According to the human investment revolution in economic thought (Schultz 1961) and in India the Education Commission (GoI 1966) and more particularly the National Policy on Education 1968, expenditure on education is an investment in human beings, an important investment for development, yielding high individual and social returns — economic, social, cultural and political — some of which are tangible, and many of which are also regarded as externalities, deserving high priority and an activity on which we need to spend more and more. It follows that expenditure on education is to be treated not as a burden on the public exchequer and as an activity for which resources have to be saved, but as priority investment. Education is widely perceived as a crucial vehicle for the upward mobility of individuals — socially, occupationally and economically — and therefore is an important instrument of equity in society. In addition, education is regarded as an important component of human development and a fundamental right, having both intrinsic and instrumental values. Therefore, public policy towards education is universally one of the most critical areas of modern development strategies and public expenditure on education is one of the most signifi cant aspects of such a policy. Public expenditure on education assumes even greater signifi cance, especially in developing societies like India, in ensuring equity and quality in education and at the same time in promoting it as a public good and as a human right.