Decoding the impact of the Union Budget 2023 on the higher education sector

By: Himanshu Rai

The union budget announcement attracts a lot of media attention, for it sets the mood, sentiments, and hopes of the people as they prepare to enter the new financial year. What follows is the detailed analysis from experts from various sectors as they try to understand the impact of the budget on the specific sector, predict the upcoming trends, and speculate on the probable future challenges or opportunities.

Just like the art of budgeting, the art of budget analysis is intricate and requires not just expertise and experience but also acute observations and an eye for minute details, as one can paint the wrong picture if one fails to make complete sense of the finer strokes. If we take the overall sentiment of the higher education sector this year, it is positive,however, there are some aspects that were criticized on the basis of a superficial scrutiny based on “numbers” without getting into the depth of those figures.Iwill make an attempt to decode the apparently problematic areasand dive deep into the details to get a clearer picture.

It appears to some that when compared to the allocation of Rs. 653.92 crore from the previous year, financial support for Indian Institutes of Management (IIMs) has been reduced to almost Rs. 300 crores. The fact is that the IIMs receive financial assistance under the capital head for the development of infrastructure (buildings and other physical property) with cabinet approval. For a limited period, recurring funds are also made available. No more funds are awarded to the IIMs under that head after the IIM project is finished (as approved by the cabinet) and because of this, the IIM’s budget provisions are limited to a bare minimum, sufficient to pay the remaining grants’ balances with the permission of the cabinet.

Likewise, some commentators argued that there is no mention of allocation for the Higher Education Funding Agency (HEFA) in the budget document. As of now, the government has invested Rs. 4812.50 crores of substantial government equity into HEFA. Canara Bank, the HEFA’s banking partner, has also contributed Rs. 481.25 crores in equity.  Loans of up to Rs. 52,937 crores can be awarded to various higher education institutions by using this equity of Rs. 5293.75 crores. There is no requirement for further fresh equity until this equity is completely leveraged. Because of this, the HEFA equity provision for FY 2023–2024 has been left at zero and can be increased when needed.

Some quarters spoke about the lack of provision for IMPRESS scheme and MOOCs in the budget. To begin with, the IMPRESS Scheme was approved for use up to March 31, 2021, and it has since been implemented to promote social science research in higher education institutions. Unless a third-party evaluation is done to assess its effectiveness, there is no point in further provisioning. Further, MOOCs and e-Shodh Sindhu (e-SS) are no longer distinct programmes. They are combined as separate elements of the NMEICT and have been adequately provided for.

Finally, it was felt by some that there has been a decline in the allocation for higher education to Rs. 50,094 crores in 2023-24 from Rs. 55,078 crores in 2022-23.To understand the actual context, we will have to go into the accounting of it.

In line with the prevailing mechanism, Cess Funds are included twice in the Gross Budget Allocation. The “Transfer to Reserve Fund” amount is subtracted once from the Gross Budgetary Allocation to arrive at the Net Budget Allocation, also known as the Actual Budget Allocation.

This can be seen in the table below:

Only the Education Cess (MUSK) has decreased, and as a result, it appears that the Gross Budget Allocation has decreased as well. The Actual Budget Allocation increased from Rs. 40828.35 Cr (FY 2022-23) to Rs. 44094.62 Cr as shown in the table above (FY 2023-24) and this is the actual budget that will be made available to the Department of Higher Education for use during the fiscal year 2023–24.

In conclusion, an increase in the allocation every year is a common expectation of almost every industry or sector but a lot more goes into the art of effective budgeting, which also aims to optimize the development opportunities within the existing constraints, thus requiring the use of dynamic reallocation techniques as well, while still aiming for as much expansion of the allocation of funds to the key sector, as is possible.The Union Budget and its impact on the education sector is definitely a step in the right direction and checks the right boxes.

The writer is Director, IIM Indore