The government of India’s decision to allow foreign educational institutes to operate independently in India has opened the doors for new debate. Till date foreign institutes needed an Indian educational institute as an active partner for their operation. Those who advocate the recent move of the government see this step as some sort of a breakthrough and are expecting a huge change in the higher education system of India. However, detractors suggest to take a pause and analyse the socio-economic impact of the move before becoming too optimistic.
Let us look at the developments so far. The department of industrial policy and promotion (DIPP) and department of economic affairs (DEA) have agreed to allow overseas universities to operate under Section 25 as non-profit companies under the newly passed Companies Act. Earlier, this was to be considered under Foreign Education Providers (Regulation) Bill (pending in parliament for about three years), but now it is covered under the University Grants Commission (UGC) Act. The government took this decision in haste, without even making efforts to pass the bill in parliament. This act of government is questionable. Question also arises about the motivation behind the move. Is this an effort by the government to attract foreign investments in the country? The present regime at the Centre has been criticised enough for its failure to bring investment into a developing India.
From India’s perspective, it is not a great idea to aim for foreign investment in education when there is underutilisation of domestic capital in the sector. From the perspective of foreign varsities, they will only come when there is an incentive of returns on their investment. But companies registered under Section 25 of India’s Companies Act cannot distribute profit or dividends to members. This means that the foreign varsities will not be allowed to repatriate money. Then, why will some foreign entity come to India if it is not allowed to send back profits to its parent entity?
Another challenge for these foreign universities will be the cost they will have to bear to bring up their Indian campuses. Most of our institutes get subsidised land to build their facilities. It is unlikely that the government will provide land to these universities and with the Land Acquisition Bill being already passed in parliament, it will not be easy for these institutions to build their campuses in India. Add to this the deposit an amount of Rs 25 crore that the foreign universities have to maintain with the human resources development ministry, which they will forfeit in case of any violation. Moreover, for opening a campus in India, an educational institution needs to be in the top 400 in one of three global rankings — the UK-based Times Higher Education Ranking; the UK-based Quacquarelli Symonds ranking; and the China-based Shanghai Jiao Tong University rankings.
This will be difficult considering the fact that high-ranking educational institutes are reluctant to open new campuses for the fear of brand and quality dilution.
If one looks at the global trend, it would be found that generally top-ranked universities open small centres and not full-fledged campuses in foreign countries.
Another supporting argument that has been given in favour is that this move will help Indian students get foreign education at an Indian price. Additionally, it will help those Indian students who are unable to go abroad due to financial constraints. The above reasoning is based on the assumption that fee charged by these universities will be lower in local campuses.
This assumption might not hold because tuition fees are likely to match their parent institution. Other expenses might be lower but the overall cost of education in these foreign universities will be significantly higher than their Indian counterparts. Moreover, this might also lead to Indian institutions increasing their fee to match the standards of foreign universities.
Some experts are of the opinion that, by having foreign universities in India we will be able to reduce the number of Indian students going abroad. In India, we have over Rs 2.1 crore annual enrollment in higher education and around 2 lakhs go abroad for pursuing higher studies. This is not a very high percentage and students studying abroad not only add to our intellectual capital but in some way represent India in a global community. India’s higher education system is the world’s third largest but it only educates around 12 per cent of the age group. China educates around 27 per cent.
What we have to ensure is to increase the annual enrollment rate in higher education and that will not happen by having foreign universities with a high fee. Relying on foreign players is not the ideal way of achieving self-reliance.
Only, a clear vision of the government and continuous investment over a long period of time can help our educational system to mature and be capable of fulfilling the needs of a nation. Currently, we spend about 3 per cent of our GDP on the education sector, which is not enough for a nation with 50 per cent of its population below the age of 25 years.
Having a mature higher education system has its own benefits and many nations in the world such as the USA, the UK and Australia are reaping those benefits. They attract a significant number of students from countries all over the world. This not only brings foreign money but also adds to their diversity which has its own intangible benefits for a country.
Ancient India was renowned as a centre of higher learning and we must aim to regain that status. This will only happen when our central and state governments increase their spending on quality higher education.
Today’s requirement is not for foreign universities but upgrade of existing universities which are able to compete with foreign universities. There is no doubt that there is a huge demand and supply gap in our higher education system. Inviting foreign universities to fill this gap seems attractive, but what stops us from building our higher education system indigenously? The Indian education system should not be degree-driven, instead it must be dividend-driven.
The author is professor of finance, XLRI, Jamshedpur.