How spending on education trends like a luxury good across classes

Under Engel’s law in economics, when a family gets richer, it does not eat proportionally more; it eats a little better, and food takes up a smaller portion of the family’s total spending. Thus, a question arises: when an Indian family gets richer, what happens to the money it spends on its children’s schooling?Data from the latest Comprehensive Modular Survey on Education (which was conducted by the National Statistical Office between April and June 2025) shows that a household that is 10% richer spends roughly 14% more on its children’s schooling. In technical terms, the expenditure elasticity is 1.42. Anything above 1 means the item behaves like a luxury good. Education, on this measure, sits alongside luxurious items.(Sign up for THEdge, The Hindu’s weekly education newsletter.)Across the 137.9 million Indian households with at least one child in school, the average annual outlay on school education, private coaching and hostel fees comes to ₹26,615. That is about 13% of everything the average household consumes in a year.The burden is not spread evenly. Families in the poorest tenth spend about ₹11,700 a year on education, against total consumption of roughly ₹1.03 lakh, which works out to close to 12%. Families in the richest tenth spend about ₹67,200, against consumption of roughly ₹3.55 lakh, or nearly 20%. One in five of these households spends more than a fifth of everything it consumes on educating its children, and nearly half spend more than a tenthFor the one in five households that spend more than a fifth of everything they consume on schooling, education is not just another line in the budget. It is one of the largest things the family buys.Join THEdge LinkedIn groupHousehold education spending is a bundle: school fees, transport, uniforms, textbooks and stationery, coaching, hostel charges. The school fee has an elasticity of 3.34. It is not merely a luxury, it is the most income-sensitive item in the entire bundle, and it accounts for 47 paise of every education rupee. Transport follows at 2.83 and uniforms at 2.08.Then the pattern reverses. Textbooks and stationery come in at 0.86, below 1, which puts them in the necessity category. Hostel charges come in at minus 0.21. It shows poorer households spend more on them than richer ones. It is a direct reflection of the residential school system that serves tribal and remote areas. And private coaching, which absorbs 16 paise of every education rupee, comes in at 0.90. Statistically, it cannot be separated from 1. What that means is that coaching spending rises roughly in step with the household budget and not faster. It does not scale with income the way the fee does. Figure 1: Spending on school education, private coaching and hostel fees as a share of the household’s total consumption, by consumption decile.Coaching is what everyone buysMoving from the poorest tenth of students to the richest, the share attending private schools goes from about 18% to about 61%. The share receiving private coaching moves from about 19% to about 34%. Figure 2: Expenditure elasticity of each component of household spending on school education.In fact, coaching takes up a larger share of the education rupee among poor families than among rich ones. For the bottom decile, it is close to 18 paise in the rupee; for the top decile, it is under 13. Coaching is not the anxious indulgence of the urban middle class. It is something families at every income level buy, and for the poorest it is a bigger part of what they are paying for than it is for anyone else.Figure 4: Composition of the household’s annual education spending, by consumption decile.The gap between the bottom and the top confirms it. The richest tenth spends ₹55,553 more per year on education than the poorest tenth. Of that gap, ₹35,120 (63%) is the school fee alone. Transport contributes 13% and coaching 12%. That is a recurring annual commitment, payable whether or not the harvest was good, and one that cannot be paused for a term without the child losing the seat Take only those households whose children are all in government schools, and compute the elasticity for them alone. It comes to 0.74. For these families, education behaves like an ordinary necessity. Now take only the households that already have a child in a private school. Their elasticity is 0.89. The elasticity of 1.42 shows up only when you put them together, because what rising income actually buys in Indian education is not more of the same thing. It is a move from one system to the other. Figure 5: How the difference in annual education spending between the bottom and top consumption decile is built up, component by component. Percentages are each component’s share of the gap.This is why coaching is the poor family’s option and the school is the rich family’s. Tuition can be bought month to month, dropped when money is short, and resumed. A school fee cannot. One is a purchase; the other is a commitment. The pattern varies sharply by State. In Uttarakhand, the elasticity is 2.63; in Telangana 2.08; in Jharkhand 2.03; in Punjab 2.01; in Odisha 1.82; in Kerala, 1.03; in Tamil Nadu 1.03; and in Bihar at 1.01, all of them statistically indistinguishable from proportional spending. In Kerala and Tamil Nadu, rich and poor households are buying broadly similar schooling. In Bihar, very few households are buying much of anything. Figure 6: Expenditure elasticity of household spending on school education, by State.What this meansRich and poor Indian families buy coaching at much the same rate. What separates them is the school itself. Only about one in five of the poorest students attends a private school, compared with three in five of the richest, and the fee alone accounts for nearly two-thirds of the spending gap between them. The inequality, then, is not that better-off parents buy more tuition for their children. It is that they buy their way out of the government school. This points to where the effort belongs: making the government school good enough that leaving it stops being worth the price.(Raunak Maitra is an Academic Associate with the Economics Team at Azim Premji University, Bhopal, and Karan Babbar is an Assistant Professor of Economics at XLRI Jamshedpur.)