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Higher Education Policy

Liberalisation of higher education services in India should not be viewed from the point of view of generating revenues but as a strategy to promote the quality of its own higher education system. Further, attracting students from outside for postgraduate study and research opportunities in India will be able to fuel innovation and enterprise in the higher education system.

Higher Education Policy

Many Contradictions

Liberalisation of higher education services in India should not be viewed from the point of view of generating revenues but as a strategy to promote the quality of its own higher education system. Further, attracting students from outside for postgraduate study and research opportunities in India will be able to fuel innovation and enterprise in the higher education system.


f the three factors involved in production – land, labour and capital, it is labour and more particularly the quality of labour that is the key determinant for a country’s competitiveness. It is, therefore, not surprising that there is a strong correlation between endowment of skilled labour and the gross domestic product (GDP) per worker across countries. Higher education enhances a country’s capacity for participation in an increasingly knowledgebased world economy and has the potential to enhance economic growth and reduce poverty.

India with its huge population in the working age group and a large system of higher education has attracted world attention in recent times. There is a sense of euphoria about the Indian success in the IT services and now IT-enabled services. At a recent international exposition on trade in services, the prime minister talked about India becoming a knowledge supplier to the world. Industry leaders, on the other hand, express concerns about the severe shortages of qualified people and unacceptable attrition rates. Most countries are faced with similar problems.

Not only the developing countries, but even the advanced countries are worried about their system of higher education. While, the Europeans lament that their universities are lagging behind those in the US, the Americans are worried that their academic leadership is threatened by complacency while the rest of the world is catching up fast. The Chinese who expanded their system of higher education from enrolling merely a 3.82 million students in 1990 to 23 million in 2006 are now faced with massive problems of graduate unemployment. China’s National Development and Reform Commission reported that 60 per cent of China’s upcoming university graduates would be unable to find work.

Several recent studies in India have revealed that the overall state of Indian higher education is dismal. This poses a severe constraint on the supply of qualified manpower. While problems have been identified and solutions found, the studies have failed to map the contradictions that exist. Unfortunately, there are far more contradictions in the Indian higher education system than most countries of the world. Based on a recent comprehensive review of the Indian higher education, this article seeks to map these contradictions in Indian higher education. In the face of new developments, it provides some directions for change and suggests that people should have realistic expectations as regards public policy towards this sector.

Indian higher education is riddled with many contradictions. It is both large and small. In terms of absolute enrolment (around 11 million students), it is the third largest education system in the world, but in terms of gross enrolment ratio, it is small

– just around 11 per cent. By taking the universities and colleges together, there are 18,000 higher education institutions in India. This is more than the rest of world taken together. Yet, the number of degree granting institutions is merely 350.

Existing Anomalies

Average enrolment in each institution is around 600. Higher education institutions in the world usually have several thousand students and many hundred teachers. Most institutions in India are very small and many too small to be viable. While undergraduate enrolment is large, enrolment in postgraduate and doctoral programmes is small. A bulk of the enrolment is in the affiliated colleges that have uniform and often outdated curriculum. Higher education courses with occupational focus form less than one-fifth of the total, while three-fourth of

Economic and Political Weekly November 11, 2006 the students in the US pursue majors at the undergraduate level that have occupational focus. At the undergraduate level, 35 per cent enrolments in China are in engineering programmes compared to about 12 per cent in India.

While reviewing growth, one sees that over the last two decades private providers of higher education have expanded rapidly, while the number of government institutions and private-aided institutions has remained by and large the same. It is primarily the non-subsidised private institutions that have responded to the demand for new kind of knowledge and skills required in the growing Indian economy that is now closely connected with the rest of the world. A majority of the private institutions offer professional courses and their share exceeds 80 per cent in many professional areas.

The small numbers of higher education institutions that are of high quality are government-funded. Their number continues to be very small, while a large expansion has been in sub-standard programmes and non-viable institutions. Industry claims that only about one-fourth of the graduates from the Indian higher education institutions are employable. As a result there are skill shortages despite large graduate unemployment.

The private organised sector in India employs around nine million people (around 2.2 per cent of the total workforce). This is so small that any expectation of it absorbing the large pool of around 3.5 million graduates coming out of the system every year is unreal. In the face of moves towards rightsizing, the public and the government sector (with 20 million people) cannot absorb many more graduates. And finally, for most jobs in the unorganised sector that employs a bulk of the Indian people, higher education qualifications are not essential. Under these circumstances, the problem of graduate unemployment will continue to persist. Higher education expansion will be dictated more by signals from the households and private demand for higher education than by the signals from the job market.

These contradictions continue. Despite very elaborate standards and the existence of many authorities responsible for maintaining standards, the overall standards of higher education have continually deteriorated, thereby reducing the value of an academic degree from India. A survey of the regulatory regimes in different countries in 2005 by The Economist pointed out that while most nations in the world are working towards relaxing norms of statutory control over higher education, India is moving in the reverse direction by imposing a more burdensome regulatory regime. Taking a cue from the US, an accreditation system has been put in place, but being voluntary with no consequences, it has failed to contain the rut in the Indian higher education.

