A 3D budget wishlist for varsities

Private US universities like Harvard can depend on their massive endowments that provide healthy annual returns. As Indian higher education institutions lack such funds, three policy moves in this budget can give them access to cheaper funds and help foster startups
The university and college endowment pie in India is diminutive, with occasional showers of generosity to deserving institutions outside the IIT orbit.
The university and college endowment pie in India is diminutive, with occasional showers of generosity to deserving institutions outside the IIT orbit.
Updated on
4 min read

Imagine a university managing to pay its faculty salary and covering its academic infrastructure operational expenses without having to rely on tuition fees. Imagine a university able to finance its long-term capital expenditure through access to low-cost debt repayable over a longer duration.

Imagine a university’s entrepreneurial test-bed connected to a talent pipeline to successfully push ideas from lab to market. Imagine a university able to provide student scholarships without relying on external support agencies. Re-imagine all of this happening for Indian universities that are an integral part of Viksit Bharat in 2047.

Let me begin the exercise by plugging the stentorian chorus demanding spending 6 per cent of GDP on education. Comparing the higher education budget with the US, UK, Germany and Japan to build a case for increased allotment is like forcing a street racer on an F1 circuit. These countries have a tax-GDP ratio of 25-40 per cent, and hence the capacity to allocate more.

A growing India—with a tax-GDP ratio of 18 per cent and burgeoning priorities in defence, infrastructure, agriculture and rural prosperity—cannot afford such a share. It doesn’t mean education is not important; but also important is the realisation of the larger public good that private higher educational institutions (HEIs) deliver as a partner in India’s progress—and their functions can be accelerated through budget catalysts.

A joint study of the National Association of College and University Business Officers and Commonfund Institute released in 2024 provides multiple insights in the 50-year trajectory of university endowments in the US. One of them is that their public and private universities’ share in the total endowment pie is almost equal. The top 20 endowments add up to $450 billion and the total across the US is nearing $1 trillion. This is a reflection of the legacy built by the American higher education system, both public and private, that manages to attract huge donations; in many cases, the endowments have outlived and outgrown the donor’s life and donation.

The study also revealed a median return of 7.7 per cent on endowments during 2022-23 and that almost 70 per cent of the endowments were valued at over $100 million; Harvard topped the list with a whopping $50 billion. So, the annual return on endowments in the US is many times more than the Union and state budgets for higher education in India. The university and college endowment pie in India is diminutive, with occasional showers of generosity to deserving institutions outside the IIT orbit. The North American and European system, enriched by wealthy individuals and institutions, advance education and research in both public and private universities with no discrimination.

In India, the share of endowments in private higher education institutions can be increased by allowing the deserving and capable ones to create quasi-endowments from internal surpluses for their own use, without eroding the corpus. Such a provision, if enabled in the Income Tax Act with suitable amendments to Sections 10(23) and 11, will not only provide assured funding for long-term growth, but also reduce avoidable expenditures by the HEIs.

It will not only retain the non-erodible and assured corpus within the rigorously-approved financial system offering more liquidity, but also signal trust and encouragement to deserving HEIs. Such a provision is not even offered by the American Uniform Prudent Management of Institutional Funds Act. Over a period, such internal endowments can take care of various expenses like building long-term assets, student scholarships, faculty development and capacity building.

The social stock exchange will take more time for impact philanthropy to reach genuine not-for-profits. Till such a time, the cost of bank loans can be softened through a higher educational loan refinancing mechanism, with development institutions like the World Bank, ADB or IFC being the refinancer. The government can select the top 100 HEIs to refinance their existing debts at favourable terms—lower interest rates and longer repayment periods.

The present Higher Education Financing Agency is available only to public HEIs. The existing extended commercial borrowing embargo can be lifted to enable Indian banks to raise dollars to be disbursed as loans to needy HEIs, like they do for exporters—India’s knowledge economy, after all, is export grade. This will also free up more bank loans for other businesses. 

The PM Internship Scheme announced in the 2024 budget has received India Inc’s thumbs-up, with 81 per cent of firms backing it fully and 73 per cent willing to offer 10 per cent of the new jobs to interns. While this is happening outside the HEI ecosystem, there is another vehicle to promote innovation and entrepreneurship on campuses. Individual ideas need to be fertilised financially for incubation and commercialisation. This convergence can be nourished by repurposing the NIDHI Entrepreneur-in-Residence scheme to provide internships to students in HEIs where incubators are established.

This will not only ensure a continuum in the talent pipeline, but also promote an innovation-driven multidisciplinary approach, an NEP 2020 objective. The budget can provide a five-year support to 100 tech business incubators or equivalents on campuses, and provide a monthly stipend to 100 students in each campus for a year to work at campus-incubated facilities.

There cannot be a time more appropriate than now to present these three budget expectations that adequately recognise, realise and reward higher education. It’s an academic’s 3D hope for a Viksit Bharat with abundant scope.

S Vaidhyasubramaniam

Vice Chancellor and Tata Sons Chair Professor of management at SASTRA (Deemed) University  

(Views are personal)

Related Stories

No stories found.

X
The New Indian Express
www.newindianexpress.com