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Indian higher education system is one of the largest in the world with 988 universities and university-level institutions and 39931colleges (UGC, 2021). There has been a tremendous increase in the demand for higher education, leading to a situation where demand far exceeds the existing capacity in universities and colleges. The extent of participation in higher education is generally measured by the enrolment ratio in higher education. GER refers to total enrolment in various categories of higher education divided by the population in the 18- 23 age group, the relevant age group that is expected to be attending higher education. Despite the spectacular growth of institutions in higher education, only about 27.1 per cent of the population in the relevant age group is enrolled in universities and colleges, compared to the world average of 36.7. The target is to increase the ratio to 30% by 2020-21 and 50 per cent by 2035 (NEP 2020). Public spending on education in India is far lower than the allocation in OECD and middle-income countries. The rising deficits in public investment manifest in compromised quality of educational outcomes and lower spending on capacity expansion and student support programmes. There is a lack of proper mechanisms for monitoring the lag in the disbursement and utilisation of public funds. Public expenditure on education in India in 2017-18 was about 10% of total public spending and it is 10.59 % in 2019-20 (Economic Survey, 2019). However, the world average is 16.4 in 2018 as per the latest statistics available (World bank, 2019). Expenditure on education as % of GDP in India has never attained the target of 6% and it is 3.19 in 2019-20 as against the world average of 4.18. In addition, widespread effect of pandemic Covid 19 created chaos in all sectors including education. The liberalisation waves of the 1990s boost private sector investments in higher education and cut government spending. Most of the private entities that focus on the provision of professional education rely on student-centric cost recovery methods. It leads to wide disparities in the fee structure of public and private sector higher educational institutions. In India, the growth of real expenditure on higher education in the public sector has been stagnant since the 1990s. In addition to this, there are state-wise disparities in financing higher education. Countries like India need a large quantum of funds to be spent for education in the public sector both for capacity expansion and maintenance. However, Education Policymakers concede that no one should be denied higher education especially because he/she is poor. Nevertheless, growing profit-seeking higher educational institutions hinder access to pupils of low socio-economic backgrounds. Ensuring equality in all standards is essential for the smooth functioning of every economic system. There are wide disparities in educational attainments across social groups, castes, gender, income levels and states in India. Equitable access to social, religious, occupational and economic groups living both in rural and urban areas to educational opportunities in general and higher education, in particular, has remained a major challenge before the policy makers for nearly six decades since the independence. Access to higher education is still less than the minimum international threshold levels, distribution of institutions is skewed, and enrolment in public universities is largely concentrated in the conventional disciplines whereas, in the private self-financed institutions, the student enrolment is overwhelmingly in the market-driven disciplines. It is argued that in order to raise the GER in higher education, it is necessary to start institutions in the private sector. But government cannot withdraw from the field. Most of private institutions concentrate on professional courses catering to students of high-income groups. But these institutions should not deny access to poor meritorious students. Government should monitor the functioning of private institutions for ensuring efficiency and equity. It is high time to return back to the public dominant higher educational system with not-for-profit making private entities.

Investment in human capital is a prerequisite for advancement in the growth and well-being of nations. Investment in education being one major element of investment in human capital plays a prominent role in enhancing aspirations, values and enriching lives. Investment in higher education prompts development through creating innovations and increasing skills.

The returns to human capital are extremely large - certainly larger than the returns to most types of physical capital. Given the public revenue, and investment in human capital notably entering into general education, it is an effective and efficient set of expenditures for attaining equity in distribution (Schultz, 1961; 1989). Education and training are the most important investments in human capital. The earnings of more educated people are almost always well above average, although the gains are generally larger in less-developed countries. High school and college education has spread extensively in modern economies because the additional knowledge and information acquired in school is so important in technologically advanced economies ( Becker  S Gary, 1993). Knowledge is one of the keys to development and that knowledge is complementary to private and public capital. Knowledge is a global public good requiring public support at the global level (Stigliz, 1999).

