ABSTRACT
Conventionally, higher education is heavily subsidised by the state in almost all countries. This has been justified by the recognition of education as capable of producing externalities, as a public good (and as a quasi-public good in case of higher education), as a merit good, as a social investment for human development, and as a major instrument of equity, besides as a measure of quality of life in itself. The launching of neo-liberal economic reforms in most developing and developed countries of the world has led to shrinking the public budgets for higher education. Recent trends in funding higher education are associated with changing perceptions on the role of higher education. As a result, business models are adopted in setting and running universities. Private universities, commercial universities, corporate universities and entrepreneurial universities are becoming the order of the day. The several basic characteristic features of higher education, such as higher education as a public good, merit good, social investment and as a human right are under attack. Recent evidence shows that many universities are experimenting with cost recovery measures, generating resources from student fees and other non-governmental sources. The effects of these cost recovery measures on the quantity, quality and equity in higher education need to be examined for sound policymaking. This chapter presents a quick review of some of these arguments being made in favour of and against public financing of higher education and restates how important it is for the state to finance higher education. It is argued that significant reduction in public subsidies to education is neither feasible, nor desirable even if feasible.
