INDIA’S HIGHER EDUCATION:

CAN IT SUSTAIN ECONOMIC GROWTH?

India, with her racing economy on one hand and seriously distressed
education sector on the other, faces a higher education crisis perhaps far deeper
than any other nation in the world today. It is estimated that barely 9-10% of
graduates of India’s archaic education system are employable. This education
crisis peaks with the demographic trends. In the next five years, one in every
four new global workers will be Indian. Alongside, India’s working age
population (15-60 years) will swell in the next two decades — in absolute terms
by 300 million and in percentage terms from 58% in 2001 to 64% by 2025. For
India, the fact of having a very large proportion of young people can become a
demographic dividend only if they are educated and have skills that make them
employable.

A study by NASSCOM and McKinsey indicates a possible shortage of

500,000 persons, in the IT industry alone, in 2010. The key problem is
employability: only about 30% of graduating engineers fit the needs of the IT
industry; it is even smaller (less than 20%) in the case of “ordinary graduates”
sought by the BPO industry. Feedback from other industries indicates similar
dissatisfaction about the employability of graduates. This points to a huge
mismatch between the skill-set needs of industry and the output of the university
system.

Despite its enormous size, the pool of skilled labor is relatively shallow,
the result of a deep crisis in higher education despite the success of a few
professional schools. The education system is not responding to market needs. A
non-existent or non-responsive feedback mechanism, or one with a very long
response time, typifies bureaucracy. Most educationists will acknowledge the
growing bureaucratization of the education system, made worse by
politicization, lack of competition and misplaced protectionist ideology that
hurts the very people it chooses to serve.

Education is one of the articles listed on the “concurrent list” of the Indian
constitution, meaning it is under the control of both the state and central
governments. In 2007, India had 18,064 colleges and 361 universities - 219 State
Universities, 21 Central Universities, 110 Deemed Universities, 11 Private Universities,
18 Institutions of National Importance (5 established under state legislations and 13
Institutes by Central Legislation). The total number of students enrolled in the
universities and colleges was 14 million, 7% of whom were engineering and
medicine students and the remaining were arts, science or commerce students.
The University Grants Commission (UGC) is the apex regulatory body for higher

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education in India. It provides funds for government recognized universities and
oversees the coordination, determination and maintenance of standards of
university education in India. The UGC has established 12 apex institutions for
distinct and divergent specialization streams, e.g. All India Council for Technical
Education (AICTE) which oversees engineering and business education, Medical
Council of India (MCI) which oversees medicine etc. All these institutions are
linked to the Ministry of Human Resource Development.

The most serious problem faced by the higher education sector is one of
over-regulation by the state bureaucracy. The regulatory bodies control the
funding, curriculum, seat allocation, fee structure and teaching appointments
within established universities leaving universities little autonomy. This is the
cause of several problems and vicious cycles in higher education which will be
examined in detail later. In addition, they also control the regulatory approval
process for establishment of new universities. This process frequently takes years
and thus, diminishes the capacity of private investment to respond to market
needs. For e.g., India experienced phenomenal growth in the aviation industry in
2001, yet approvals for aviation schools were not forthcoming. Hence, India is a
net importer of pilots and aviation engineers. The approval process is often
corrupt and opaque and result in subpar outcomes since success often depends
on the ability to manipulate the system rather than project design. Regulatory
approvals further hinder the development of vibrant, hi-tech universities since
they insist that new institutes instead of innovating academically conform to
centrally mandated course outlines, degree structures and admissions policies.
They also stipulate infrastructure requirements irrespective of cost or location.

A key element of a well functioning market- competition- is sorely amiss.

In spite of the large number of colleges and universities, the focus has been more
on quantity than quality, with the exception of a few good universities. Debates
over higher education center more on the quantity of seats available in
institutions than quality. As a result of excessive regulation, foreign universities
are not allowed to set up campuses in India and this arguably prevents
benchmarking to international standards. The middle class itself is not making
any serious demands for quality education. Instead a large portion of them are
opting for quality education abroad and thus distancing themselves from issues
in higher education at home. In the absence of meaningful degrees, competitive
exams and certifications have taken over the “signaling effect” to employers of a
candidate’s worthiness. As a result an almost parallel system of education that
comprises coaching classes for various academic entrance exams and vocational
institutions offering various certifications (eg. NIIT, APTECH, Microsoft MOS
certification etc.) has arisen. In addition, universities are now judged not on the
basis of their education but on the basis of their selection mechanisms. This
signals more of a focus on selecting already competent students rather than on

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any notion of development of human capital. In addition to poor standards and
rote learning, the emphasis on quality of research is very poor. According to Mr.
Narayana Murthy, CEO Infosys Technologies Ltd, “India has hardly produced any
worthwhile inventions. Almost every technology we use is from abroad. The reason is the
low quality and quantity of our doctoral programmes and our emphasis on rote
learning”. Companies like Reliance Ltd. have started setting up their own
institutes in order to ensure quality and employability,eg, Reliance BioSciences
Institute. Companies like TeamLease, RPG, L&T, ICICI are tying up with
universities and premier colleges like Manipal University, IIMs to offer
customized training programs. Although minimal, corporates are pushing for
change in science and technology R&D. However, research in Arts and
Humanities remains negligible even though these colleges form the major chunk
of colleges in India. In private institutions, which make up the majority of Indian
colleges, curriculum rarely includes arts and humanities courses due to a market
reactive design that focuses on technical skills demanded. Academics often argue
that this leads to lop-sided development and lack of conscientious citizenry.