There are controversies about higher education as a public or private good. The main economic justification for providing public finance for any service is that society as a whole derives some benefit from the service. It would be neglected or reduced if it were left entirely to private individuals to finance it. Thus subsidy of higher education is justified by the argument that it produced economic and social benefits for society including highly qualified manpower, and cultural and aesthetic values and the social benefits exceed private benefits (Woodhall, M 1969).

The public good nature of higher education is well understood when one recognizes the traditional functions of higher education and the social benefits that it produces, many of which constitute public goods in themselves (Tilak, 2008). Under the influence of neo-liberalism, educational institutions have been undergoing re-organization, with the private sector assuming an increasingly important role. This trend has also been driven by pressures on public finances and an accompanying economic austerity.  The opportunity for higher education is still today considered a right rooted in the development of education more generally as a public good. Although the model of its provision moves increasingly towards that of a tradable commodity, its full value, to both individuals and to society, rests on this (Morgan and White, 2014). Given the central concern for sustainable development in an increasingly interdependent world, education and knowledge should thus be considered the global common good. This means that the creation of knowledge, its control, acquisition, validation, and use, are common to all people as a collective social endeavour. The governance of education can no longer be separated from the governance of knowledge (UNESCO, 2015).

Equality in education implies that all must be provided with the same level of education in the same sort of institution having a common curriculum. It is stated in section 26 of the United Nations Declaration of Human Rights that access to education for children should be ensured irrespective of social class, economic condition and place of residence of their parents. Panchamukhi’s (1981) study examined the extent to which the policies of expansion had achieved the aim of equitable distribution of education and concluded that even in educationally advanced environment participation in education was severely constrained by socio-economic inequalities. It is argued by some that private higher education would improve equity, access and quality in higher education. But it can be evident from Indian and global experience that (a) public higher education has the greatest potential to address the issue of equity in higher education; (b) charity and philanthropy-based private sector may also have high potential in addressing this issue; (c) state-supported and effectively regulated private sector can address the issue to some extent; and (d) the private higher education sector based on the market principles can actually work against the principles and goals of access, equity and excellence in higher education (Tilak 2018).

Secondary data is used for the study which includes reports of UGC, AISHE and MHRD.

The statistical techniques used are average percentages and growth rates.

Trends in Financing Higher Education in India
Financing of higher education denotes how the institutions imparting higher education get resources for meeting their recurring and non-recurring expenditures. Recurring expenditures are expenditures for maintenance activities of the institutions whereas non-recurring expenditures are meant for development activities or capital expenditure. The important recurring expenditures are expenditure on salaries and allowances to teaching and non-teaching staff, maintenance of buildings, water and electricity charges, subscription of journals, and purchase of consumables and chemicals in laboratories. Non-recurring /capital expenditures are expenditures on the construction of buildings, purchase of furniture and equipment and purchase of books.
The resources for meeting expenditure on higher education come from government and non-government sources. Education being a concurrent subject, both Centre and State Governments contribute to this sector. In India, the main sources of government funds come in the form of grants from the central government, State governments and UGC. The other sources of funds include fees, donations and endowments. The state’s revenue for education comes mainly from its own tax and non-tax revenues, statutory transfers from the centre and discretionary transfers. The sources of revenue may vary with the type of institution like government, aided and unaided or self-financing institutions. Obviously, government and aided (aided by government) rely on government sources and unaided or self-financing on non-government sources, especially student fees and donations. Alternatively, government sources can be generally referred to as public and non-government as private.
Sources of Financing Higher Education in India (1950-51 to 1990-91)
The pattern of financing higher education varies considerably across countries of the world. However, they all face crises in financing higher education. Sufficient resources are necessary for maintaining the quality and expanding quantity of higher education. The pattern of financing from 1950-51 to 1990-91 shows government funds increased from 68 per cent to 93 per cent (Table.1).  
Table.1 Patterns of Financing Higher Education in India (%)1950-51 to 1990-91

