Fixing Primary Education in India

Much of the billion plus population lives in the villages and small towns. The only schools accessible to the children in these places are the government run primary and secondary schools. Some of these schools are in such dilapidated state that its a miracle that any education if any happens at all.
A 2005 study of government schools by Pratham, an NGO, found that 35% of schoolkids surveyed between the ages of seven and 14 failed a reading test involving a simple paragraph, and 41% of them could not subtract or divide. A 2006 study found that half the children who enroll in the first standard drop out before reaching the eighth. A 1999 government report stated that just 53% of the accredited public schools in rural North India were engaged in teaching during surprise visits on school days.
The state and central government together send about Rs 3000 per student through the public education system. So it is not a question funds but how the funds are spent. If you read Milton Friedman's book "Free to Choose" he mentions the four ways that you can spend money. One of the four ways is to spend somebody elses money on somebody else. When this happens, there seems to be a lack of accountability as well as false sense of ownership. This is analogous to the government spending the tax payers money on public schools without having the right policies and processes for accountability on how this money is spent.
In order to make better use of the government funds and to ensure that funds are spent on prudently and wisely, one of the solution would be develop a educational voucher system as proposed by Milton Friedman. Parents would be given the vouchers and can use to at any school of their choice. The schools can then redeem the vouchers. This will help create competition between schools and make them more efficient, improve their standards and help minimize waste.
In order to ensure that the quality of education is maintained at these schools,the government must develop policies and standards against which these schools are compared. The government must also take a carrot and stick approach by rewarding schools that are performing better and putting improvement actions for schools that are below par to help them raise their standards.
Unless the government starts putting policies and process in place to ensure accountability on how the money is spent, the miserable state of primary and secondary schools will continue. India cannot afford the status quo in this era of globalization.