India’s Higher Education Policy – New Rules

The Hindustan Times is carrying a print article today (14 Sept, 2006) on plans to invigorate the higher education system.

Centre plans new ‘ground rules’ for higher education

The Union commerce ministry wants to change the ground rules in the higher education sector through a liberal “playing field” for the private sector, including foreign education providers (FEPs).

In a consultation paper titled, Higher Education in India and the GATS, the ministry has proposed a separate regulatory framework for private players – both domestic and foreign.

On the face of it, anything aimed at improving higher education in India is good. Higher education in India is in short supply, as evidenced by the scores of students going abroad each year, often to dubious institutions. And while we trumpet our large engineering talent pool, according to the McKinsey Global Institute the talent pool is smaller than it appears and the quality of graduates highly variable. Most important, from a long-term perspective, our institutions are not involved in the basic research that is essential to innovation and long-term competitiveness.

Yet, one must worry if it is the commerce ministry, not the education or HRD ministry (though with Arjun Singh leading the latter its probably still better this way), that defines education policy. Education in India is indeed big business, and the purpose of this paper is to evaluate if foreign institutions should be allowed access to the Indian market and at what terms. That, however, should not be the primary focus of education policy.

Public spending on education is similar to spending on healthcare or infrastructure. From an economics perspective, it is a public good. From a social contract perspective, it is the reason why government exists. The priorities of the commerce ministry are, unfortunately, driven by neither perspective, but rather by a short-term financial perspective. As the article suggests, the ministry wants to expand the number of FEPs, and create a financially sustainable model:

Suggesting a paradigm shift from fully government-funded or totally unaided higher education institutions, the paper calls for a combination of public and private participation.

To make the new model financially viable the ministry has suggested a cost recovery regime, at the core of which is a suitable tuition fee structure. “This will reduce the financial constraints faced by higher education instutions,” the ministry said.

Financial sustainability is important, but cannot and should not be the overarching goal of a country-wide education policy. Governments make investments in public health, education, and infrastructure not because they will generate a financial return but because they are essential to the State’s development. The purpose of government is to serve its people, and providing education is one of its functions. If not, we get the sort of twisted logic the ministry has used in encouraging private sector spending:

“Public spending on higher education should be discouraged since private benefits outweigh social benefits. Subsidising higher education benefits the rich more than the poor.”

It is true that education, particularly higher education, generates both individual and public benefits. That, however, is not the same as saying that ‘private benefits outweigh social benefits’. And to go as far as saying that such spending benefits the rich more is utter nonsense.

If anything, both are reasons for more public spending on higher education – not less. Because education is a social investment, government is obliged to and should be held accountable for its success – and in the present case failure. And because the poor cannot afford the best education, the government must step in to fill that gap. Beyond mere wealth redistribution there are compelling reasons why the poor should not be excluded from the best higher education. We live in a world where human talent is a competitive advantage. By excluding a large proportion of our potential talent pool, we reduce our own competitiveness.

There are two models of higher education to consider. The American one is largely private funded through personal finances or government sponsored loans that see most students graduate with substantial debts. By contrast, the European system emphasizes uniform and cheap (or free) education through graduation, with the Scandinavian system, as a special case, investing heavily in a free but excellent education system. This has been applauded as one reason for Finland’s competitiveness.

In the past, the Indian state was criticized for being overbearing. In recent years, however, it has slowly withdrawn from many aspects of governance, including basic services. As a result, private spending on education has increased. Today, even the poor turn to private schools and colleges, given their inability to find affordable and decent (not even good) public education.

That education – particularly higher education – creates private benefits is indeed a reason to evaluate the proportion of private versus public spending. To take that as the starting point of education policy, however, is to start off on the wrong foot. It is a shocking example of a government hiding its complete failure to provide an acceptable level of education, both primary and higher and shirking its responsibility under the guise of economics. Regardless of the policy results this logic does not portend well for the country and the government should not be allowed to escape with it.

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