Year	Govt. Funds (Centre and States)	Local bodies funds	University funds	Total funds	Fees	Endowment and other sources	Total
1950-51	57.06	10.9		68	20.39	11.62	100
1960-61	67.97	6.53		74.5	17.14	8.35	100
1970-71	75.65	4.34	1.36	81.4	12.81	5.85	100
1980-81	81.7	4.71	1.37	87.8	8.2	4.03	100
1983-84	81.51	5.61	1.61	88.7	7.5	3.78	100
1984-85	79.98	5.4	2.08	87.5	6.47	6.07	100
1985-86	80.29	5.23	2.15	87.7	6.27	6.06	100
1986-87	81.36	5.12	3.35	89.8	6.17	4	100
1987-88	85.92	6.49	0.01	92.4	4.25	3.33	100
1988-89*	83.08	6.72	0.04	89.8	6.08	4.08	100
1989-90*	83.51	9.89	0.01	93.4	3.55	3.04	100
1990-91*	86.48	6.39	0.06	92.9	3.94	3.13	100

*School education only
(Source: Economic Survey, 1995)
By the 1980s, governments began facing severe financial crises and most state governments were forced to stop funding new institutions. Governments started withdrawing from the field and gave a boost to the private sector as an alternative source of financing. The change in the pattern of financing higher education evident since the 1990s.The global economic forces as part of the structural adjustment programme of 1991 had compelled India to open its market to the global economy. There has been tremendous growth in private sector higher educational institutions offering a variety of courses. Many developing and least developed countries in Asia introduced tuition fees and student loans as a means of financing higher education while overcoming the financial stringency of the governments (CABE, 2005).
The adverse impact of economic reforms reflects upon various revenue-raising measures such as a rise in student fees, privatization, student loan programmes and scholarships to meritorious and financially backward students. The major cost recovery measures as suggested by the Committees include raising fees, privatization and provision of student loans and scholarships. High dependence on non-government sources of revenue such as student fees has regressive effects. It hampers access to higher education for students from low-income backgrounds and most of the committees on higher education recommended for provision of scholarships and free ships to those students so that no one can be denied access to higher education due to paucity of funds. However, these programmes are available only to a low proportion of students.
Trends in Educational Expenditure in India Since 1991
Various Education Policies in India contributed to the envisioning and transformation of the higher education system in the country. It was recommended by the Kothari Commission (1964-66) that government expenditure on education should reach the level of 6 per cent of GDP. The percentage of GDP allotted to education varies between 3.4 and 3.2 in 1991-92 and 2020-21.

Figure.1 Expenditure on Education as % of GDP

 (Source: Union budget, various years)
The trends in expenditure on education as per cent of public expenditure for the past 30 years from 1991-92 to 2020-21 reveals that it has stood around 10% (See Figure.2). The target fixed in NEP 2020 is 20% within 10 years by allocating 1% each year up to 2030. Even so, the expanding size of the economy will not be imperative for expansion in its public spending. The Policy itself pointed out that the projected allocation of funding for education would only be possible as India’s tax-to-GDP ratio improves. The recent trends indicate that economy is confronting a fiscal crisis and a drastic fall in tax revenue, especially in the outbreak of the Covid19 Pandemic in 2020. It is arduous to achieve this percentage to 20 within 10 years, especially in the context of fiscal slowdown.
Figure.2 Educational Expenditure as % of Public Expenditure, Centre and States, 1991-2020

(Source: Economic Survey, various years)

