Indian Higher Education Sector : The Way Forward

 

 

 

Achieving India’s demographic dividend will depend on our ability to provide a simple regulatory framework in
education that eliminates opportunities for rent seeking and low quality. Hence the recent initiative of the
Government to reform the regulatory regime is a welcome step. The four Bills presented to Parliament will
potentially overhaul the education set up in the country. Their cumulative impact would be the most significant
reform of the Indian Higher Education framework in the past 60 years.
While the Bill for permitting foreign universities to establish campuses in India, has garnered significant
attention and has been the subject of significant debate (politically and otherwise), the other Bills also have the
potential of altering, albeit more significantly the Indian regulatory framework dealing with education because
we believe they will lay the foundations for a more transparent, governance focused framework. While these
Bills are yet to become law, we will briefly review them.
The Prohibition of Unfair Practices in Technical Educational Institutions, Medical Educational
Institutions and Universities Bill, 2010
This is a truly welcome initiative that will not only improve governance but also go a long way in protecting the
interests of children and parents. It seeks to prohibit unfair practices in technical educational institutions,
medical educational institutions and universities. Its aim is to introduce greater transparency and governance
through mandatory disclosures regarding faculty, fees and infrastructure. It prohibits an institution from a)
demanding or accepting capitation fees or other charges in excess of those declared in its prospectus; and b)
admitting students without conducting admission tests specified by the appropriate authority. The Bill also
prohibits publishing or issuing advertisement based on false or misleading facts for inducing students to take
admission. The Bill prescribes penalties for indulging in practices prescribed as unfair in the Act. It is the first
time that such legislation has been proposed in the Education sector. It will be an essential component in an
education eco-system that is plagued with rent seeking and malpractices. The question for consideration though
is the ability and the willingness to implement the provisions of this Bill when it becomes a law.
The National Accreditation Regulatory Authority for Higher Educational Bill, 2010
This seeks to make accreditation by independent accreditation agencies mandatory for higher educational
institutions (HEIs), educational programs, and educational infrastructure. The Bill also provides for establishing
an independent statutory authority for the purpose, the National Accreditation Regulatory Authority (“NARA”),
which will inter-alia include registration of accreditation agencies and determining the procedure for
accreditation, which is an essential ingredient for ensuring quality in the education sector. The Bill requires that
every HEI seek accreditation for every program conducted by it before it starts the admission process for such
programs. Existing HEIs will have to apply for accreditation of their institution and programs within three years
of the commencement of this Act (five years in case of HEIs engaged in medical education).
The Education Tribunals Bill, 2010
It seeks to provide for a two-tier system of adjudication of disputes relating to education that involve teachers
and employees of higher educational institutions, students, universities, institutions, and statutory regulatory
authorities. It provides for the establishment of a National Education Tribunal and State Educational Tribunals,
prescribes the composition of the Tribunals, and delineates the powers and functions to be exercised by the Tribunals. If implemented as envisaged, this Bill will expedite the process of resolving intra- and interinstitution
disputes.

Indian Higher Education Sector – The Regulatory Regime

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Historically, AICTE, MCI, DCI, ICAR, VCI were formed to focus attention on specialized areas. These
institutions issue licenses, control curriculum and standards and, regulate operations through inspections and
reporting requirements. Each has its own set of regulations. The Yashpal Committee Report has recommended
that the multiple agencies, bodies should all merge into one National Commission for Higher Education and
Research (NCHER), which can be the umbrella organization or a one-stop shop for all regulatory work in higher
education. To better understand the dynamics and the differences of these two sectors, Exhibit 12 compares the
extent and intensity of restrictions that existing regulations place. It explains why there is so much interest in the
unregulated sectors.

India : A Promising Global Destination for Higher Education

A large section of the Indian population is at the age at which an individual would enroll into a higher education

course. This number is expected to increase further in the future driving demand for more institutes. In comparison with other major destinations for higher education, India has the strongest
opportunity for growth due to its population distribution. The following shortcomings need to be addresses in
Indian higher education space:
 Over regulation and under-governance.
 Curriculum development in comparison to global standards.
 Examination system to be focused on application of the discipline learnt by the students.
 Learning to be made more industrial application oriented.
 Development of good faculty.
 Improvement of the overall quality of education.
 The unemployment in higher education.

Indian Higher Education Sector – Low Gross Enrolment Ratio

India has the third largest volume of enrollments in higher education, after China and the US. However, India’s
GER compares poorly to its global counterparts. Furthermore, high dropout rates in primary education have
affected the enrollments in higher education. Drop out rates in Grades 1-5 is 29%; in Grade 6-8 is 50% and in
Grades 9-12 is 62%. The planning commission is targeting a GER of 15.5% by 2012 which is an increase from 11% in 2008

