Using a panel of 15 major states from India, this paper examines patterns and changes in the allocation of government funds for education, particularly higher education, over a span of two decades, before and after the introduction of the new economic policies. State real per capita income, with elasticity less than one, is found to significantly enhance educational expenditure at the aggregate, elementary, secondary and higher levels. Moreover, contrary to general perceptions, education expenditure at all levels has been significantly lower after liberalisation vis-Ã -vis the pre-economic reform era. This is particularly detrimental for the vulnerable sections of the population, i e, for females and backward social groups. It is evident that even after controlling for the economic reform process, privatisation exerts a negative significant impact on expenditure on higher education.
