For example, consider the function of inspection. The Private School Branch of the Directorate of Education is supposed to inspect all private schools every year but only 60 schools are inspected in a year. As we reviewed the approach to the few inspections that do happen, we found that the method does not fulfil the spirit of the Delhi School Education Act and Rules (DSEAR) 1973. Rule 192 states that every inspection of a private school should be “as objective as possible”. The inspection proforma, however, is populated with measures and constructs that cannot be measured objectively. One such question is: did the teacher ask “thought-provoking” and “well-distributed” questions? Not surprisingly, the interpretation of these terms and the recorded answers vary across inspectors and schools (Figure 1). Besides, it is not clear how constructs such as “proper blackboard summary” link to the quality of education.

These inspections are also not typically followed by punitive action. DSEAR 1973 allows the Director to take any action against a non-compliant school but no school has been de-recognised in the last five years in Delhi. While officials cited the fear of student displacement, schools pointed out that they often bribe officials.

What drives this subjective/opaque application of punitive measures? What are the standards of quality? Do the standards adequately measure what they intend to do? What is the consequence of this on schools and quality of education? Where does a school go for appeal? Our research raises questions on the functioning of the state department—pertinent to any debate on education reform. We argue that there is a need for administrative reform and that the coercive power of government on private action ought to be within the constraints of law, guided discretion and due process.


The authors are researchers at the Centre from Civil Society. This paper was presented at the APU-NIPFP workshop Strengthening the Republic #1, January 11, 2020.

The changing role of women in India

The three modernisations

The trajectory of a country is about three modernisations: social, political and economic. Social modernisation is about establishing freedom and rights of individuals. Political modernisation is about achieving democracy, where there is rule of law, where State power is dispersed and restricted, where elections generate contestability. Economic modernisation is about achieving a high growth modern market economy, about a government that gets away from expropriation and central planning to a government that is focused on solving market failures.

All three modernisations interact in complex ways and fuel each other. As an example, Milton Friedman's `Capitalism and Freedom' hypothesis is the idea that political modernisation fuels economic modernisation and vice versa. This is a well established idea in the discourse. I find it also interesting to think about the other two legs of the stool: the interlinkages between social modernisation and the other two kinds of modernisation.

The role of women

When we think of social modernisation and economic modernisation, the big thing that leaps out is the role of women. A society that does not respect women is under-utilising half its labour force. We would expect to see a causal impact of greater equality of women upon growth.

We in India are sometimes complacent about the role of women in India. India is famous for having women in leadership roles. In a dinner meeting by Larry Summers, I once said that India was world #1 on one measure of the role of women: the fraction of the top 100 financial firms that are headed by women. I once met Andre Beteille, and asked him: When compared with 1947, in what aspect have things in India worked out much different from what you expected. He said: The role of women in the elite. He said that for upper class women in India today, it's better than even Japan, which is otherwise a very advanced country. The daughters of the elite in India have no glass ceiling, which is better than what we see in most places.

On a population scale, however, things are vastly worse. Paramita Ghosh reports, in the Hindustan Times, on a crime victimisation survey of women with scary results. The India Today survey (link, link) shows us that 79.3% of men believe that marital rape is okay. We don't know how many men in India act out on this belief, but the report Why do some men use violence against women and how can we prevent it? by the United Nations, shows us scary facts from some Asian countries that have men who think similarly to what the Indian data is showing. The Supreme Court ruling of yesterday is a reminder of the distance that we have to go on achieving social modernisation.

Things are changing dramatically with the young

With human capital measures like literacy or graduating high school, a person tends to achieve them when young. If a person has not become literate or graduated high school by age 20, things are unlikely to change later on. Hence, the analysis of the cross section in the population is tantamount to looking at the history: what we see for (say) 50 year olds today is a description of what things were like, 30 years ago, for 20-year olds. Age-specific rates are like rings of a tree.

Literacy of the cohort aged 22.5
(Time-series reconstructed from age-specific rates visible in the cross section)

The graph above shows the literacy of the cohort entering the labour force, which I approximate as being the cohort at age 22.5. The blue vertical line stands for today. This is constructed using the cross-section visible in March 2013 from CMIE Consumer Pyramids, a quarterly panel dataset with 150,000 households covering 700,000 individuals. With children, high literacy rates are found early on, and this yields projections for literacy of the age 22.5 cohort in the future.

We see that overall literacy of the cohort entering the workforce has gone up from roughly 70% in 1990, when India began opening the economy, to roughly 90% today and will go up to 100% in the coming 15 years. In addition, there was a big gender gap, which has been significantly reduced and will fully go away.

Let's turn to high school graduation.

High school graduates in the cohort aged 22.5
(Time-series reconstructed from age-specific rates in the cross section)

It seems shocking to think that in 1990, roughly 7% of the cohort starting off into the labour force, at age 22.5, had passed 12th standard. This has gone up dramatically to 20%. Sharp growth is visible into the future when today's 15 year olds become age 22.5, and there is no gender gap with today's 15 year olds.

The third thing that I want to show from household survey data is the ownership of mobile phones.

Age-specific rates of mobile phone ownership

All of us have been hearing about miraculous growth of mobile phones in India for a while, and have become a bit inured to the story. While a lot has happened, however, a lot remains to be done. The black line shows that with males, roughly 75% of the young and 80% of the old have mobile phones. The work is progress lies in taking this up to 100% for everyone. What's striking is the women. The upper red line, for March 2013, shows that 40% of girls have mobile phones, and this decays to 20% at age 45. On a related note, Avjit Ghosh, writing in the Times of India, talks about a paper by Yvonne MacPherson and Sara Chamberlain which finds that only 9% of adult women in Bihar have ever sent an SMS. There is a high rate of change with mobile telephony, in even the short timespan between the latest data (March 2013) and the first data from CMIE (June 2010) which is the lower red line.

Speculation

I feel that in the early decades after independence, we had a progressive elite, which was able to bring up daughters well and we made amazing strides at the top. But social modernisation took place only in the elite. For the bulk of the population, attitudes and indoctrination and levels of violence remained neanderthal.

M. N. Srinivas has emphasised the extent to which the rest of society aspires to catch up with the lifestyle and the values of the elite. In the early years, there was little catch up on the treatment of women: the elite and the proletariat coexisted like oil and water. Perhaps budget constraints came in the way of translating aspirations. Maybe poor households shortchanged daughters on nutrition and education and mobile phones and such like, thus encouraging subservience in daughters. In my opinion, the economic growth of the last 20 years is creating a new wave of households within which daughters are growing up differently. Daughters who have high school education and a mobile phone are going to engage with the world differently. As an example, they are less likely to accept sexual harassment and sexual assault. We may now be at the early stages of something very big.

Economic modernisation has created this phase of social modernisation. The rise of capable women who will not be pushed around will, in turn, fuel economic growth because we are then getting a superior labour force. There is an enormous distance to cover. In my opinion, it will be a story spread over two generations (50 years) starting from 2000, through which we will endup with something satisfactory on the role of women. Economic growth will create opportunities for women and for sensibly bringing up daughters, and the rise of capable women will fuel economic growth.

Insourcing vs. outsourcing government functions: A setback for public sector production of elementary education

A recurrent theme in the field of public administration is the appropriate separation, between things done within government qua government, versus the things that are best contracted out.