Normally believed to be inexpensive, higher education in India is costly except in centrally funded institutions and those (that do not matter) in Bihar and Uttar Pradesh. A majority of the professional courses are offered by private institutions that depend only on fee income from the students. The government has had plans to raise fees, but the fund allocation mechanism discourages it. Despite very rigid fee caps determined by public authorities, some private unaided institutions have managed to dodge these and charge exorbitant fees from gullible students. While, the government is concerned about the commercialisation of higher education in India, students continue to be subjected to exploitation by some unscrupulous private providers. Unfortunately students who face such problems have no recourse.

Similar contradictions have been seen in public investment on higher education. The government spends merely 0.37 per cent of the country’s gross domestic product (GDP) on higher education compared to 1.41 per cent in the US, 1.07 per cent in the UK. Even China spends 0.50

per cent of its GDP on higher education, considerably more than India. Only countries such as Japan and Korea, where more than 80 per cent of students are in largely unsubsidised private institutions, is government spending at a level similar to India’s.

Contradictions in Policy

Not only is the level of public funding small, allocation too is skewed. A majority of the central government funding that accounts for around one-fourth of the total government funding goes to a small number of (around 130 out of 18,000) institutions in the country. Other institutions have either no government funding or have a much lower level of funding per institution and per student than the privileged few central institutions. Government funding is largely institutionbased and the fund allocation mechanisms obsolete, which in turn perpetuates the status quo.

Despite low spending on higher education in terms of GDP, the relative effort of the government in funding higher education in India is significantly higher than most advanced countries and China. The relative effort measured in terms of amount spent per student as a percentage of GDP per capita is 83 per cent for India, compared to 53 per cent in China, 26 per cent in the US, 31 per cent in the UK, 17 per cent in Japan and merely 5 per cent in

Anusandhan Trust

Announces the institution of the

Krishna Raj Memorial Lecture Series on Contemporary Issues in Health and Social Sciences

Inaugural Lecture

organised by CEHAT, SNDT University, the Tata Institute of Social Sciences, eSocial Sciences and The Department of Civics and Politics (Mumbai University) By

Anirudh Krishna

Assistant Professor, Public Policy Studies and Political Science, Duke University On

December 8, 2006 3 p.m. to 6 p.m.


Committee Room, SNDT University, Churchgate Campus, 1, Nathibai Thackerse Road, New Marine Lines, Mumbai 400 020

Economic and Political Weekly November 11, 2006

Korea. In the face of this reality and with competing demand from other sectors, any talk of increasing public funding for higher education to the level of around 1.5 per cent is ridiculous. To reach this level, additional money required for higher education would exceed the entire subsidy bill of the government.

Private funding for higher education that is perceived to be small is as much as 50 per cent in India. It exceeds private funding in most advanced countries. Despite high and increasing cost of higher education, financial support for students is almost non-existent. Only about 2 to 3 per cent students (mostly from middleincome families) avail of education loans compared to 85 per cent in the UK and 77 per cent in the US.

Though there are many schemes for providing financial aid to the poor students, the amount given is awfully low and procedures to secure loans are cumbersome. While, the US spends nearly $ 80 billion on higher education annually mostly in the form of student aid, India has allocated only about $ 3 million in 2005/06 for its flagship merit-cum-means scholarship scheme.

Because of its many inherent contradictions, it is not surprising that public policy on higher education in India is marred with inconsistencies. There are innumerable committees, commissions and reports and little concrete action. Public discourse is often based on rhetoric. The government is uneasy about market forces, yet it is the market forces that are increasingly shaping higher education in India. The government adopts an ambivalent stand on the growth of private institutions, yet with the interests of the ruling class and private promoters aligned with each other, private higher education continues to flourish.

The current debate on opening up the Indian higher education to foreign providers initiated by the ministry of commerce by releasing the consultation paper, ‘Higher Education in India and GATS: An Opportunity’ fails to capture many of the above contradictions. It seems to suggest that globally reputed institutions like Harvard, Oxford and MIT are just waiting to enter the Indian higher education sector. It goes on to say that liberalisation would increase the number of foreign students in India and retain the Indian students who go abroad thereby saving billions of dollars for India in foreign exchange. Many people take a contrary view and feel that foreign providers would hurt the political and cultural sensitivities of the people in India.

It is disappointing to see that rather than drawing up a concrete road map for giving a new shape to the Indian higher education in the face of new realties, the debate in India continues to be based on its unrealistic potential and unfounded apprehensions.

It needs to be realised that cross-border activities in higher education are large and growing regardless of General Agreement on Trade in Services (GATS). The negotiations under GATS merely tend to bind the autonomous liberalisation that a country undertakes to achieve its national policy objectives. The current debate is an opportunity to define these national policy objectives in the context of an increasingly interdependent world and thereby develop a realistic plan of action.