In the case of Higher education, it is to be noted that the percentage allocation of GDP allotted is below 1%. Expenditure on Higher Education by the Centre at Current and Constant Prices shows a marginal increase in nominal terms and a decrease in real terms (See Figure.3). Whereas the sectoral allocation reveals that the majority of the funds are allotted to school education. After all, a country cannot have a strong higher education office built on a weak school education base and vice versa; it is higher education that provides teachers, administrators, policymakers and planners for school education, and the school education provides students to higher education (Tilak, 2020). The distribution of expenditure on higher education shows that half of the funds are allocated towards institutions under the central government such as central universities (19%), IITs, IIMs, IISERs, and IIITs (33%) (Source: Union budget, 2020-21). The allocation towards UGC and AICTE is reduced (13%) and only 1% of funds are earmarked for new funding agencies called Higher Education Funding Agency (HEFA) and RUSA through which funds are distributed to colleges. Student aid got 5% allocation and 1% for research and innovation. Shortage of funds manifests in compromised quality of educational outcomes and improvement. It may lead to a lack of funds for the maintenance of buildings and laboratories, research, and scholarships and the burden on payment of salaries of existing teachers may lead to the appointment of contract teachers with low salaries. Thus there is an increasing tendency from the government to withdraw from the education sector.

Table. 2 Expenditure on Higher Education by the Centre (in Crs), 2012-2020

Year	Expenditure on Higher education (Current Price)	GDP Deflator (Base Year 2011)	Expenditure on Higher education (Constant Price)
2012-13	21277.00	100.00	21277.00
2013-14	24485.00	107.90	22692.31
2014-15	23700.00	114.60	20680.63
2015-16	25439.00	118.40	21485.64
2016-17	29702.00	120.90	24567.41
2017-18	33614.00	124.90	26912.73
2018-19	33512.11	129.70	25838.17
2019-20	37461.01	134.80	27790.07
2020-21	32900.00	138.80	23703.17
2021-22	38350.00	146.10	26249.14

(Source: Analysis of Budgeted Expenditure on Education, MHRD, various years)

We need more funds for new institutions not only for the best world-class institutions but also for setting up colleges in rural areas. It is a pre-requisite for raising Gross Enrolment Ratio in higher education from the current 26.3 to the targeted 50% by 2035 as envisaged by the previous policies on higher education.

Growth of Private Higher Educational Institutions in India

In the past two decades, there have been many respectable institutions established by private individuals or corporations either with some funding from the government or with no public funding. They are philanthropists or not-for-profit institutions. However, there has been no policy or guidelines to measure the competence and philanthropy of private investors in starting and managing a technical institution other than the requirement that it should be registered as a non-profit or charitable trust or society. The absence of any significant expansion in different sectors of higher education by the State has created a space for the growth of private providers (Yash Pal Committee, 2009).

Percentage Share of Higher Educational Institutions

At present, India has 935 universities of which half of them are private and deemed to be universities, 43% are state universities and only 5% are central universities (UGC,2020). Of the 36308 colleges more than 78% are running in the Private sector (AISHE, 2019). It evidently shows the increasing privatisation of higher education in the country. However, quantity does not ensure quality. As per the Time Higher Education Rankings (THE) 2020, only 6 universities in India come under the top 500 world-class universities and the country has 31 institutes among the top 250 under QS World University Rankings, 2020. The poor quality of our higher education is reflected in rising graduate unemployment—open and under-employment. Only about 25–30 per cent of our graduates are reported to be employable. Hardly one-fourth to one-third of the institutions accredited by the National Assessment and Accreditation Council received A-grade. The research output of our universities is extremely small (Tilak, 2020). Correspondingly we need a higher allocation of resources for public sector educational institutions so as to ensure access and quality.

Figure.3 Number of Universities in India as on 22.11.2021

Source: UGC, 2021

Patterns of Financing Private Higher Education

There are no specific studies regarding the sources of funds utilized by private investors in higher education and the fees charged by the students. This is mainly due to the reluctance of private educational investors in disclosing their sources of revenue. Nevertheless, Fees constitute the major portion of the revenue of these institutions. Donations also play a significant role in this regard. They have also other measures for raising internal revenue. Nevertheless, a relatively small proportion of private institutions have other financial resources available to them. Universities sponsored by religious organizations sometimes have funds from these groups or at least can rely on help with staffing. In a few countries, a small number of institutions can depend on endowments or other funds contributed by alumni or other supporters (Altbach, 1999).