Example: A fascinating question in finance is the supervisory role of exchanges. Do we want exchanges to be rule makers and the front line of supervision, or do we want them to be mere profit-maximising IT companies who run trading systems, with all regulatory/supervisory functions being performed by SEBI? Is the exchange a public utility or a mere business?

In the field of education, the question is: Should government be the producer of education services (building schools, worrying about drinking water at the school, hiring teachers etc.) or should the actual production be done by private schools, with government giving money and decision making power to parents (through vouchers) and working on the public goods of education (measuring what children know, establishing curriculum, releasing information about each school into the public domain so as to assist the decision making of parents).

Our thinking on these boundaries is critically related to our views about the capabilities of government and the complexity of the problem.

How should we think about complexity? Problems that are hard, in the field of public administration, have three characteristics: large number of transactions, high discretion in the hands of the front-line civil servant, high stakes. (On the first two, see Pritchett & Woolcock, 2004). Under these conditions, production in government is hard.

How should we think about capability of government? When the government is fluently able to reorganise agencies, shift functions from one government agency to another, achieve cooperation between multiple government agencies, hire and fire civil servants, and pay market wages, then the government is going to be a capable one. A government that is weak on all these attributes is a low-capacity one.

Our views about the appropriate separation between in-sourcing and outsourcing would thus vary by problem and locale. For some problems, production in government is easy, and we'd be less emphatic that contracting-out should be done. E.g. monetary policy is easy, and there is no big problem with keeping it inside government. In some places, the government has high capacity - e.g. public schools work relatively well in Sweden. In other places, when the government has low capacity, we'd be more keen to contract things out.

Turning to the Indian setting, there are two huge problems that hold back the possibility of building high quality public schools. First, civil servant wages are set to 2x to 3x higher levels, when compared with market prices, thus inflating the cost of government schools. If you took the same money and gave it to parents, who chose a private school on their own, the private school would be recruiting much better teachers. Second, civil servants can't easily be fired, thus reducing the incentives of teachers to teach. Teaching is a transaction-intensive discretionary public service. When the front-line provider has no incentive to work, the quality of teaching will collapse, as has been seen with schools in India.

Some states in India had, appropriately, tried to fight these problems by going to the basics: by bringing in non-tenured staff at lower wages. By recruiting these "para-teachers", we improve production of education in the public sector. These two issues are of essence. By removing tenure, we increase the incentive of teachers to teach. By bringing wages in line with market conditions, we bring public sector production closer to the cost efficiency that can be obtained by the private sector.

This line of attack may now be torpedoed by the courts. The Gujarat High Court sees to have ordered the government to pay para-teachers full wages and give them tenure.

If this goes through, and if this creates a precedent for the rest of India, then this pretty much closes off these avenues for strengthening public sector production. It would, then, emphasise vouchers as the only way to go.

There is one important slip between cup and lip. The Right to Education (RTE) Act, one of the less impressive legislative achievements of the Indian Parliament, asks state governments to write rules about salaries paid by private schools. RTE was an attack by the public sector education providers against the private sector: so they wanted to kill off the ability of the private sector to pay market wages. Some states have written rules under the RTE which force private schools to pay civil servant wages. For these states, the gains from private production of education services will be smaller. Other states have been silent on this, and there is then a possibility of reaping the full superiority of private production.

I am grateful to Jishnu Das, Lant Pritchett, Parth Shah and Jeff Hammer for useful discussions on this.

Path-breaking rules under the Right to Education Act, in Gujarat

by Parth Shah.

One major initiative of the Indian government, in the field of education, was the Right to Education Act of 2009. This act has major problems, as has been argued by numerous observers and experts in the field. This Act focuses on the interests of incumbent public sector education providers, instead of focusing on the interests of children and parents. It is focused on inputs into the educational process, regardless of the outcomes which are coming out. It penalises private schools that have weaknesses on inputs, regardless of the fact that these schools often induce better learning outcomes when compared with public schools.

At the same time, the translation of the Act into benign or malign outcomes critically hinges on the Rules under the Act, which are notified by State governments. Thus, now that Parliament has chosen to enact the RTE Act, the critical frontier that matters is how state governments choose.

In recent weeks, Gujarat notified its Rules for the implementation of the Right to Education Act (RTE) 2009. It has introduced some of the most innovative ideas for recognition of existing private unaided schools. The Committee in charge of drafting the Rules in Gujarat, that was headed by the former Chief Secretary Mr.Sudhir Mankad, has broken new ground in understanding the policy issues faced in education in India today.

Instead of focusing only on input requirements specified in the Act like classroom size, playground, and teacher-student ratio, the Gujarat RTE Rules put greater emphasis on learning outcomes of students in the recognition norms. Appendix 1 of the Gujarat Rules is the one which has a path breaking formulation for recognition of a school: this will be a weighted average of four measures:

Student learning outcomes (absolute levels): weight 30%

Using standardised tests, student learning levels focussing on learning (not just rote) will be measured through an independent assessment.

Student learning outcomes (improvement compared to the school's past performance): weight 40%

This component is introduced to ensure that schools do not show a better result in (1) simply by not admitting weak students. The effect of school performance looking good simply because of students coming from well-to-do backgrounds is also automatically addressed by this measure. Only in the first year, this measure will not be available and the weightage should be distributed among the other parameters.

Inputs (including facilities, teacher qualifications): weight 15%

Student non-academic outcomes (co-curricular and sports, personality and values) and parent feedback: weight 15%

Student outcomes in non-academic areas as well as feedback from a random sample of parents should be used to determine this parameter. Standardised survey tools giving weightage to cultural activities, sports, art should be developed. The parent feedback should cover a random sample of at least 20 parents across classes and be compiled.

This is one of the first times in India's history that public policy has focused on children and parents, instead of focusing on the public sector producers of education services.

Furthermore, the Gujarat RTE Rules have taken a more nuanced and flexible approach in other areas too. For instance, both class size and teacher-student ratio have not been defined in absolute terms, but in relative terms. The required classroom size is 300 sq feet but in case classrooms are smaller, then instead of re-building them, the Rules allow for a way to accommodate that with a different teacher-student ratio. The formula is: Teacher Student ratio = (Area of the classroom in sq feet-60)/8. This approach not only allows smaller classrooms to exist but also gives schools a more efficient way to manage physical infrastructure.

If a private school is unable to meet recognition norms, then the RTE Act de-recognises the school and forces it to close down. This sudden forced closure would create serious problems for the students and parents who would have to find a new school in the neighbourhood. The Gujarat Rules allow for the State to takeover the school, or transfer management to a third party, and create a genuine possibility for the school to continue and meet the norms. This, once again, shows the focus of the Gujarat Rules upon the interests of students and parents.

This approach is significantly better to that of the other states where recognition norms are based solely on input requirements and that are also rigid (like playground, classroom size and teacher-student ratio). The Gujarat approach recognises the substantial contribution made by budget private schools in urban and semi-urban areas where land and buildings are very expensive. Actually many government schools themselves would not be able to meet the rigid input norms that RTE has mandated.

