Does higher Government spend on education produce higher literacy? Before we say anything, we’d like to inform you that opinions on the subject are sharply divided.

And while the answers may not be established in this study, IndiaSpend’s Dhritiman Gupta’s first cut finding arising from a study of 10-year numbers: except for some state suggest there is no direct correlation between high Government spending and growth rate of literacy, particularly in this study of 10 states. But if we look at absolute literacy rates, there seems to be a positive correlation between higher spending.

And yet, in the last 10 years, some states like Bihar and Uttar Pradesh have achieved considerable acceleration in literacy rates, despite spending lesser per person. States like Goa, Kerala & Maharashtra spent the highest per person but grew more slowly, partly due to high bases. There could be many reasons for these trends; including India’s high private sector contribution (half of $90 billion) to education spends. There could be other reasons as well, but this report only looks at available Government data.

Before we look at the states, let’s see where India stacks up in the global arena. India has an overall literacy rate of 74.04% as compared to developed nations like United States which are at 99%. However, India ranks behind most developing countries too.

It ranks behind its neighbour Sri Lanka, which has an impressive literacy rate of 94.2%. South-east Asian nations like Thailand and Vietnam are also ahead with literacy rates of 94.1% and 92.8% respectively. In a list of a total of 183 countries, India is at 137th. Neighbours Pakistan and Bangladesh, however, are behind India with literacy rates of 58.2% and 55.9% respectively. (Source: UNDP 2011 Report)

Literacy Rate Improving?

Even within the country there are wide variations. The only positive is that India has achieved a lot with respect to literacy over the last decade. According to Census 2001, India’s literacy rate was 65.38%. Hence over the last decade India has gained 9 percentage points.

Let’s see how literacy has unfolded across 13 Indian states over the last decade. The states have been ranked from best to worst with respect to improvements in literacy rates over 2001-2011.

State RankLiteracy Rate in 2001 (%)Literacy Rate in 2011 (%)Increase over 2001(%)
1. Bihar47.5363.816.27
2. Uttar Pradesh57.3669.712.34
3. Orissa63.6173.59.89
4. Gujarat69.9779.39.33
5. Karnataka67.0475.68.56
6. West Bengal69.2277.17.88
7. Tamil Nadu73.4780.36.83
8. Andhra Pradesh61.1167.76.59
9. Madhya Pradesh64.1170.66.49
10. Rajasthan61.0367.16.07
11. Maharashtra77.2782.95.63
12. Goa82.3287.45.08
13. Kerala90.9293.92.98

Source: Census 2001, Census 2011

For a better understanding the states need to be grouped according to their standing in 2001. Admittedly, it becomes difficult to achieve improvements once you have reached a high level of literacy. Hence it would be unfair to compare a state like Kerala which had a literacy rate of 90.9% in 2001 with states like Bihar and Uttar Pradesh, the figures for which were below 60% in 2001.

Hence, we’ve gone for four categories. States with literacy rates below 60%, above 60% but below 70%, above 70% but below 80% and above 80% in 2001.

Performance Over A Decade

Bihar and Uttar Pradesh were the only two states with literacy rates below the 60% mark. Bihar had a rate of 47.53% and Uttar Pradesh a rate of 57.36%. Both states have done remarkably well in the last decade. Bihar recorded an increase of 16.27% points, whereas Uttar Pradesh was not far behind growing 12.34%. However, both these states have not yet broken the 70% literacy rate mark. Hence much still needs to be done.

In the above 60% but below 70% category, we have 7 states namely – Orissa, Gujarat, Karnataka, West Bengal, Andhra Pradesh, Madhya Pradesh and Rajasthan. All but Rajasthan and Andhra Pradesh have broken the 70% barrier. Orissa was the best performer recording an increase of 9.89%. Even West Bengal did well recording a rise close to 8%.

The worst performers were however, Andhra Pradesh, Madhya Pradesh and Rajasthan. They recorded rates of increase well below 7%- the worst being Rajasthan with a rise of only 6.07%.

Maharashtra and Tamil Nadu are the two states in the above 70% but below 80% category. In the last 10 years both states have broken the 80% barrier. Tamil Nadu performed relatively better achieving an increase of close 7%. Maharashtra also did not fare badly recording an increase of 5.63%.

