India Likely To Allow Foreign Universities

Can India create a higher education system worthy of its aspirations as a full-fledged knowledge economy? That’s still to be determined. But India is on the verge of taking a major, long-awaited first step in the right direction: With the recent release of draft rules by the country’s higher education regulator – the University Grants Commission – India is moving closer to allowing high-quality foreign universities to set up campuses to help meet the country’s growing appetite for advanced education.

Crucially, under the rules, which will have to be approved by Parliament, foreign universities would get the freedom to decide their own curriculums, fix fees and hire faculty at terms of their choosing. They would even be allowed to repatriate earnings. That all might seem underwhelming to readers accustomed to the U.S. system. But it would be a radical – and, eventually, perhaps game-changing – shift for India.

And India’s higher education system badly needs shaking up. Setting aside issues of quality (as if those can be set aside), India does not come close to providing sufficient seats to those aspiring to higher education – a glaring shortcoming as India’s burgeoning middle class strives to prepare their children for the opportunities of the future.

India’s system has its successes, of course, but they are narrow. Just nine Indian higher education institutions made the top 500 of the most recent QS World University Rankings. The top one – the Indian Institute of Science (at 155) – is a highly specialized institution focused on postgraduate studies and research in the sciences. The other eight are part of the well-known Indian Institutes of Technology, which specialize in engineering. The highest-ranked comprehensive university was the University of Delhi, falling in the 520s.

That is simply not good enough. All told, India has just over 1,000 institutions of higher learning. China, with a similar population, has three times that. The United States, with a much smaller population, has four times as many.

India’s gross enrollment ratio for higher education – the percentage of college-age adults who are enrolled – is around 27 percent, much lower than in advanced economies and even other emerging economies such as Brazil and China. Expect that figure to increase. If the supply of higher education cannot keep pace, more students will look overseas, as so many already do. Canada, the United States, Australia and Britain are primary destinations. The “import” of higher education from other English-speaking countries makes no sense for a country that prides itself on a service-based economy and its English language advantage. Education should be a sector that provides export earnings.

So, what’s the problem? Overregulation, as with so much of the Indian economy. Other parts of the economy have been liberalized over the years, but not higher ed.

More than half of Indian colleges and universities are government-run – around 200 by the federal government and 400 by state governments. Of course, it is not uncommon for countries to have large public university systems. But India grants little autonomy to such institutions, which have no freedom to set tuition and fees – kept artificially low by the pressures of populist politics.

Thus, institutions are totally dependent on the government for funding, eroding what autonomy exists on paper. The federal and state governments have serious fiscal constraints, and higher education always struggles in the competition for resources. Faculty salaries are benchmarked with civil servants, but at a somewhat lower level; tenure and promotions are based on service time, not merit. There is no way to reward stellar talent.

Private universities, too, are overly regulated and cannot operate for profit. That deters the best entrepreneurs from entering the sector.

Critics argue that allowing in foreign universities will not solve the problem, and it’s true it won’t be a cure-all. But if even a small number of acclaimed universities establish campuses, it would both improve overall quality and inject some competition into a sector that badly needs it. It should also induce more top academic talent to stay in India.

More important, it would set a precedent that Indian universities, both public and private, can and will use to argue for greater liberalization and freedom. They will push for a level playing field, which will eventually be granted. In the long run, high-quality foreign university campuses and improved Indian institutions can attract students from Africa and elsewhere in Asia, turning higher ed into the growth-and-jobs pillar that it should be in a world-leading economy.

Of course, it would be better if Indian institutions could get the benefits of change before, or at least alongside, foreign universities. But in India’s reform-resistant system, sometimes all you can do is open one window at a time.

Dhiraj Nayyar is the director for economics and policy at Vedanta Resources, whose philanthropic arm runs three not-for-profit colleges in India.

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