ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Household Expenditure on Higher Education

What Do We Know and What Do Recent Data Have to Say?

Data from the two recent National Sample Survey Office surveys are analysed to provide estimates of higher education expenditure and loans. Households that participate in higher education spend 15.3% of their total expenditure on average in rural areas; in urban areas, they spend 18.4%. This share is larger in southern states, where individuals are more likely to be pursuing technical education in private, unaided institutions and are more likely to have outstanding borrowings for education. At the all-India level, poorer households are less likely to borrow for higher education, possibly because they are risk-averse and uncertain about future returns.

The authors are grateful to Anuja Jayaraman, Sumit Mishra, Andaleeb Rahman, and an anonymous referee for useful comments on an earlier draft of this article.

Public and private investments in higher education have positive implications for economic growth (Castelló-Climent and Mukhopadhyay 2013). Estimates suggest that private returns to education in India indeed rise with the level of education, and that returns are highest for tertiary education (Agrawal 2014). If higher education fosters growth and returns to education indeed increase, why is the proportion of graduates and postgraduates not substantially higher?1 There are two competing explanations. The first pertains to the opportunity cost of time and credit constraints faced by households. To ensure that credit constraints do not deter individuals from pursuing higher education, developed and developing countries, including India, have taken supply-side measures to ensure the availability of credit to individuals pursuing vocational and tertiary education. The second explanation is that individuals would not invest in higher education even if credit and interest rate subsidies were available if a college degree did not translate into employability.

Two key statistics from the Census of India 2011 data sum up the state of India’s labour market. First, at the turn of this century, in 2001, the proportion of Indians who were seeking or available for work was 6.8%; by 2011 this proportion had increased to 9.6%. Second, in 2011, among those seeking work or underemployed, the share of individuals having at least a technical or graduate degree was 8.6%. In total, in 2011, 116.2 million individuals self-reported that they were seeking work, or that they were either underemployed or unemployed.

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Updated On : 20th May, 2019
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