While many countries in the world have adopted pragmatic policies to serve their purposes, in India, we continue to be caught up in unnecessary debate.

Singapore and Malaysia have attracted high quality higher education institutions from many advanced countries. This has augmented their domestic capacity of quality higher education serving their own citizens. They have also been able to attract a large number of foreign students. From almost no foreign students a few years ago, Singapore and Malaysia now have over 70,000 and 30,000 foreign students respectively. China hosts more than 1,40,000 foreign students. The number of foreign students in India continues to be in the range of 15,000 to 18,000, which in fact declined during the 1990s. The three Asian countries – Singapore, Malaysia and China

– are significant global players in the crossborder higher education attracting many reputed universities from advanced countries and hosting a large pool of globally mobile students.

China has been gradually opening its door to foreign providers over the last decade. Today, the education authorities in China have approved proposals from more than 1,400 foreign higher education institutions to operate in China. While the main foreign motivation is commercial, the foreign institutions and governments have other motivations as well.

Most of the foreign academic institutions are not the top institutions in their own countries, though Yale and Cornell in the US and several reputed Australian institutions are now working in China with a variety of motivations – including providing opportunities for their own students and faculty to learn about China because of its growing importance. There is no reason to believe that motivations would be otherwise in case of India.

Regulatory Credibility

A proper and predictable regulatory regime would see higher education facilities being set up by many foreign providers in India either on their own or in partnership with domestic providers. Though, most of these are likely to be less-reputed institutions from abroad, this would augment the capacity of the Indian higher education and may even help India to get more foreign students.

An effective system of registration has to be put in place to prevent unapproved foreign institutions from operating in India and to ensure that students are exploited. Good quality foreign institutions could also enter if proactively persuaded and facilitated. In terms of export potential, India can attract a larger number of foreign students. Higher education institutions here could also set up their campuses abroad. There are however many practical limitations and several contradictions in policy that need to be sorted out. It is however estimated that India could at best generate only about 1 to 2 per cent of the overall expenditure on higher education through export provision.

Liberalisation of higher education services in India should therefore not be viewed from the point of view of generating revenues, but as a strategy to promote the quality of its own higher education system, and as a means of creating a multicultural ambience on its campuses so as to promote diversity and international goodwill. By attracting bright students for postgraduate and research in India, it will be able to fuel innovation and enterprise in the higher education system.

It is now increasingly clear that the growth on Indian higher education will be largely through private provision. Private institutions now compete with each other for students. Some of them will enter into a variety of arrangements with foreign institutions with a view to enhance their prestige and entice students. It would be increasingly difficult for any government authority to regulate this trend.

With increased and varied opportunities available within the country, many students with capacity to pay would prefer to study in India rather than go abroad to less reputed institutions. Though highly reputed institutions abroad will continue to attract both bright and fee paying students from India.

Economic and Political Weekly November 11, 2006

The changing dynamics of the higher education sector and growing global interaction and interconnectedness will see several interesting developments in the cross-border activities in higher education in India. Many of these developments are inevitable and not subject to government regulation.

Further, a look at the domestic higher education provision in the global context is important because of its direct link with large and growing trade in professional services. Estimated at more than $ 300 billion annually, India has a small share. These are manpower intensive services and the changing demography suggests that India has a huge potential.

According to the United Nations, over the next five years, India will contribute an additional 44 million to the global labour pool. During this time, the US workforce will expand by 10 million, Europe’s will not increase and Japan’s will decline by three million. In this scenario, it is important that people in India have access to high quality higher education and training system whether within the country or abroad.

For the greater acceptability of the Indian graduates in the global labour markets, standards of Indian higher education have to be benchmarked with the global standards. This would give the Indians and India a distinctive competitive edge and public policy needs to be geared to this. Unfortunately, over the last two decades, unplanned and chaotic growth of higher education has resulted in deterioration of overall standards lowering the value of an academic degree from India. Restoring the credibility of higher education in India is therefore utmost important. For global recognition of its qualifications, India needs to work towards the harmonisation of its academic standards with internationally accepted practices.

While the domestic regulation must be investment-friendly and forward-looking, the loopholes in the existing system need to be plugged to enhance the credibility of an academic qualification from India.

In sum, the country requires forwardlooking policies on higher education. There is a need for investment both from public and private sources in Indian higher education. The private sources could even be foreign sources. The country needs an environment for more domestic as well as foreign competition. This would require a review of the regulatory arrangements and adopting a pragmatic approach. A greater clarity is required on what

servesnational policy objectives best. And [This is based on ICRIER Working Paper No 180 available at and chapter in the

finally, public policy has to be rooted in

forthcoming book on ‘Trade in Services’ by the

the realities of Indian higher education

Centre for Trade and Development (CENTAD),and take into account its many contra-New Delhi.]dictions. Even with all this, the expectations have to be realistic.


Economic and Political Weekly November 11, 2006

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