Budget 2020-21: Education loans are more expensive than car loans. It is important to bring the education sector in-line with agriculture, MSMEs, and others.
- Rustom Kerawalla
Budget 2020 India: The education sector in India is one of the largest in the world, with over 260 million enrolling each year to enhance their repository of knowledge. Since the day India achieved freedom, the government has contributed its efforts towards increasing the literacy rate and implemented measures to alleviate the education-employability issue to attain economic stability. With plans to provide financial support of USD 1 billion to Indian states for introducing skill development initiatives, the education sector remains a strategic development priority.
The first Union Budget of 2020 is set to be announced on February 1 by the Finance minister, Mrs. Nirmala Sitharaman. Furthermore, the education sector being one of the most important sectors, both for the social and the economic development of India, there’s anticipation that engulfs the spectators on the reforms that the government may enfold this year.
According to the Right to Education Forum fact-sheet 2020, nearly 60 million children lack access to education in India. The report has also indicated a downward trend in spending in the education sector as one of the biggest challenges. Therefore, in the upcoming budget, it is necessary to classify ‘Education and related services’ under the definition of priority sector lending. This change will enable access to lower interest rates, longer tenure of loans, and other benefits for fuelling the growth of the Education sector in India along with Agriculture, MSME, and other sectors.
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Through the Union Budget, we hope that the Honourable Finance Minister will consider two prominent modifications in 2020. The first one is to make GST applicable to school fees and other receivables of the school. In the current regime, GST benefits, for the purchase of various materials and services become a cost that is passed on to the parents. By doing so, there will be less pressure on the total cost of education for the student.
The second important reform is to get the ‘Education and related services’ classified under the definition of priority sector lending. Currently, education loans are more expensive than car loans. This change will enable the much-needed access to lower interest rates, longer tenure of loans and other benefits for fueling the growth of the education sector in India in line with Agriculture, MSME and others.
Historically, the government has prioritized budget allocation for various sectors over education. In the 2018-19 Budget, the Finance Minister announced a 10 percent increase in the expenditure for education, however, the other sectors witnessed a minimum 15-20 percent hike. Owing to the progressive growth of the education sector, it is imperative for the government to increase the amount in the upcoming Union Budget to ensure that this demographic dividend does not morph into a demographic liability, by boosting employability through a holistic approach to education.
Rustom Kerawalla is Chairman of Ampersand Group. Views expressed are the author’s personal.