Financing for equity in higher education

1. Education resources to subnational governments

Introduction

Key financing indicators (UIS Data)

The gross enrolment ratio for tertiary education for both sexes is 34.42% (UIS 2024 estimates). The initial government funding per tertiary student as a percentage of GDP per capita 56.65 (UIS 2021 estimates). The initial household funding per tertiary student as a percentage of GDP per capita 14.05 (UIS 2005 estimates).

Tuition-free status

India does not have a national law or policy that provides tuition-free education at the public tertiary level. The 2009 Right of Children to Free and Compulsory Education Act guarantees free and compulsory education only at the elementary level for children aged 6-14, covering eight years of schooling. Public universities and colleges at the central and state levels therefore levy tuition and related fees, although these are regulated and substantially subsidised by government authorities. Differential and subsidized fees are fixed for students disadvantaged by poverty, ethnicity, disability, remoteness, and gender.

Governance

Institutions in higher education are distinguished by management, ownership, and financing criteria. Broadly, these criteria lead to classification of higher education institutions into three groups: government institutions, private institutions and government-aided private institutions. Higher education financing is a shared responsibility between the Union government and the state governments. At the federal level, the Ministry of Education, through its Department of Higher Education, formulates national policy, allocates Union budgetary funds, and finances central institutions, regulatory bodies, scholarship schemes, and research support. Governance and funding of higher education institutions are under different Ministry/Departments. General and technical education is under Ministry of Education/Department of Higher Education, medical education and research under Ministry of Health and Family Welfare/Department of Medical Education, agricultural education and research are under Ministry of Agriculture and Farmer Welfare/Department of Agriculture.

In general, Central and State public universities are statutory (i.e. created by acts in parliament and state legislature). Statutory and funding agencies such as the University Grants Commission (UGC) and the All India Council for Technical Education play key roles in regulating institutions and disbursing public funds, while the Higher Education Financing Agency provides loan-based financing for higher-education infrastructure. Concurrently, state governments, through their higher-education departments, fund state universities and colleges and operate state-level scholarships and fee-support programmes.

The following profile is focused on general and technical education under the Ministry of Education/Department of Higher Education.

1. Education resources to subnational governments

Funding for higher education from the Centre to States and Union territories (UTs) is best understood as operating through two distinct intergovernmental channels, of which the specific-purpose, earmarked transfer is the most relevant for higher education. General-purpose transfers - tax devolution and Finance Commission grants - flow from the Centre to States and UTs as untied resources and may finance higher education only indirectly, at the discretion of State governments. By contrast, higher education appears most clearly in specific-purpose transfers routed through ministries, typically justified in the Constitution (Article 282) and implemented through Centrally Sponsored Schemes.

The core mechanism here is Rashtriya Uchchatar Shiksha Abhiyan (National Higher Education Mission), launched in 2013 and subsequently continued in modified form as Pradhan Mantri Uchchatar Shiksha Abhiyan (PM-USHA) (Prime Minister’s Higher Education Mission). Funds are released to State governments in prescribed cost-sharing ratios (60:40 for general category States, 90:10 for special category States, and 100% for UTs), and States are the accountable recipients responsible for matching contributions, utilisation, and reporting.

Funds then flow administratively from the State government to the State Higher Education Departments and onward to identified public universities and colleges. Allocations are conditional on the approval of State Higher Education Plans, through which States commit to system-level reforms and articulate strategies to address access, equity, and quality. Equity considerations are embedded not through quotas in intergovernmental sharing, but through programme design and targeting such as prioritisation of low-gross enrolment ratio (GER) districts, disadvantaged social groups, and special geographies.

2. Education resources to institutions

Funding for private universities in the absence of public institutions

There is no systematic mechanism through which the government funds private universities as substitutes when public universities are absent, however, funds are provided in regular circumstances. The 1956 University Grants Commission Act provides that the University Grants Commission (UGC) may allocate and disburse grants to universities established or incorporated by or under a Central Act, to other universities, and to institutions deemed to be universities under Section 3.

For autonomous institutions including deemed universities and private colleges, funding is through grants-in-aid which is not statutory and mandatory. State governments fund the private colleges in higher education through grants-in-aid policy/Codes. Such grants may provision for infrastructure facilities and maintenance expenses (e.g. salary payments) in State universities, colleges and autonomous institutions. Private colleges and autonomous institutions which receive grants in aid from the State governments are called government-aided autonomous/private institutions.

As per Section 2(f) and Section 12B of the UGC Act -1956, government-aided and other private colleges, permanently affiliated to the University of jurisdiction, are eligible for development grants from the UGC. No private University is given grants-in-aid under Department of Higher Education, but private universities may receive non-recurring research grants from Government of India (Statement 9 in Union Budget 2026-27).

