Impact of Demonetisation on Education Sector
One of the key advantages of demonetization is to create a level playing field for aspiring and deserving students, who are unable to pay capitation fee, which has been widely prevalent in Indian private education system.
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Money in the education ecosystem flows in many forms. Imagine a student paying his fee to an institute. This fee has multiple components as admission fee, tuition charges, transportation charges, hobby activities fee, uniform money to name a few. The aggregated amount paid by parents is disbursed in different bank accounts based on the various fee elements mentioned herewith. This payment by parents in part cheque/DD/digital and part cash. Hereon, with the demonetization, a lot of hassles get sorted for the institutes as well as parents. On parts of both ends, the cash management gets eliminated and there is total management system accountability for the money trails. Auto debit to the payer account and credit to the receiver account ensures that there are no chances of any revenue leakage in the system. This also will ensure that capex and opex accountabilities are assigned to the right heads rather than facing issues of reconciliations.
One of the key advantages of demonetization is to create a level playing field for aspiring and deserving students, who are unable to pay capitation fee, which has been widely prevalent in Indian private education system. Such fee is paid by parents of students who have underperformed in their academics and are able to pay donations – sometimes over 100% of the fees, to demanding educational institutions. Going forward, the amount of unaccounted wealth with many of these parents is likely to considerably reduce, resulting in increased opportunities for those students who are capable, but previously edged out by capitation paying students.
The next wave of demonetization impact is on the larger education ecosystem where vendors management by institutes will go digital and bring in total discipline on payments management. However, the most important positive impact is the low demonization spends on campus by students. These transactional costs are for canteen and monthly food bills, buying stationery, getting notes arranged and so on. Till now, it was a tedious task to carry money for petty educational expenses, which now will be digital and hence on the click of a button. It may be a lesser talked habit but short term loans between students are regular and its accountability has always been an issue. Now it’s assumed that each student will have a digital wallet and will be able to keep track of receivables and payables, bringing maturity and discipline in money management.
This round of demonetization by the government has also lead to a high proportion of people being forced to changing their purchase habits and increasingly uses online payment wallets, credit and debit cards, to carry out their purchases. Education sector will also benefit from efficiencies brought by this new payment infrastructure, in terms of fee payments, benefitting both for educational institutions and for parents/students.
Demonetization has resulted in a large proportion unaccounted black money out of circulation. This in conjunction with the cash collected due to recent spate of bank deposits will help the government increase its expenditures on key public sectors including education. Making of world class campuses is possible only when the money on the table is available. With the same becoming accountable, push to make ivy league status institutes in India is no longer a dream, but an achievable vision.
Demonetization and subsequent increase of payments through the banking system for purchases by Indian population will increase tax collection by the government from 4% to a higher proportion of the population. Even if one were to assume similar levels of system leakages, as previously, in terms use of tax money towards creating public infrastructure, the extra tax collection should lead to a higher level of government expenditure towards sectors including education. This will help improving physical infrastructure and facilities, increasing salaries of teachers and staff and provide an overall lift to the sector in India.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house
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