Kerala and Goa which form the elite club of above 80% literacy rate in 2001. Goa recorded a growth of 5% in the last decade; impressive considering it’s on a higher base. Goa is on the verge of crossing the 90% mark, presently at 87.4%. Kerala, which has a literacy rate of 90.9% in 2001, however could have done better. It recorded a rise of 3% to reach 93.9%.

Incidentally, the north eastern states Mizoram and Nagaland have high literacy rates. Mizoram is at 91.6% while Nagaland is doing well at 80.1%. The Union Territory of Lakshadweep has a literacy rate of 92.3%.

Expenditure Over Last Decade

Now let’s look at how much these states have spent on education in the last ten years to understand whether spending actually affected their performance in achieving higher literacy rates.

The ranking of the state have been maintained according to the previous table.

StateAveragePopulation No’s over 2001-11(million)Annual Education Spend per year 2001-11(Rs crore)Annual education spend over 2001-11 (Rs per person)Literacy Rate in 2011 (%)
1. Bihar93.35,27956663.8
2. Uttar Pradesh182.811,14760969.7
3. Orissa39.33,36285473.5
4. Gujarat55.45,586100679.3
5. Karnataka56.96,166108375.6
6. West Bengal85.77,14983377.1
7. Tamil Nadu67.17,060105180.3
8. Andhra Pradesh80.16,57081967.7
9. Madhya Pradesh66.44,05060970.6
10. Rajasthan62.55,70191167.1
11. Maharashtra104.514,225136082.9
12. Goa1.4487347687.4
13. Kerala32.64,232129793.9

Source: RBI State Budgets (2001-11), Census 2011

For starters, it would be fair to mention that using the total population of states to calculate per person education spend is not correct. A far better indicator would be to use the population in the age group 5-24. Total population was used as a proxy because of unavailability of such data.

Higher Expenditure=Positive Impact

First let’s look into the connection between average spend per person and literacy rate. There seems to be a positive correlation between spend per person and literacy rates. States like Uttar Pradesh, Bihar, Madhya Pradesh and Andhra Pradesh which spent lower amount per person over the last decade also have lower literacy rate. On the other hand states like Maharashtra, Goa, Kerala, and Tamil Nadu which have spent more have higher literacy rates- above 80%.

One interesting state is West Bengal which has been able to achieve an impressive literacy rate of 77% even while spending just Rs 833 per head. Rajasthan on the other hand has spent Rs. 78 more per head and yet its literacy rate is just about 67%.

Higher Expenditure Leads To Improvements?

However, if we move away from literacy rates and try to relate spend per person to the improvements in literacy over the last decade, the story changes. The correlation seen above is not apparent anymore.

Uttar Pradesh and Bihar- which belong to the below 60% category- have achieved much without spending much per head. Bihar has spent only Rs 566 per head. Up on the other hand has spent only Rs 609 per head. This would suggest that whatever has been spent has been spent efficiently and that it is quite easy to achieve improvements starting from low levels of education even if per person spending is not very high.

In the above 60% but below 70% category, Orissa has been the star. It achieved better while spending less than some states in the same category- namely Rajasthan, Gujarat and Karnataka. Madhya Pradesh’s underachievement can be explained by the lower Rs 609 per head. However, the curious case is Rajasthan. Despite spending Rs 911 per head - which is more than all except two states in the category- it has been the worst performer when it comes to improvements in literacy rates.

Maharashtra and Tamil Nadu, which form the above 70% but below 80% category, both have spent more than Rs 1,000 per head with Maharashtra spending a handsome Rs 1,360 per head. However despite spending more per head Maharashtra has achieved less when it comes to rate of growth in literacy rates.

Goa Spends Maximum

In the elite club of above 80%, Goa spent the highest Rs 3,476 per head while Kerala spent Rs 1,297 per head. Kerala is behind only Goa and Maharashtra when it comes to spending on education, but tops the charts in absolute literacy rates. The story of Goa and Kerala seem to be linked to the amount it has been spending on education per head.

Even though it is very difficult to draw a specific prescription for all the states, what is obvious is that at low levels of literacy much can be achieved with lower amounts of money. Bihar and Uttar Pradesh are examples. However spends have to rise if more has to be achieved starting from a higher level of literacy. Such is the case with Goa, Kerala and Maharashtra.

Another point which is worth mentioning is the efficiency of spending. Orissa, it seems, has efficiently allocated its educational spend. The case with Rajasthan is just the opposite.