CNBC Awaaz symposium on India's education crisis

India's education crisis is now high on our consciousness. In response to the recent developments, CNBC Awaaz did a four-hour symposium on national television (in Hindi/English) titled Kala Akshar: The Great Education Crisis. This brings together an interesting and diverse set of voices on the subject.

10:00 - 11:00 AM	1	2	3	4
11:00 - 12:00 PM	5	6	7	8
12:00 - 1:00 PM	9	10	11	12
1:00 - 2:00 PM	13	14	15	16

Education in India: A compact reading kit

With the first release of OECD PISA results for India, and with the release of one more year of Pratham data, there has been an upsurge in interest in education in India. The following set of materials are a useful reading kit to get a grip of the field.

Elementary education

• At the crossroads, in Pragati, 16 February 2012.
• Education in India at the crossroads, 24 January 2012.
• Ila Patnaik in the Indian Express, 20 January 2012.
• ASER 2011 report by Pratham. Article in the Indian Express on this by Rukmini Banerji.
• Accountability in education by Jeff Hammer, 18 January 2012.
• The first PISA results for India: The end of the beginning by Lant Pritchett, 5 January 2012.
• The Right to Education Act: A critique by Parth Shah, 1 April 2010. Also see Raghuram Rajan and Abhijit Banerjee 20 February 2010.
• Getting results on education and health expenditures of government, by Lant Pritchett and Jeff Hammer, 16 July 2009.
• Ila Patnaik on the then draft Right to Education Bill, 13 January 2008.
• The mess in education by me in the Business Standard, 28 February 2006.
• The World Bank's WDR 2004: Making services work for poor people.
• Rethinking elementary education by me in the Business Standard, 1 July 1998.

Higher education

• The THES ranking of the top 400 universities of the world. The only win for India in this list is IIT Bombay (ranked in the 301-350 range).
• The six ingredients for a great university, 5 January 2010. And, read Larry Summers in the New York Times on the key ingredients of the university of the future.
• Andre Beteille on private and public education, 27 August 2008.
• Pratap Bhanu Mehta in the Indian Express, 26 August 2008.
• Don't play Arjun Singh's game by me in the Business Standard, 7 June 2006.

Education in India at the crossroads

The debate

Roughly one decade ago, there was a strong debate in India about how we should tackle the problem of education. There were two views:

Intensification

On one side were those who felt that nothing was fundamentally wrong; all that was needed was more money. So we should just continue building more government schools and hiring more civil servants to act as school teachers, and we'll be fine.

Reform

On the other side were the reformers, who argued that the basic incentives in Indian education were wrong. Putting more money down a dysfunctional system was pointless.

The Intensifiers won this debate. An informal coalition of educationists (i.e. the incumbent education system) and leftists came together, supported by the World Bank, which pushed for mere enlargement of Indian education, without questioning the foundations.

All of us are involved in this story at many levels. At the simplest, we are the customers of the education establishment. We pay income tax and VAT and a few other taxes. On top of this, we pay the 2% education cess. In return for this, we get certain educational services. These influence our kids, and they influence all the young people that we encounter in this young country. Trillions of rupees have been spent, and more than a decade has gone by. It is time to assess the performance of this strategy.

Three blocks of evidence are now visible, which tell us that the Intensifiers were wrong. The old strategy, which was invigorated by a vast rise in spending, was the wrong one.

Evidence #1: OECD PISA results for India

This story is well told in a recent blog post by Lant Pritchett. Bottom line: The first internationally comparable measurement of what children learn has been done. The sample correctly includes urban and rural children; it correctly includes children going to private or public schools; there are no first order mistakes in what was done. It tells us that Indian education policy has failed miserably: the results have come out at the bottom of the world.

Evidence #2: ASER 2011 results

Pratham has been running surveys which measure characteristics of children and schools in rural India (only). Their latest survey results, for 2011 show the following facts.

First, rural kids learn less at public school. Here's a simple example of what the evidence shows. Surveyors ask kids in class III to recognise numbers upto 100. Here are the numbers, for the proportion of kids in class III who cannot recognise numbers upto 100:

In 2008, the failure rate with private schools was roughly 17 per cent. Government schools were much worse at over 30 per cent. A short three years later, conditions had deteriorated sharply in government schools. The failure rate had gone up to 40 per cent. Private schools had also worsened slightly, to a failure rate of 20 per cent. By 2011, a big gap had opened up between the two: private schools are failing to teach 20 per cent of the kids while government schools are failing with a full 40 per cent of their kids.

Parents in India face the choice between sending their children to a government school, which is free and serves a mid-day meal, versus sending them to a private school where they pay fees. Yet, an increasing fraction of parents choose to send their children to a private school, paying tuition fees from their own pockets, while government schools are free. The relationship between a parent and a private school is a transaction between consenting adults. The relationship between a parent and a government school involves all of us, because we are paying for it.

Given the low income of parents in India, their use of private schools is a striking indictment of what the Intensifiers have wrought:

At class II, the fraction of rural children in private school went up from 19 per cent (2007) to 23 per cent (2011). At class VII, this rose more slowly to levels slightly above 20 per cent.

Evidence #3: CMIE household survey

CMIE has data for the year ended March 2011 about the behaviour of 169,492 households, about their expenditure on school/college fees and tuition fees. Here's the picture for the quarter ended September 2011; all values as percent of overall expenditure:

Income class	School/college fees	Private tuition fees
Rich - I	4.79	0.66
Rich - II	3.79	0.51
High Middle Income - I	3.54	0.63
High Middle Income - II	3.12	0.65
High Middle Income - III	2.44	0.68
Middle Income - I	1.93	0.59
Middle Income - II	1.62	0.45
Lower Middle Income - I	1.38	0.49
Lower Middle Income - II	1.05	0.60
Poor - I	0.76	0.58
Poor - II	1.13	0.28
Overall	2.10	0.57

If parents chose to stay within public sector schools, their expenditure on fees would have been zero. The table shows that across all income groups of India, there is movement towards private provision of education, both by paying fees at schools and by paying for private tuition classes. These two elements add up to 2.67 per cent of overall expenses of households. (The CMIE household survey separately measures expenses on books, journals, stationary, additional professional education, education overseas, hobby classes and other education expenses. This helps us gain confidence in the extent to which the two fields in the table above narrowly pin down the feature of interest).

These decisions of well intentioned parents are the strongest indictment of education policy in India. The product being given out by the Intensifiers is such a terrible one, the parents of India are walking away from it even though it is free and the alternative is not and the parents are poor.

Implications

For more than a decade, the Intensifiers have controlled Indian education policy. They have said: Leave education to the education establishment, do nothing radical, just give us more money, we will deliver results. Now we know that they were wrong. They took the money, but failed to deliver the results.

Kapil Sibal has said that his ministry should not be held responsible for the stream of bad news that is coming out. To me, this seems to be dodging accountability. His ministry is responsible for Sarva Shiksha Abhiyaan, for the Right To Education Act, for blocking OECD PISA from being done in India, etc. The bureaucratic consensus of his ministry represents the education establishment.

The key phrase that needs to be emphasised today is accountability. If a contractor took money from you, and failed to deliver on building your house, you would sack him. (You would also take him to court, to recover the money that was paid to him, for services not delivered). In similar fashion, education is too important to be left to the educationists. We need to start over.

