AUTHORS: RASHI SINGH, AROHI, ANANYA GUPTA, HANNAH, DISHA GOSWAMI, HARSHAD, PRINCE, PARVATHY  Abstract India’s public expenditure on school education has increased over the past two decades, although independent evaluations of early learning are much lower than required competencies for grades. The difference between investment expenditure and learning outcomes achieved is precisely the issue addressed in this paper. Drawing on a state-level panel that pairs disaggregated education-budget data with structural inputs (pupil-teacher ratios) and independently assessed learning outcomes (ASER), the study progresses from macro-level trend analysis to pooled cross-sectional correlation and a first-differenced, state-fixed-effects panel. The descriptive record shows education’s share of state budgets drifting downward even as classroom staffing improved, while learning followed a non-monotonic, V-shaped path of pandemic-era decline and partial recovery. Once state heterogeneity is differenced out, neither aggregate expenditure share nor pupil-teacher ratio retains a statistically significant association with learning. Rather than implying that public spending is irrelevant, the results indicate that aggregate expenditure is a poor proxy for the quality of education: the expenditure-learning relationship in India is conditional, regime-dependent, and heterogeneous across states. The paper argues that whether, and by how much, expenditure improves learning in India’s lowest-performing states remains the critical unanswered question in Indian education finance, and it specifies threshold and quantile regression on disaggregated data as the targeted next step this baseline evidence motivates. Keywords: public education expenditure; learning outcomes; ASER; state-level panel; fixed-effects regression; threshold regression; quantile regression; NEP 2020; NIPUN Bharat; expenditure composition; education finance; India 1. Introduction Imagine a large, three-storey building -well maintained, equipped with classrooms, laboratories, and air conditioning: a government school. You enter a Grade V classroom and, for the sake of curiosity, ask three students to solve a long-division problem. Only one can; the others visibly struggle. What went wrong? The question is not rhetorical. A World Bank assessment reports that nearly half of India’s ten-year-olds cannot read and understand a simple text, and ASER 2024 finds that three out of four Standard III students in government schools cannot read a Standard II textbook. They are not only numbers, they represent the reality of students in government schools today. “Education is the most powerful weapon which you can use to change the world,” has been a common quote for many years, but the facts on basic education speak a different tale. India’s school-education system presents one of the most consequential puzzles in contemporary public policy: which is an increased investment in schooling for children without any commensurate gain in learning levels. Since the introduction of the Sarva Shiksha Abhiyan program, which made universal elementary education central to national policy, there has been a significant rise in government expenditure on schooling. But when the question shifts from whether children attend school to whether they learn while attending it, the picture changes completely. The Annual Status of Education Report (ASER), which measures foundational reading and arithmetic among school-going children, has documented for nearly two decades that most children in government schools cannot read or perform arithmetic at grade-appropriate levels. This paper uses the above dilemma as the central analytical issue and poses a series of questions: Is greater spending better for learning, and under what circumstances would the public money spent have the biggest impact on learning? The questions need to be explored with a better understanding than just asking whether there is a relationship between spending and learning. Issues such as what type of spending, spending levels, and the conditions of spending need to be considered. As equally important is the diversity of the federal education system in India where expenditures and learning outcomes differ from one state to another. With regard to this problem, the need for an effective educational policy was greatly emphasized by the implementation of the National Education Policy (NEP) 2020, which symbolizes an unprecedented institutional change with respect to India’s perception of educational success from “schooling for all” to “learning for all.” This reframing is, in effect, an official acknowledgement that the input-expansion model of the Sarva Shiksha Abhiyan era has reached diminishing returns with respect to what ultimately matters. The existing literature on the expenditure-learning relationship in India leaves an important gap. No prior study estimates that relationship on a multi-year, multi-state panel while simultaneously allowing for non-linear threshold effects and permitting the effect to differ between low- and high-performing states. Every earlier design falls short on at least one dimension: two-point compound-growth comparisons and single-state case studies produce findings that cannot be generalised and cannot identify the functional form of the relationship, while simple correlational designs impose linearity and assume that the relationship between spending and learning is constant across all spending levels -an assumption the literature itself predicts to be wrong. This paper therefore examines the relationship between public education expenditure and learning outcomes across Indian states within a state-level panel framework. It advances two propositions that the ASER 2024 pedagogy-driven recovery makes plausible: first, that the composition of spending moves learning outcomes more than its volume; and second, that treating education expenditure as a single aggregate is the central measurement failure of the prior literature. The novelty of the study lies less in asking new questions than in replacing poorly posed ones with better ones, and in deploying a tiered empirical strategy in which each estimator is a targeted response to a documented failure of previous work. The analysis reported here establishes the descriptive and fixed-effects baseline; on the strength of what that baseline reveals, it specifies threshold and quantile regression on disaggregated fiscal data as the analytical program the evidence motivates. 2. Literature Review Public expenditure on school education in India has risen substantially, in nominal and real terms, over the past two decades, yet independent assessments continue to record learning levels far below grade-appropriate competency. This chapter reviews the empirical, theoretical, and policy literature bearing on that paradox, drawing on descriptive budget-trend analyses, regression-based panel studies, efficiency-frontier estimations, systematic reviews, and state-specific case studies. The review is organised thematically rather than source by source;