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Loopholes in the Indian Education Framework

Updated: Sep 4, 2021

Context behind the need for a Direct Benefit Transfer policy reform

Shivam Gujral

BSc Economics, UCL


A country’s economic growth is not only dependent on natural resources, technology, and capital but also the human resource within the nation (Sun et al., 2018). To improve human resource, development economists focus on the term ‘Human Capital Formation’ and promote skill formation in an individual. This acquired skillset links with the chain reaction, which further takes place: better the skill, higher chances of being employed and being productive, and ultimately contributing to the total GDP of the country. But here, we are going to focus on something which is the first and foremost step to acquiring that skillset: education.

India is a nation where there have been many discussions on the education system. From a compelling debate regarding the caste-based reservation system to highlighting the state of uneducated youth prevailing in India, the education sector requires structural reforms focusing on providing education to all irrespective of the backgrounds of an individual, along with standardizing the system throughout the country.

In this article, I will provide the background literature along with the economic and political context for the requirement of a Direct Benefit Transfer (DBT) system in the Indian education framework. It will explain the loopholes from 2 distinct perspectives, which are:

(a) The Indian Reservation system

(b) Widespread gap between Public and Private sector school education levels

The empirical analysis and modelling of the DBT was presented as a poster in the UCL Explore Econ 2020 conference and would be available in the September Issue of the Economic Tribune magazine.

The reservation system - is it really reserved?

Following the ideals of Dr B.R. Ambedkar, who worked extensively to uplift the lower caste people in India back in the 1920s, the Indian Constitution guarantees equality to all in Article 14, 15(1), 16(1), and 16(2). Furthermore, Article 16(4) explicitly states,

Nothing in this article shall prevent the State from making any provision for the reservation of appointments or posts in favour of any backward class of citizens which, in the opinion of the State, is not adequately represented in the services under the State

(Constituent Assembly Debates)

Since then, the reservation system is prevalent in India, for the Scheduled Castes (SC), Scheduled Tribes (ST), and Other Backward Classes (OBC). For some background information on the Indian Caste system, these 3 classes have been defined as below:

SC: they are the sub-communities within the framework of the Hindu caste system who have historically faced deprivation and extreme social isolation in India on account of their perceived low status

ST: they are classified as marginalised communities on the basis of geographical isolation

OBC: Those communities that have been historically marginalised in India but do not fall in the list of SC and ST are classified as OBC’s

In central-government-funded higher education institutions, 22.5% of available seats are reserved SC and ST students (7.5% for STs, 15% for SCs). This reservation percentage has been raised to 49.5% by including an additional 27% reservation for OBCs (Sekhri, 2011).

Reviewing the perspective of those opposing this system, the argument comes out to be that all students from the backward classes at the most elite Indian universities and institutions would not have been admitted in the absence of reserved seats. Weisskopf (2004) finds that very few of them can succeed in open competition for general entry seats at prestigious institutions because they rarely have access to high-quality secondary education, or to privately funded preparatory workshops, all of which contribute to the substantial competitive edge enjoyed by students from relatively well-to-do families. Even with lower cut-off points for admission, these students typically do not come close to filling the available reserved seats at such institutions. Thus, those getting admitted to such institutions are the ‘creamy layer’ of the backward population. However, getting into the institutions with a lower mark tends to reduce the incentive of the better off students among the aforementioned castes to make an effort, while making it harder for the average students of the general category to enjoy decent education.

Extending the arguments further, one might call the reservation system to be the biggest enemy of meritocracy. By offering reservation through relaxed entry criteria, we are fuelling inflation of moderate credentials as opposed to the promotion of merit-based education system, which is the foundation of many progressive countries (Goyal, 2019). Meritocracy should not be polluted by injecting relaxation of entry barriers, rather should be encouraged by offering financial aids to the underprivileged although deserving candidates only. Reservation is good, as far as it is a method of appropriate positive discrimination for the benefit of the economically backward sections of the society but when it tends to harm the society and ensures privileges for some at the cost of others for narrow political ends, as it is in the present form, it should be done away with, as soon possible (Goyal, 2019).

The Widespread gap: Ugly Truth of Public and Private sector schooling

Source: Data retrieved from Experiment reports by ASER Centre, Pratham (2014)

‘The widespread gap’: The ‘gap’ here would be further illustrated in a study conducted by the ‘Annual Status of Education Reports (ASER), Pratham’. In order to investigate the learning differences between the Public and Private sector schools, the organisation first conducted a stratified random sampling survey within the Tamil Nadu region. The sample population was then identified for conducting experiments. Students from 5th standard were chosen randomly across Public and Private sector schools. They were given a simple 2nd standard English text to read. Assuming education levels are equal, one would expect the outcomes to be the same. However, the randomness of the experiment helps us to establish a causal link between the education levels and the learning outcomes. This is why results show an average of 25% difference between the learning levels across the 2 sectors.

From a wider scope of literature in economics and other social sciences, the differences between public and private schools portray that private schools are associated with student achievement that is as high or higher, even after accounting for all pre-existing differences in socio-economic background. (Singh, 2014)

Most studies in the literature find that students in private schools significantly outperform students in government schools (at least along some dimensions); coupled with the fact that per-person expenditures in private schools are frequently much lower than in the state sector, this suggests that private schools are considerably more productive on average than state schools

Way forward by Direct Benefit Transfers:

Since 2013, the Government of India has steadily expanded the scope of Direct Benefit Transfer (DBT) to onboard 380 schemes administered through 55 ministries (Centre for Civil Society, 2017). Direct transfers can be applied through different instruments, depending on the context and needs of different areas:

- Unconditional cash Transfers: Main motive is to cover the direct or indirect costs of education. These transfers are not conditioned while they are given to the beneficiary

- Conditional Cash Transfers: These include cash transfers to parents from marginalised communities conditional on enrolment, attendance, performance, and completion of schooling.

- Vouchers: They are tied to the performance of educational institutions to promote parental choice, school accountability, and stimulate supply of quality educational institutions

In the research poster, the reader can expect to see an empirical model showing the impact of previous Randomised Controlled Trial voucher programs on test scores, particularly in language subjects, of the policy recipients. Broadly, the purpose of the policy would be to provide a way forward in resolving the distortion effects caused by the flaws in the Indian education framework.


Centre for Civil Society. (2017) “Direct Benefit Transfer in Education: A Policy Blueprint”. Available at: [Retrieved on 02/12/2019]

Chauhan, C.P.S. (2008) “Education and Caste in India”. Asia Pacific Journal of Education, 28, pp. 217–34.

Goyal, S. (2019) “Reservation in India Advantages and Disadvantages | UPSC IAS PCS”. Available at: [Retrieved on 02/12/2019]

Constituent Assembly Debates India (n.d) “Equality of opportunities in matters of public employment”. Available at:

Sekhri, S. (2011) “Affirmative Action and Peer Effects: Evidence from Caste Based Reservation in General Education Colleges in India”. University of Virginia. Available at: [02/12/2019]

Sun, H., Sun, W., Geng, Y. and Kong, Y. (2018) “Natural resource dependence, public education investment, and human capital accumulation”. Petroleum Science, 15: 657, pp.657-665.

Weisskopf, T.E. (2004) “Impact of Reservation on Admissions to Higher Education in India”. Economic and Political Weekly, 39: 39, 2004, pp.4339–49.

Abhijeet Singh (2014) Test score gaps between private and government sector students at school entry age in India, Oxford Review of Education, 40:1, 30-49,


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