What is to be done

• We need to start over in the field of education, with a fresh management team, one that is not a part of the status quo, one that is rooted in the worlds of incentives, public policy and public administration.
• In 2004, we were told that in return for a tax rate increase of 2%, in the form of an education cess, we would obtain improvements in education. We now know that those improvements did not come about. Hence, that tax rate increase should go. (Even if sharp improvements in educational outcomes had been obtained, the education cess was a mistake in terms of basic public finance, and needs to go. Public expenditures on education should simply come out of general tax revenues; there is no need to have a cess.)
• The flow of public money into the status quo needs to go down sharply. There is no reason to put money into something that fails to deliver the goods. First we must prove that a mechanism delivers results, and only after that should we put money into it. This is the common sense that a housewife would apply. She would not spent gigabucks on promises from people who have failed to deliver.
• OECD PISA measurement needs to take place every year at every district. The production of this data is a public good that the government can and should do. It can be fully contracted out to private firms so as to avoid the problems of public sector production. Datasets about student characteristics and school characteristics should be released, covering every district and every year, so as to enable research.
• Civil servant teachers, who have tenured (permanent) have no incentive to teach well, regardless of their qualifications or high income. We can't sack them, but what we need to do on a massive scale is to stop recruiting them. The existing stock can be reallocated to other civil servant functions where staff is in short supply. Through this, it would become possible to whittle away at the accumulated stock over the coming 20 years.

Accountability in education

by Jeff Hammer.

I was shocked by Lant Pritchett's note on the appalling performance of India's best two states on the international PISA assessment. Actually, I was not really shocked; I didn't expect anything else as I've been listening to Lant for years now. By the same token, I agree with Jishnu Das that we really don't know much about what works in education (other than that good teaching makes a difference) and that our bean-counting of inputs into education may be completely wrong headed. From conversations with him (also over years) I surmise that the only thing we really know about what leads to more learning is that it is correlated with how many years children stay in school. What that suggests, though, is that attention be directed towards the choice of parents and students to stay in school.

In my opinion people choose to do things if it is worth it to them. This is a common assumption for economists. While challengeable in some circumstances, does it make any sense to think that people send their children to school if they don't think it's worth it? If it is compulsory: sure. With compulsion, attention of policy makers and carefully watchful observers such as Pratham should be to make sure school is worth the year of children's attendance since people would not be able to decide for themselves. Until we see compulsory schooling enforced, though, years of education remain a family's choice and we have to understand how and why people make that choice.

Unless we think parents are utterly clueless about the value of education and totally incapable of telling if teachers are doing anything or their children are learning anything, the effectiveness of teaching and the amount of knowledge imparted must be a major factor in their decision as to whether school is worth it. Don't get me wrong, I've met dozens of educators and education officials in India who believe parents are, indeed, clueless and such decisions should be out of their hands. But they are the very people who gave us the PISA ratings and are indeed throwbacks to the License Raj where only bureaucrats were assumed to know anything. Further, with the explosion of private schools, even in rural areas, it is laughable to think that there are so many parents who value education so little. They are willing to forego free public education in order to pay for something more worthwhile.

Which brings us to accountability.

What could parents be looking at, that makes them think school is worth it? It must be based on performance: parents don't really see the inputs, they mostly just see their children learn. Or not learn as is the case. So how can they translate their concern for learning into actual learning? They have to be free to pick the educational context that they see is working for them or their neighbors. That's where accountability comes in.

A provider of any good or service is likely to be most accountable when their livelihood depends upon attracting customers. If what they provide is worth it, people will take the service, and the provider can make a living. If not, parents won't pay and teachers won't get paid. As of now, there is no mechanism to allow families to make that choice. There is no such compulsion for teachers to provide a service worth paying for. No doubt there are many teachers (probably most) who are doing the best they can regardless of how they are paid. But with over 24% absenteeism, large numbers of teachers observed to be doing anything but teaching, and many sub-contracting their position to under-qualified replacements at a fraction of government salaries, there is substantial room for improvement.

Further, if we are going to get more students (and, hence, teachers) into classrooms, the dedicated teachers may be the ones who are already on the job. People induced to enter the profession may not be as dedicated and, hence, need some other way to hold them accountable than internally felt professional ethics.

I am an educator (of sorts) but have no opinion about what the bottleneck in children's learning really is. Jishnu says the most successful headmasters all say different things (after good teachers - but then, don't we judge the goodness of teachers by whether their students actually learn? It's an output based judgment, too.) I know little of pedagogical theory. But I know just as little about the inner workings of most complex things I use -- computers and the Internet, water systems, bicycles. I can tell when they work and when they don't, though. Similarly, I know that my sons learned to read and write, become responsible citizens and to develop and exercise critical intellectual capacities (sometimes way too critical for my taste) even though I have no idea how they learned them. I did know that their teachers were in school almost every day and doing things that sounded like teaching to me. I did not have to be an expert on pedagogy to hold the schools completely accountable for my children's education.

I was also fortunate enough to be able to take (or threaten to take) them out of government schools if I thought otherwise. Funding for government schools (in the U.S.) follows enrollment, if not so directly and obviously as for private schools. So my threats about shifting my children out of government school directly mattered to their teachers.

There is no reason why Indian parents can't do the same. They, on average, may not have my education but after talking to hundreds of families in rural areas, tribal villages, urban slums and SC hamlets, I hear no less concern for their children's future than I have for mine and no less ability to tell if a teacher appears to be doing his job. They may be more capable than me since they are more likely to see the teachers themselves -- I needed to ask my children.

In many rich countries, the issue of vouchers to pay for schools is emotionally charged. Historically, free compulsory public education was a result of fights between church and State (even in Japan where `church' doesn't quite fit -- but religion and State does). Children were already attending school in high percentages and there was a fight for their hearts and minds. In rich countries currently, suggestions to provide vouchers instead of State-run schools re-kindle this old antagonism against religious instruction.

India never had this fight nor this evolution of public provision. Our view of schooling here in India was imposed based on the final result of universal free education seen in rich countries without the history from which that final result evolved.

India needn't go through the phase of fighting over who gets to teach students who are already highly motivated to learn and have seen learning take place. If India wants to see all children educated, she can certainly pay for the cost of education (in fact, the job can be done for much less per student is presently spent) so that families don't have to. But the government doesn't have to provide it directly (though government schools should be free to compete for this money if it can). The fight is the State against society (families), not against the church.

What the State can do is make as much information known to parents as possible. What should children know after how many years of school? How do you know if your child is keeping up? How do you know what you're paying for is worth it? As of now, this information is certainly not given to parents. Maybe State run schools don't want parents to know (and, unfortunately, most Indian parents will not know about PISA). And as of now, there is nothing parents (particularly poor parents) can do about it anyway.

The first PISA results for India: The end of the beginning

by Lant Pritchett.