Lack of funds is a major issue facing higher education. Most of the funds
available are eaten up in salaries, leading to extremely poor infrastructure.
Libraries, computer labs, research facilities are not widespread and are usually of
very low standard. Academic buildings are in varying states of disrepair, most of
the plumbing and electric infrastructure being far too old. Due to rigid fee
structures, the cost of education bears no relation the earning potential of
degrees. The state’s recovery of costs recovered from students remained at
roughly 5% the last decade. Due to the migration of many higher income group
students overseas for higher education, the state not only loses the voice of the
middle class and the contribution of great students but also a substantial source
of funds for a sector so starved financially. In 2006, there were more than 150,000
Indian students studying abroad, spending about $3.5 billion, a staggering
amount of possible funding for the higher education sector! Additionally, the
negligible signaling function of most formal degrees to employers means that
students spend considerable resources gaining certifications from vocational
training institutes like NIIT, APTECH etc. To add to this, alumni contributions
from graduates settled abroad are very low largely because of the centralization
of overseas donations to the Bharat Shiksha Kosh which denied would-be donors
of any say in how the funds would be used. The lack of autonomy of educational
institutions has been one of the biggest impediments in attracting diasporic
philanthropy for higher education. Limited funding further acerbates the need
for autonomy, since presently most allocation decisions are centrally made by the
Planning Commission, the Ministry of Human Resource Development and the
University Grants Commission. The quality of these allocation decisions depends
entirely upon the informational resources a very small group of decision makers have
access to. Such extraordinary centralization of allocations is bound to produce

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significant distortions, because it presupposes an omniscience that few decision makers
can have.

The lack of funds and serious competition for them has led to increased
politicization of university life. The “promotion schemes” of the late 1970s
enabled several mediocre academic professionals to rise to top positions of
responsibility. It removed incentives for performance and led non-academically
oriented administrators get the upper hand in university administration. As a
result, the clout of the teaching community is considerable and they form a
powerful lobby that has resisted attempts at change and reform in the
educational system. Excessive government control has several benefits to
politicians making poor universities not just a result of limited resources but of
deliberate strategy. Firstly, there is a lot of rent-seeking on contracts,
appointments, admissions and grades. The ability to make appointments also
leads to partisan politics, where ministers seek to pack universities with
academically inept supporters of their political parties. Thirdly, politicians have
emerged as the single largest providers of new higher educational institutions.
The large scale de-facto privatization of higher education, the license raj,
underground capitation fees ensure large amounts of untaxed income to
politicians since most of these universities are classified as trusts or societies.
Lastly, public education, especially in small towns, have little effect in the job
market and serve as screening grounds for future politicians. The ability to win
student elections and resort to street violence is an asset to all politicians.

While policies such as low fees, reservations etc. are made in the name of
protecting the poor, the mess that higher education has become is hurting the
poor far more than the rich. At the top of the heap is the creamy layer that sends
around 1.5 lakh young Indians to overseas colleges spending over Rs 50,000 crore
every year, completely evading the mess in the higher education in India. Those
who stay back, only relatively well off have the wherewithal to continue
studying. UGC reports that only 53% of those who pass higher secondary go for
further studies. The drop out rates surge as one goes down the income class.
Poor do not have the staying power to continue pursuing a degree that is so
divorced from immediate returns. Due to sharp supply-demand mismatch at the
top of the pyramid, the wage differential between primary and higher-level
educated workers is rising rapidly. Thus, the poor stay stuck in low-skilled
services with not much upward mobility.

In conclusion, Indian education is so entrenched in state control and so

deeply implicated in politics that a simple technocratic solution cannot cure it.
There is need for serious reform in nearly every aspect of higher education:

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entry, access, quality, accreditation, institutional formation. Firstly, government
control needs to be liberalized, licensing removed and institutions of higher
learning granted autonomy. Secondly, an increase in private funding and a
market driven fee structure will enable universities provide competitive salaries
and scholarships and thus compete for high quality faculty and students. It will
also help universities acquire good infrastructure, latest teaching tools,
computers and internet connectivity. Thirdly, meritocracy and pay-for-
performance systems need to be reintroduced among faculty and student
evaluations of faculty need to be introduced. Lastly, reservations and student
subsidies should be reduced at the higher education level and increased in basic
education. This will ensure meritocracy at the higher education level and reduce
politicization and increase quality education. The competition for talent in now
genuinely global. Without such reforms, India cannot hope to sustain her current
rates of economic growth nor use her demographic advantage to capture a
leadership position in the emerging knowledge economy.