Allocation and equity

The central government directly allocate funds to higher education institutions, without state governments as intermediaries, but only for institutions under its jurisdiction. Through the Ministry of Education, institutions such as central universities, Indian Institute of Technologies (IITs), and other centrally funded institutions receive direct budgetary grants, largely routed via the University Grants Commission (UGC) (for universities) or directly from the ministry (for autonomous institutions like Indian Institute of Technologies (IITs)). These grants cover salaries, infrastructure, research, and operations, and include targeted equity-linked funding through earmarked schemes and components, such as fellowships, scholarships, hostels, and infrastructure support (See Section 3). The UGC also provides General Development Assistance to select State Universities for infrastructure development, staff, books, journals, and equipment.

3. Education resources to students

Admission for vulnerable groups

The 1956 University Grants Commission Act mandates central universities (except minority institutions under Article 30(1) of the Constitution) to strictly implement reservation policies, while state universities and their affiliated colleges follow reservation percentages as prescribed by their respective state governments. In central universities, a uniform reservation policy applies to admissions and recruitment: 15% for Scheduled Castes (SC), 7.5% for Scheduled Tribes (ST), 27% for Other Backward Classes (OBC), and 10% for Economically Weaker Sections (EWS), with additional horizontal reservation for Persons with Disabilities (PwD) (4% in direct recruitment, 5% in admissions, and 4% in promotion), while SC and ST also receive reservation in promotions up to 15% and 7.5% respectively.

Many universities provide supernumerary or special quotas for groups such as orphans, children/widows of defence personnel, Kashmiri migrants, single girl children, and candidates with outstanding achievements (for example, sports), though these vary by institution.

To avail these benefits, candidates must still participate in the standard admission process or entrance examinations (e.g., National Eligibility cum Entrance Test (NEET) or institution-specific tests), but are considered within their reserved category, often with relaxed cut-offs or eligibility criteria as per institutional rules; claiming reservation requires submission of valid, current category certificates issued by competent authorities (caste certificates for SC/ST/OBC, non-creamy layer status for OBC, income and asset certificates for EWS, and benchmark disability certificates for PwD), and failure to produce proper documentation typically results in the applicant being treated as unreserved (general category) for that admission cycle.

In parallel, the Ministry of Social Justice and Empowerment’s Scheme of Free Coaching delivers high quality coaching to economically disadvantaged Scheduled Castes (SC), Other Backward Classes (OBC), and beneficiaries of PM CARES Children Scheme (added from 2024-25) to help them appear in competitive examinations for gaining suitable employment in public or private sector and for obtaining admission in reputed technical and professional education institutions therein.

Scholarships, grants and loans for vulnerable groups

The government is implementing a range of scholarship, fellowship, and loan schemes, administered by different ministries and institutions, to offer financial support to students from multiple categories.

The Ministry of Tribal Affairs administers two major Central Sector financial support initiatives for Scheduled Tribe (ST) students: the National Scholarship Scheme (Top Class) for Higher Education of ST Students and the National Fellowship Scheme for Higher Education of ST Students. The Top Class Scholarship supports eligible fresh ST students pursuing higher studies in prescribed courses at 265 identified premier institutions across the country for the entire duration of the course, subject to a family income ceiling of INR 600,000 per annum. It comprehensively covers tuition, admission and non-refundable fees, and stipends. Complementing this, the National Fellowship Scheme supports meritorious ST students pursuing Master and Ph.D. programmes in UGC-recognized universities, deemed universities, government-funded institutions, and Institutes of National Importance, with 750 fresh fellowships awarded annually based on merit in the Master’s degree, with preference to girls, students with disability, and PVTGs. The fellowship is provided for the full duration of the programme at INR 25,000 per month for master and INR 28,000 per month for Ph.D., along with admissible contingency and housing allowances as per guidelines.

The Ministry of Social Justice and Empowerment’s Scheme of Top Class Scholarship supports Scheduled Castes (SC) students to pursue studies beyond Grade 12 by providing financial help, and once awarded it continues till course completion subject to satisfactory performance. There are also fellowships for Other Backward Classes (OBC) and Scheduled Castes (SC) students to obtain quality higher education in universities, research institutes, and scientific institutions in India. The National Overseas Scholarship Scheme provides financial assistance to low-income meritorious students belonging to the Scheduled Castes (SC), De-notified Nomadic and Semi-Nomadic Tribes, Landless Agricultural Labourers and Traditional Artisans category to pursue higher education abroad, 30% of the scholarships are earmarked for female students. Regarding loans, the Ministry’s Dr. Ambedkar Scheme of Interest Subsidy on Educational Loan for Overseas Studies (in effect from 2017) offers an interest subsidy on education loans for overseas higher education to Indian students belonging to Other Backward Classes (OBC) or Economically Backward Classes (EBC) with annual family income up to INR 25000, who have secured admission to approved master or PhD programmes abroad and availed an education loan from a scheduled Indian bank under the Indian Banks’ Association (IBA) Education Loan Framework. Furthermore, The National Backward Classes Finance and Development Corporation (NBCFDC), functioning under the Ministry, provides educational loans to OBC students living below double the poverty line for pursuing general, professional, and technical courses or training at graduate and higher levels, with a maximum loan limit of INR 1 million for studies in India and INR 2 million for studies abroad, an interest rate of 4% per annum, a concessional rate of 3.5% per annum for girl students, and loan coverage of 90% for studies in India and 85% for studies abroad.