     Now this is not the end. It is not even the beginning
of the end. But it is, perhaps, the end of the beginning.
Winston Churchill, November 1942

The PISA 2009+ results are the end of the beginning. For the last decade there has been a debate. Some argued the levels of learning inside Indian elementary schools (primary and upper primary) are a national scandal and a threat to the future of India's society, polity, and economy. Others appeared to believe that the main, if not only, problem with Indian schools was that not enough children attend them and that with more money and more of the same, all would be well. The last five years saw a relentless accumulation of evidence about the crisis of learning. The establishment has tried to deny, deflect, and dismiss the evidence on learning. Eventually the Government of India agreed to participate in the PISA (Programme for International Student Assessment) - but only for two states, Tamil Nadu and Himachal Pradesh - and both sides agreed PISA was the litmus test. The PISA 2009+ results, which are both official and are beyond gain-saying are unspeakably bad. They confirm the worst of what anyone has been saying about the levels of learning in India elementary education.

• In reading of the 74 regions participating in PISA 2009 or 2009+ these two states beat out only Kyrgyzstan.
• In mathematics of the 74 regions participating the two states finished again, second and third to last, again beating only Kyrgyzstan.
• In science the results were even worse, Himachal Pradesh came in dead last, behind Kyrgyzstan, while Tamil Nadu inched ahead to finish 72^nd of 74.

But just coming in last (if we can dismiss as a relevant comparator for India a tiny Central Asian state) does not convey the enormity of how bad these results were, as not only was India last, it was far, far, behind its aspirations, both at the bottom and at the top levels of performance.

PISA expresses the levels of performance in two ways, an overall index number and the fraction of students achieving various "levels" of achievement. The PISA index numbers for each subject are scaled so that the typical OECD student is at 500 and the standard deviation across OECD students is 100. The testing of thousands of students allows the results to present not only the average but also the worst (5^th percentile) and best (95^th percentile) students do in each country/region. PISA also classifies student performance into "levels" that represent different degrees of mastery of the material.

Table 1 compares India's performance to three groups of countries. The economic superstars have successfully completed the transition from poor to rich economies in just two generations - Singapore, Hong Kong, Korea (China's only results are just for the city of Shanghai, which are the highest scores of any region tested, but this is too a typical to really be comparable) and India aspires to their sustained success economically. The current super powers are represented by the USA and the OECD average reflects India's aspirations as a superpower. The rising powers are represented by the BRIC countries of Russia and Brazil which reflect the rise of the emerging markets.

Compared to the economic superstars India is almost unfathomably far behind. The TN/HP average 15 year old is over 200 points behind. If a typical grade gain is 40 points a year Indian eighth graders are at the level of Korea third graders in their mathematics mastery. In fact the average TN/HP child is 40 to 50 points behind the worst students in the economic superstars. Equally worrisome is that the best performers in TN/HP - the top 5 percent who India will need in science and technology to complete globally - were almost 100 points behind the average child in Singapore and 83 points behind the average Korean - and a staggering 250 points behind the best in the best.

As the current superpowers are behind the East Asian economic superstars in learning performance the distance to India is not quite as far, but still the average TN/HP child is right at the level of the worst OECD or American students (only 1.5 or 7.5 points ahead). Indians often deride America's schools but the average child placed in an American school would be among the weakest students. Indians might have believed, with President Obama, that American schools were under threat from India but the best TN/HP students are 24 points behind the average American 15 year old.

Even among other "developing" nations that make up the BRICs India lags - from Russia by almost as much as the USA and only for Brazil, which like the rest of Latin America is infamous for lagging education performance does India even come close - and then not even that close.

To put these results in perspective, in the USA there has been huge and continuous concern that has caused seismic shifts in the discourse about education driven, in part, by the fact that the USA is lagging the economic superstars like Korea. But the average US 15 year old is 59 points behind Koreans. TN/HP students are 41.5 points behind Brazil, and twice as far behind Russia (123.5 points) as the US is Korea, and almost four times further behind Singapore (217.5 vs 59) that the US is behind Korea. Yet so far this disastrous performance has yet to occasion a ripple in the education establishment.

Table 1: Comparing Indian (Tamil Nadu and Himachal Pradesh) students mastery of mathematics to economic superstars, current superpowers, and rising superpowers
Country/Region	5th	mean	95th	HP+TN average to comparator average	HP+TN average to comparator 5th percentile	HP+TN best (95th) to comparator's average	HP+TN best (95th) to comparator's 95th
				Points TN/HP is behind (-)/ahead(+)
Economic Superstars
Singapore	383	562	725	-217.5	-38.5	-99	-262
Hong Kong	390	555	703	-210.5	-45.5	-92	-240
Korea	397	546	689	-201.5	-52.5	-83	-226
Current Superpower
OECD avg.	343	496	643	-151.5	1.5	-33	-180
USA	337	487	637	-142.5	7.5	-24	-174
Rising Superpowers
Russia	329	468	609	-123.5	15.5	-5	-146
Brazil	261	386	531	-41.5	83.5	77	-68
Indian States
Tamil Nadu	241	351	468
Himachal Pradesh	223	338	458
Average of TN and HP	232	344.5	463
Source: PISA 2009 Plus Results, Table B.3.1 for first three columns and author's calculations.

I have emphasised Mathematics because many believed math was an Indian strong suit. The results for reading and science are similarly bad. Table 2 shows science results in a different format, which shows the proportion of children in various categories of performance. There are three points:

1. "Below level 1" doesn't even have a description as it implies that so little proficiency is demonstrated it is impossible to distinguish from not knowing anything at all. In the USA, even with its socio-economic and racial inequalities and language inequalities and its failing inner city schools, only 4.2 percent are in this category. In HP 57.9 percent of 15 year olds in school cannot be distinguished from not having learned any science at all and in TN 43.6 percent all in this category - ten times as many as the USA.
2. PISA considers "level 2" as the minimum level that provides the science competencies that will enable them to participate actively in life situations related to science and technology. Since more than 80 percent of students in both HP and TN are level 1 or below this most students in these states have reached age 15 ill-equipped for the century they will face.
3. While a thin elite that competes for the few highly selective technical institutes are globally competitive, this is a tiny fraction of the population. The estimate of the fraction of TN or HP students at level 6 in science proficiency was zero. Their estimate of the fraction at level 5: also zero. Of course this does not mean there are not such students in these states, of course there are, just that from the samples available in the study the best estimate was so small as to be indistinguishable from zero.

Table 2: Comparison of science proficiency in Tamil Nadu and Himachal Pradesh to India's aspirations
Country/Region	Below level 1	Level 1 1	Level 5 5	Level 6 6
Singapore	2.8	8.7	15.3	4.6
Hong Kong	1.4	5.2	14.2	2
Korea	1.1	5.2	10.5	1.1
OECD avg.	5	13	7.4	1.2
USA	4.2	13.9	7.9	1.3
Russia	5.5	16.5	3.9	0.4
Brazil	19.7	34.5	0.6	0
Tamil Nadu	43.6	40.9	0a	0a
Himachal Pradesh	57.9	30.9	0a	0a
Source: PISA 2009 Plus Results. Description of levels Table 3.2, percentages Table B.3.4. 1) At Level 1, students have such a limited scientific knowledge that it can only be applied to a few, familiar situations. They can present scientific explanations that are obvious and follow explicitly from given evidence. 5) At Level 5, students can identify the scientific components of many complex life situations, apply both scientific concepts and knowledge about science to these situations, and can compare, select and evaluate appropriate scientific evidence for responding to life situations. Students at this level can use well-developed inquiry abilities, link knowledge appropriately and bring critical insights to situations. They can construct explanations based on evidence and arguments based on their critical analysis. 6) At Level 6, students can consistently identify, explain and apply scientific knowledge and knowledge about science in a variety of complex life situations. They can link different information sources and explanations and use evidence from those sources to justify decisions. They clearly and consistently demonstrate advanced scientific thinking and reasoning, and they demonstrate willingness to use their scientific understanding in support of solutions to unfamiliar scientific and technological situations. Students at this level can use scientific knowledge and develop arguments in support of recommendations and decisions that centre on personal, social or global situations. a) In Table B.3.4 these are reported as blank but the estimated percentages in below 1 to level 4 sum to exactly 100 percent. Obviously this not imply that there are exactly zero students in all of these two states meeting these levels but that with the sample sizes assess students of 1616 in HP and 3210 in TN there was insufficient information to create a non-zero estimate.