The fee structure of courses varies from institution to institution and depends on factors like demand for the courses, category of courses such as whether it is for a degree, diploma, certificate or post-graduate degree, the duration of the course, the market value of the courses and the name and fame the institution carries. It is observed that in general education, the average fees per student for degree courses in regular streams are Rs 1,759, while the average fee per student (Rs. 10428) for the self-financing streams is six times higher than that of the regular course. The overall fee of students taking regular and self-financing courses together comes to Rs. 3477. A shift from low tuition fee regular programmes to full tuition fee-based self-financing courses in Indian colleges and universities is likely to adversely affect the participation of lower social and economic groups due to unaffordability to pay fees out of current family income (Bhushan, 2008).

Committees on higher education recommended that fees should be fixed on the basis of recurring expenditures of private institutions. However, most of the management do not follow this principle and appropriate huge amounts as donations. It is otherwise called capitation fees which form a major role in the revenues of private self-financing institutions. The issue of admission and fee policy in private professional colleges has been a contested terrain between government and private providers of higher education. As a result, judicial pronouncements were made to settle the problems of admission and fee in private institutions. In this context; it would be necessary to understand various judicial pronouncements as these have influenced the direction of growth of deregulation.

New Education Policy 2020 and Privatization of Higher Education

The Policy acknowledge that the new institutional architecture of higher education with large multidisciplinary institutions, with a liberal education approach, will require significant investment. This will range from faculty, learning resources, infrastructure and maintenance. The Policy envisages three types of institutions in higher education such as research universities, teaching universities and colleges. Higher priority is given to teaching universities (70%) and colleges got lower priority (10%) over 10 years. It also recommended for diversion of funding through Higher Education Grants Council in place of UGC.   

The National Education Policy 2020 envisions an India-centred education system that contributes directly to transforming our nation sustainably into an equitable and vibrant knowledge society, by providing high-quality education to all. The Policy recommended for high-quality higher educational institutions distributed equitably across the country to achieve a GER target of 50% by 2035 from the current 26.3%. The Policy also suggested increasing the expenditure of States on education. At present 75% of the overall educational spending is done by states even though there exist disparities between states in spending. It is desirable for the Centre to raise the fiscal powers of the States, particularly in the context of increasing financial stringency.   

The policy emphasises the role of non-public sources of funds in imparting education. India has had a long history of private philanthropic educational activity. It was lost due to increased profit-seeking ventures and increasing government control over educational institutions during the 1960-80 period. Many private institutions became dependent on governmental financial support and the distinction between private and public activity became blurred. The approach of the Policy is to encourage not-for-profit, public-spirited private funding in education (Draft NEP, 2019). A new class of private institutions for grant making which pool smaller private funding for new and existing institutions may be established. It can make use of large private donors and individuals and existing trusts with regulatory enablers. The state government and central government may set up procedures to facilitate regulatory permission for obtaining licenses. But it should be ensured that public assets would not be appropriated by private parties.

Apart from this, it advocates for mobilising resources from CSR funds of corporates, community mobilisation of funds and Alumni though the contribution from such sources is much lower in India. The recommendation for an equitable method of charging fees to students who have the capacity to pay is a good one for ensuring equity in the provision of higher education. The method of financing higher education should be based on State versus student sources of funds. The limits to raising student fees should be fixed by the policymakers in a timebound manner through expert panels. To ensure a greater inflow of finance in education, the Union budget 2020 states that steps will be taken to enable external commercial borrowings and FDI investment in India. This type of policy would have repercussions on access and equity for students of backward socioeconomic backgrounds.

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