The PM CARES for Children Scheme, with the Ministry of Women and Child Development as the nodal ministry, facilitates access to higher education loans, scholarships, and interest subsidies for children who lost one or both parents or their legal guardian due to the COVID-19 pandemic.

Pradhan Mantri Uchchatar Shiksha Protsahan [PM-USP] Yojana aims to provide financial assistance for pursuing higher studies to socially and economically marginalised but meritorious students. It has three components (i) PM-USP Central Sector Scheme of Scholarship for College and University Students; (ii) PM-USP Special Scholarship Scheme for Jammu & Kashmir and Ladakh; and (iii) PM-USP Central Sector Interest Subsidy Scheme and Credit Guarantee Fund Scheme for Education Loan.

The All India Council for Technical Education (AICTE) provides targeted scholarships and fellowships for higher education at the undergraduate, masters, doctoral and postdoctoral levels to promote technical education in AICTE-approved institutions. These include postgraduate fellowship, doctoral fellowships for meritorious full-time PhD scholars, and postdoctoral fellowships for researchers who have completed a PhD and wish to pursue careers in research and development. AICTE also offers category-specific scholarships such as Saraswati and Pragati for meritorious girl students, Saksham for differently abled students, and Swanath for students from vulnerable backgrounds such as orphans and wards of martyrs.

The Savitribai Jyotirao Phule Fellowship for Single Girl Child of the University Grants Commission (UGC) supports single girl children pursuing Ph.D. research in social sciences in any recognized Indian university or institution. The Commission also offers the Junior Research Fellowship, which provides financial support to candidates who have qualified national-level eligibility tests such as the National Eligibility Test for Junior Research Fellowship or the University Grants Commission-Council of Scientific and Industrial Research joint test, to pursue advanced research leading to masters or PhD degrees in Sciences, Humanities, Social Sciences, and Languages.

Higher-education loan framework is anchored in a set of central government schemes. Through the PM-Vidyalaxmi Scheme, the Government provides fully digital, collateral-free and guarantor-free education loans to students admitted to designated high-quality higher education institutions, with an interest subvention of 3% for eligible families up to a specified income threshold, thereby directly lowering borrowing costs. Complementing this, the Central Sector Interest Subsidy Scheme (CSIS), in operation since 2009, covers the interest during the moratorium period (course duration plus one year) for students from economically weaker sections pursuing approved professional and technical courses, ensuring that repayment pressure does not arise before employability. In parallel, the Credit Guarantee Fund Scheme for Education Loans (CGFSEL) reduces lenders’ risk by providing a government-backed guarantee on education loans without collateral or third-party guarantees.

4. Support for students’ living costs

Transportation

State governments, such as Tamil Nadu through its Schemes for the Welfare of Backward Classes, Most Backward Classes, and Denotified Communities, Karnataka through its Vidyasiri-Food and Accommodation Scholarship Scheme, Maharashtra through its Dr. Panjabrao Deshmukh Vasatigruh Nirvah Bhatta Yojna, and West Bengal through its Swami Vivekananda Merit-cum-Means Scholarship offer financial support for accommodation, transport, and textbooks.

In addition, various state government provide free or concessional bus travel in state road transport corporation busses for students, especially for girls and transgender students. This includes Free Bus Travel for Women scheme in Punjab, Shakti scheme in Karnataka, Vidital Payanam (Zero Ticket Bus Travel) in Tamil Nadu, Stree Shakti scheme in Andhra Pradesh and Pink Tickets scheme by Delhi Government. These schemes are not a part of Department of Higher Education but benefits the students in higher education.

Accommodation

At the central level, the 2020 National Education Policy explicitly recognises state support for student accommodation and learning resources in higher education, including the expansion of hostel and residential facilities and the provision of digital and physical learning resources. However, this support is not provided as a separate entitlement. Instead, it is mostly embedded within scholarship, fellowship, and loan schemes as mentioned in Section 3. For example, the National Fellowship Scheme for Higher Education of ST Students provides housing allowances and allowances for books and computers.

Apart from the central level, state governments, such as Tamil Nadu through its Schemes for the Welfare of Backward Classes, Most Backward Classes, and Denotified Communities, Karnataka through its Vidyasiri-Food and Accommodation Scholarship Scheme, Maharashtra through its Dr. Panjabrao Deshmukh Vasatigruh Nirvah Bhatta Yojna, and West Bengal through its Swami Vivekananda Merit-cum-Means Scholarship offer financial support for accommodation, transport, and textbooks.

Textbooks

This profile was reviewed by Dr. Pradeep Kumar Choudhury, Assistant Professor at Jawaharlal Nehru University; and M.R. Narayana, Professorial Consultant (Academic & Research) at the Fiscal Policy Institute of the Government of Karnataka.

Dernière modification:

jeu 26/02/2026 - 14:50