These results on PISA 2009+, while tragic for what they imply for Indian youth and perhaps shocking to newcomers to this subject, come as no surprise to those who have been working on basic education in India:

• Das and Zajonc (2008) used results from Orissa and Rajasthan to create indices on mathematics performance similar to those of TIMSS (Trends in Mathematics and Science Study) and found these states near the bottom of the global rankings.
• Educational Initiatives carried out an 18 state study using sophisticated testing instruments and found levels of performance on TIMSS comparable items that were stunningly lower. For instance on the open ended question "Write a fraction larger than 2/7" less than 30 percent of Indian students in standard 8 could answer correctly compared to more than 70 percent internationally.
• The APRest study led by Karthik Muralidharan and Venkatesh Sundararaman in rural AP asked the same questions of students in grades 2 to 5 and found very slow rates of learning progress.
• The results year after year from the ASER [2010 2009] study supported by Pratham find that significant fractions of students in Standard 8 cannot master even Standard 2 curricular basics. In rural areas nationwide a third of children in grade 8 could not do a simple division problem and almost 20 percent could not read a level 2 text. The 2011 results, due out in a few weeks will show continued stagnation or even retrogress in learning.
• Numerous studies by MIT's JPAL, World Bank, NCAER/University of Maryland and other researchers found levels of performance that were shockingly low compared to curricular expectations.

These PISA 2009+ results are the end of the beginning. The debate is over. No one can still deny there is a deep crisis in the ability of the existing education system to produce child learning. India's education system is undermining India's legitimate aspirations to be at the global forefront as a prosperous economy, as a global great power, as an emulated polity, and as a fair and just society. As the beginning ends, the question now is: what is to be done?

Addressing the problems of Rupeezone

While everyone is pondering the ways in which Eurozone is not an optimal currency area, I found myself worrying about the ways in which Rupeezone is not an optimal currency area. In the Financial Express today, I have a column: Addressing the problems of Rupeezone.

Here are interesting materials on Greece which set the stage for this:

• A money too far by Paul Krugman, in the New York Times.
  
• A response by Greg Mankiw on his blog. He refers to this AER article from 1986 by Christine Romer, and this article by Christopher Hanes in AER in 1993.
  
• A response by Paul Krugman on his blog.
  
• A blog post by David Beckworth.
  
• On the subject of labour mobility, Casper van Ewijk and Michiel van Leuvensteijn have an important column on voxEU making the link between labour market mobility and the transactions taxes which governments impose on real estate transactions.
  
• Here is a column by Feldstein on these issues back in 1998.
• Greek lessons for India, in the Business Standard, by Suman Bery.

This is an interesting demo of how economics happens today: an interleaving between journal articles, newspaper columns and blog posts.

The Right to Education Act: A critique

by Parth Shah.

The `Right of Children to Free and Compulsory Education Act 2009' (RTE Act) came into effect today, with much fanfare and an address by Prime Minister Manmohan Singh. In understanding the debates about this Act, a little background knowledge is required. Hence, in this self-contained 1500-word blog post, I start with a historical narrative, outline key features of the Act, describe its serious flaws, and suggest ways to address them.

Historical narrative

After independence, Article 45 under the newly framed Constitution stated that The state shall endeavor to provide, within a period of ten years from the commencement of this Constitution, for free and compulsory education for all children until they complete the age of fourteen years.

As is evident, even after 60 years, universal elementary education remains a distant dream. Despite high enrolment rates of approximately 95% as per the Annual Status of Education Report (ASER 2009), 52.8% of children studying in 5th grade lack the reading skills expected at 2nd grade. Free and compulsory elementary education was made a fundamental right under Article 21 of the Constitution in December 2002, by the 86th Amendment. In translating this into action, the `Right of Children to Free and Compulsory Education Bill' was drafted in 2005. This was revised and became an Act in August 2009, but was not notified for roughly 7 months.

The reasons for delay in notification can be mostly attributed to unresolved financial negotiations between the National University of Education Planning and Administration, NUEPA, which has been responsible for estimating RTE funds and the Planning Commission and Ministry of Human Resource and Development (MHRD). From an estimate of an additional Rs.3.2 trillion to Rs.4.4 trillion for the implementation of RTE Draft Bill 2005 over 6 years (Central Advisory Board of Education, CABE) the figure finally set by NUEPA now stands at a much reduced Rs.1.7 trillion over the coming 5 years. For a frame of reference, Rs.1 trillion is 1.8% of one year's GDP.

Most education experts agree that this amount will be insufficient. Since education falls under the concurrent list of the Constitution, financial negotiations were also undertaken between Central and State authorities to agree on sharing of expenses. This has been agreed at 35:65 between States and Centre, though state governments continue to argue that their share should be lower.

Overview of the Act

The RTE Act is a detailed and comprehensive piece of legislation which includes provisions related to schools, teachers, curriculum, evaluation, access and specific division of duties and responsibilities of different stakeholders. Key features of the Act include:

1. Every child from 6 to 14 years of age has a right to free and compulsory education in a neighborhood school till completion of elementary education.
   
2. Private schools must take in a quarter of their class strength from `weaker sections and disadvantaged groups', sponsored by the government.
   
3. All schools except private unaided schools are to be managed by School Management Committees with 75 per cent parents and guardians as members.
   
4. All schools except government schools are required to be recognized by meeting specified norms and standards within 3 years to avoid closure.

On the basis of this Act, the government has framed subordinate legislation called model rules as guidelines to states for the implementation of the Act.

A critique

The RTE Act has been criticised by a diverse array of voices, including some of the best economists. MHRD was perhaps keen to achieve this legislation in the first 100 days of the second term of the UPA, and chose to ignore many important difficulties of the Act. The most important difficulties are:

Inputs and Outcomes

The Act is excessively input-focused rather than outcomes-oriented. Even though better school facilities, books, uniforms and better qualified teachers are important, their significance in the Act has been overestimated in the light of inefficient, corrupt and unaccountable institutions of education provision.

