Union Budget: Investing in the future of India, the youth

Jul 07 2014, 20:51 IST
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SummaryThe public expenditure on education needs to be increased in addition to incentivising the sector for private investment

The primary focus of the new government should be to invest in India’s intellectual talent, i.e. the youth. Reports indicate that, by 2020, India is set to become the world’s youngest country with a substantial part of its population entering into the working age group. The question to ask is: While the youth will reach the working age, have we as a country skilled them enough to be gainfully employed? There clearly is a crying need for creating the right infrastructure to equip the youth for tomorrow such that they can contribute to the economy in a meaningful way. A good education system coupled with growth and opportunities in the Indian economy will enable restricting flight of intellectual capital.

On the policy front, the government needs to roll up its sleeves in order to reform the sector by getting key regulations such as Foreign Education Bill, Unfair Trade Practices Bill, Universities for Innovation Bill cleared in Parliament. The public expenditure on education needs to be increased in addition to incentivising the sector for private investment. The proposed incentives could be on the lines of the investment-linked incentive provided to the health and hospitality sector, viz allowing 100% deduction for capital expenditure (excluding land, goodwill and financial instrument) incurred by an entity that builds and operates, anywhere in India, an educational institution. The government can consider formulating rules such that education institutions having a prescribed capacity and education streams are provided this benefit. This will help in creating world-class infrastructure in the much-needed education sector.

While a significant part of primary and secondary education sector operates on a ‘not for profit’ basis, this proposition has created its own challenges in creating further infrastructure in this domain. In order to encourage investments in the sector, the government may consider encouraging private investments in this area as well with the investor being entitled to recover an agreed upon return on investment—akin to what has been prescribed for certain infrastructure projects like the power sector.

The government has included ‘education’ within notified CSR activities. The inclusion of education does help but a sector as critical as this has to compete with other activities that have been notified. Further, there is no clarity on deductibility of expenditure on CSR-related activities. The government can provide clarity in this regard and consider weighted deduction for grants made to the education, skill development and teacher-training institutions.

In order to provide a level-playing

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