School Recognition

The Act unfairly penalises private unrecognised schools for their payment of market wages for teachers rather than elevated civil service wages. It also penalises private schools for lacking the infrastructural facilities defined under a Schedule under the Act. These schools, which are extremely cost efficient, operate mostly in rural areas or urban slums, and provide essential educational services to the poor. Independent studies by Geeta Kingdon, James Tooley and ASER 2009 suggest that these schools provide similar if not better teaching services when compared to government schools, while spending a much smaller amount. However, the Act requires government action to shut down these schools over the coming three years. A better alternative would have been to find mechanisms through which public resources could have been infused into these schools. The exemption from these same recognition requirements for government schools is the case of double standards -- with the public sector being exempted from the same `requirements'.

School Management Committees (SMCs)

By the Act, SMCs are to comprise of mostly parents, and are to be responsible for planning and managing the operations of government and aided schools. SMCs will help increase the accountability of government schools, but SMCs for government schools need to be given greater powers over evaluation of teacher competencies and students learning assessment. Members of SMCs are required to volunteer their time and effort. This is an onerous burden for hte poor. Payment of some compensation to members of SMCs could help increase the time and focus upon these. Turning to private but `aided' schools, the new role of SMCs for private `aided' schools will lead to a breakdown of the existing management structures.

Teachers

Teachers are the cornerstone of good quality education and need to be paid market-driven compensation. But the government has gone too far by requiring high teacher salaries averaging close to Rs.20,000 per month. These wages are clearly out of line, when compared with the market wage of a teacher, for most schools in most locations in the country. A better mechanism would have involved schools being allowed to design their own teacher salary packages and having autonomy to manage teachers. A major problem in India is the lack of incentive faced by teachers either in terms of carrot or stick. In the RTE Act, proper disciplinary channels for teachers have not been defined. Such disciplinary action is a must given that an average of 25 percent teachers are absent from schools at any given point and almost half of those who are present are not engaged in teaching activity. School Management Committees need to be given this power to allow speedy disciplinary action at the local level. Performance based pay scales need to be considered as a way to improve teaching.

25% reservation in private schools

The Act and the Rules require all private schools (whether aided or not) to reserve at least 25% of their seats for economically weaker and socially disadvantaged sections in the entry level class. These students will not pay tuition fees. Private schools will receive reimbursements from the government calculated on the basis of per-child expenditure in government schools. Greater clarity for successful implementation is needed on:

• How will `weaker and disadvantaged sections' be defined and verified?
  
• How will the government select these students for entry level class?
  
• Would the admission lottery be conducted by neighbourhood or by entire village/town/city? How would the supply-demand gaps in each neighbourhood be addressed?
  
• What will be the mechanism for reimbursement to private schools?
  
• How will the government monitor the whole process? What type of external vigilance/social audit would be allowed/encouraged on the process?
  
• What would happen if some of these students need to change school in higher classes?

Moreover, the method for calculation of per-child reimbursement expenditure (which is to exclude capital cost estimates) will yield an inadequate resource flow to private schools. It will be tantamount to a tax on private schools. Private schools will endup charging more to the 75% of students - who are paying tuitions - to make space for the 25% of students they are forced to take. This will drive up tuition fees for private schools (while government schools continue to be taxpayer funded and essentially free).

Reimbursement calculations should include capital as well recurring costs incurred by the government.
By dictating the terms of payment, the government has reserved the right to fix its own price, which makes private unaided schools resent this imposition of a flat price. A graded system for reimbursement would work better, where schools are grouped -- based on infrastructure, academic outcomes and other quality indicators -- into different categories, which would then determine their reimbursement.

What is to be done?

The RTE Act has been passed; the Model Rules have been released; financial closure appears in hand. Does this mean the policy process is now impervious to change? Even today, much can be achieved through a sustained engagement with this problem.

Drafting of State Rules

Even though state rules are likely to be on the same lines as the model rules, these rules are still to be drafted by state level authorities keeping in mind contextual requirements. Advocacy on the flaws of the Central arrangements, and partnerships with state education departments, could yield improvements in atleast some States. Examples of critical changes which state governments should consider are: giving SMCs greater disciplinary power over teachers and responsibility of students’ learning assessment, greater autonomy for schools to decide teacher salaries and increased clarity in the implementation strategy for 25% reservations. If even a few States are able to break away from the flaws of the Central arrangements, this would yield demonstration effects of the benefits from better policies.

Assisting private unrecognized schools

Since unrecognized schools could face closure in view of prescribed recognition standards within three years, we could find ways to support such schools to improve their facilities by resource support and providing linkages with financial institutions. Moreover, by instituting proper rating mechanisms wherein schools can be rated on the basis of infrastructure, learning achievements and other quality indicators, constructive competition can ensue.

Ensure proper implementation

Despite the flaws in the RTE Act, it is equally important for us to simultaneously ensure its proper implementation. Besides bringing about design changes, we as responsible civil society members need to make the government accountable through social audits, filing right to information applications and demanding our children's right to quality elementary education. Moreover, it is likely that once the Act is notified, a number of different groups affected by this Act will challenge it in court. It is, therefore, critically important for us to follow such cases and where feasible provide support which addresses their concerns without jeopardizing the implementation of the Act.

Awareness

Most well-meaning legislations fail to make significant changes without proper awareness and grassroot pressure. Schools need to be made aware of provisions of the 25% reservations, the role of SMCs and the requirements under the Schedule. This can be undertaken through mass awareness programs as well as ensuring proper understanding by stakeholders responsible for its implementation.

Ecosystem creation for greater private involvement

Finally, along with ensuring implementation of the RTE Act which stipulates focused reforms in government schools and regulation for private schools, we need to broaden our vision so as to create an ecosystem conducive to spontaneous private involvement. The current licensing and regulatory restrictions in the education sector discourage well-intentioned `edupreneurs' from opening more schools. Starting a school in Delhi, for instance, is a mind-numbing, expensive and time-consuming task which requires clearances from four different departments totaling more than 30 licenses. The need for deregulation is obvious.

Please support our efforts towards ensuring Right to Education of Choice through some of the activities suggested above. Join our RTE Coalition.

The Right to Education Act

Raghuram Rajan and Abhijit Banerjee in Indian Express on the flaws in the Right to Education Act.

The rise of private sector education service producers in India

In India, in the fields of health and education, an impressive rise of a private ecosystem has come about. In these fields, the State has tried hard to get back in the game, particularly after the UPA won power in 2004. But the unwillingness of the State to undertake deeper reforms has meant that ultimately, government facilities generally work badly. CPI(M) ideologues send their children to private schools.

The CMIE Consumer Pyramids data shows the fraction of household expenditure on school/college fees. Households that spend nothing are those that have no children, or those that are fully served by government schools/colleges. The CMIE data separates out expenditures on stationery, books, private tuitions, etc., so what is observed here is just the pure payment to the school/college. It shows:

Income class	Fraction of expenditure
Rich 1	2.88
Rich 2	3.25
Higher Middle Income 1	3.52
Higher Middle Income 2	4.16
Higher Middle Income 3	3.81
Middle Income 1	3.17
Middle Income 2	2.78
Lower Middle Income 1	2.43
Lower Middle Income 2	1.89
Poor 1	1.46
Poor 2	1.35
Overall	2.82

The overall average expenditure per household in the survey is Rs.86,228, so 2.82% of this is Rs.2400 a year or Rs.200 a month. This, of course, reflects a split between some households who use government facilities (who spend nothing) and others who use private facilities (who spend more than Rs.200 a month).

An incipient academic literature shows that learning outcomes from the weakest private schools broadly replicate learning outcomes from government schools even though the resource outlay of government schools is 3x to 10x bigger. If this evidence was correct, private schools would not have gained market share. Poor people have been spurning government schools with zero tuition fees and free meals, and choosing private schools where significant payments have to be made. There are two possible explanations: either the parents are not understanding how best to take care of their interests, or the econometricians are not understanding what parents are thinking. I am biased in favour of the latter explanation.

Like all incumbents, public sector producers of educational services resent competition, and particularly competition that is gaining market share. With the Right to Education Act, the government has armed itself with new powers to force `unrecognised schools' to close down. This is similar to the Department of Posts trying to prevent private firms from carrying letters. This is going to shape up as one of the most important battlegrounds in Indian education. So far, the broad story was that the government floundered and spent ever larger sums of money, but did not prevent `unrecognised' schools from coming up. Now it is shifting gears from category 3 ("State Production But Do No Harm") to category 4 ("State Production While Damaging the Private Sector").

As Lant Pritchett has emphasised, countries like Chile which have a fully competitive framework, where parents choose between public and private schools, have a bigger market share of public schools as compared with India, where the main approach of the State is to pretend that private schools don't exist, or to try to force them out. This ought to trigger off fundamental rethinking about what we are doing in the government. This rethinking has not begun, and the customers are quietly voting with their feet, switching their children to private schools. Despite the huge increase in funding to public schools, the market share of private schools is rising every year.

In this setting, it is worth attending the School Choice National Conference 2009 which will be held in Delhi on 16 December. And, do read The Beautiful Tree by James Tooley.

Getting results on education and health expenditures of government

• Lant Pritchett in Indian Express, 6 July 2009
• Jeff Hammer in Financial Express: 6 July 2009, and on 9 July 2009.

Lant and Jeff are the best deep thinkers about how to make the Indian government function better.

Inequality

Michael Walton has a good opinion piece in Financial Express on the subject of inequality in India. He starts out with the eminent good sense on the subject:

Should we care about inequality? Many would see this as a dumb question. But there are two, opposing views on why it may be considered dumb. The first is that inequality is so obviously central an issue, so pervasive in Indian society that it is transparently the case that tackling inequality is central to the development process. Indeed, the long history of both rhetoric and action by the Indian state is, ostensibly, in line with this view.

A second view is that inequality is a big diversion. India is still a poor country. The first order question is sustaining growth, while ensuring the poor participate in that growth. (And, indeed, in most growth episodes, most of the time, the income of the poor grows more or less as fast as the average.)

Moving from Latin America to India a year ago (as I did) casts this question into relief. At first glance the contrast seems to support the view that inequality is a second order question here. Latin America is the region of inequality par excellence. Measured inequality in India (from the National Sample Survey) is way below the Latin American average, and even below the most equal society theretiny Uruguay, famed for its extensive social insurance system. It is also lower than in China, Malaysia and Thailand. Sustaining rapid growth looks much more important than any feasible redistribution, not least for the poor.

On the scale of decades, the only thing that matters for poor people is GDP growth. Every percentage point of the growth rate that is given up in the quest of reduced inequality today does permanent damage of the trajectory of consumption of poor people in coming decades. As an example, suppose a family starts out in poverty in India today earning Rs.1000 a month. Here is what 30 years of growth does at a few alternative growth rates:

2.5%	2,097
6.0%	5,744
7.0%	7,612

6% growth over the coming 30 years gets a family making Rs.1000 a month in India today up to Rs.5,744 a month. But if the growth rate gets up to 7%, then this same family gets up to Rs.7,612 per month. These large differences are induced by small improvements in the growth rate. And, if we sink into socialist stasis of 3.5% GDP growth which would yield 2.5% per capita growth, then this family gets up to Rs.2,097 a month in 30 years.

I think 30 years is the right horizon to think about these issues, for it corresponds to the change that a person sees from age 0 to age 30, and then again from age 30 to age 60. It is very important for poor people in a country to see such massive changes in their well being coming about within such timescales.

Policymakers who care about the consumption of poor people have to have a very short-sighted discount rate (in addition to certain kinds of preferences) in order to espouse policies that emphasise equity at the price of growth.

Manish Sabherwal has a piece in Economic Times today, where he points out the logical fallacies of simplistic beliefs about inequality using a natural experiment that recently took place in India:

India has become substantially more equal since January 8, 2008. About two hundred billionaires have turned into millionaires. The drop in stock market and real estate values means that the top 5% richest people may have lost about 40% of their wealth and making the rich poor increases equality. But does this exponential increase in equality help India’s poor? Do they even care?

Michael Walton then runs through the criticisms of this perspective. First, inequality off NSSO data is underestimated. I feel that inequality using household survey data is underestimated everywhere. It's as hard for an investigator in Mexico City filling out forms to get into one of the haciendas of the rich, or an investigator in New York City filling out forms to get into a penthouse in Manhattan, as it is for him to get into a prosperous home in Bombay.

Second, the really important thing is inequality of opportunity. I fully agree. Here, it is possible to obtain first best with reduced inequality of opportunity and higher GDP growth, by undertaking fundamental reform of education and health in India. This is a rare situation where policy makers with an interest in one kind of inequality can actually assist growth. But so far, the gigantic spending programs in health and elementary education (e.g. Sarva Shiksha Abhiyaan) have been dominated by the interests of their respective civil servants, and not the interests of the users of these services. Higher education is another great opportunity to make a difference to equality of opportunity, but so far in India, the policy framework is systematically designed to disadvantage a person born in a family with weak financial and human capital.

Third, he says that inequality is likely to get worse, and that this will have implications for the political system and society. I agree with this outlook. Inequality in India will get a lot worse before it gets better, given that the top decile is in the process of plugging into globalisation, and generating tremendous wealth in the process. Over time, the remaining nine deciles will handsomely reap the fruits of this transformation, but in the short term, inequality will worsen.

Vijay Kelkar has always emphasised that inequality matters because it influences the political foundations of liberal economic policies. I see this as shaping up to be a big challenge for Indian politicians over the coming 25 years. So far, the early indicators are bleak.

In her article The first globalization: Lessons from the French, Suzanne Berger emphasises one of the `great surprises in history' : despite the inequalities created by capitalism, no electorate has ever voted in free national elections to overturn it. She argues that while anti-capitalist political parties have been strong, they have never won the day.

I'm not so sure. Democracy does contain the possibility of the demos coming together and expropriating private property and trampling on individual freedoms - as Indira Gandhi did and as a number of `idiotic' regimes in the world have shown. Berger emphasises one element of what holds such dangers in check:

...the constitutional engineering of Madison and the founders of other liberal democratic societies did work to protect the rights of individuals and the functioning of a market economy. Institutions like the Bill of Rights, the Supreme Court, and federalism did in fact build dikes that protected property and markets against democratic majorities

To the extent that the `constitutional engineering of Madison' is important in throwing up these dikes, we are in trouble in India, given the extent to which constitutional engineering (and re-engineering) have systematically damaged the rights of individuals and the functioning of the market economy.

A critical gap in education policy

We badly need internationally comparable measurement of what Indian 15-year-olds know using the OECD PISA.