The National Knowledge Commission (NKC) has recommended that the government will need to establish
1500 universities to meet their GER target. Thus, India’s low GER provides opportunity for new and existing
players in the market including skill development and vocational training institutions (Refer to exhibit 9). The
expenditure required in higher education will have to increase to 1.5% of the GDP from the existing level of
0.7%. This translates into a huge potential for about 22mn students enrolling in higher education institutions by
2012. The public spending is focused more on primary education leading to underdeveloped higher education
sector in India. Public spend on education in India amounts to 5.2% of the world’s cumulative public spend, but
India is home to 20% of the population in the target group. The investment in the higher education sector increased from 0.67% of the total GDP in FY07 to 0.7% of the total GDP in FY08 whereas the share of higher
education expenditure as a percentage of total education expenditure has declined from 17.4 in FY06 to 19.1%
in FY08. Lack of higher education infrastructure has made it extremely difficult for India to act as a hub for
professional education. The current higher education infrastructure can admit only 7-8% of the college students.
India attracts 20,000 foreign students yearly, whereas China attracts more than 0.15mn students annually. Even
though public expenditure on education has been rising, the investment per student is one of the lowest among
other major countries

Indian Higher Education Sector – Low Gross Enrolment Ratio

Import and Export of Education Services in India

The scenario in Indian Higher Education with respect to the four modes under GATS has been extensively
covered by Prof. Rupa Chanda of IIM Bangalore in her study on the implications of GATS for higher education
in India, which was presented on a Higher Education Summit, organized by FICCI in New Delhi on December
2, 2004. The highlights are as follows:
India’s Import Interests in Education Services
 Mode 1: Prospects for distance education and degrees from foreign academic institutions.
 Mode 2: Indian students studying in foreign universities (US, UK, Australia).
 Over 40,000 studying in US courses (This is more like 75,000 added per year).
 Several thousand in Europe.
 Mode 3: foreign institutions entering India through twinning and franchise arrangements.
 Indian students getting foreign degrees, doing professional courses at local branch campuses
of foreign institutions in India.
 UK-based Wigan and Leigh College.
 Indian School of Business tie-up with Kellogg, Wharton, and London Business
School.
 Western International University, Arizona.
 NIIT tie-up with ITT Educational Services, USA.
 Tata InfoTech tie-up with Hertfordshire University, UK.
 Mode 4: Foreign faculty and scholars teaching in India.
India’s Export Interests in Education Services
 Mode 1: Prospects for tele-education in management and executive training.
 Experience with distance learning, use of new technologies (IGNOU).

 Education process outsourcing with remote tutoring from India (along the lines of efforts by
Career Launcher, Educomp Datamatics etc.)
 Mode 2: Students from developing countries studying in Indian engineering and medical colleges.
 Around 5,500 students from neighbouring developing countries (2001).
 Exchange programmes and twinning arrangements.
 Mode 3: Setting up of overseas campuses, franchising by Indian institutions.
 MAHE, BITS, Central Institute of English and Foreign Languages.
 Over 100 CBSE schools abroad, catering to diaspora.
 Mode 4: Indian teachers, lecturers teaching abroad in Middle East, Africa, researchers/scholars on
visiting arrangements abroad.
 Some 10,000 secondary school teachers overseas.
 Recruitment of Indian teachers in Maths, Science, English.
 Potential as a regional hub for exporting higher education services.

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Indian Higher Education Sector : Trade Barriers in Education

 

 

There are some barriers that are applicable to all sectors, while other impediments are specific to the education
services sector. The trade barriers have been extensively covered in a consultation paper on “Higher education
in India and GATS: An Opportunity” (some of the key information has been presented below) prepared by trade
policy division, Department of commerce, Government of India.
The barriers with general application are:
 The majority of generic barriers are from an exporter country’s point of view and focus on the supply
modes “cross border supply” and “commercial presence.”
 There is a certain lack of transparency of government regulatory, policy and funding frameworks.
 Domestic laws and regulations are administered in an unfair manner.
 Subsidies are not made known in a clear and transparent manner.
 Tax treatment which discriminates against foreign suppliers.
 Foreign partners are treated less favourably than other providers.
GATS defines services trade as occurring via four modes of supply all of which are relevant to education:
 Mode 1: Cross Border Delivery: Delivery of education services via internet (distance education, teleeducation,
education testing services).
 Mode 2: Consumption Abroad: Movement of students from one country to another for higher
education (foreign students in US universities).
 Mode 3: Commercial Presence: Establishment of local branch campuses or subsidiaries by foreign
universities in other countries, course offerings by domestic private colleges leading to degrees at
foreign universities, twinning arrangements, franchising.
 Mode 4: Movement of Natural Persons: Temporary movement of teachers, lecturers, and education
personnel to provide education services overseas.
The principal barriers to trade in higher education services as regards cross-border supply (mode 1: e.g.
distance delivery or e-education; virtual universities) are the following:
 Inappropriate restrictions on electronic transmission of course materials.
 Economic needs test on suppliers of the services in question.
 Lack of opportunity to qualify as degree granting institution.

 Requirement to use local partners, with at the same time a barrier against entering into and exiting from
joint ventures with local or non-local partners on a voluntary basis.
 Excessive fees/taxes imposed on licensing or royalty payments.
 Restrictions on use/ import of educational materials.
The principal barriers to consumption abroad (mode 2, e.g.: students studying in another country) are:
 Measures that restrict the entry and temporary stay of students, such as visa requirements and costs,
foreign currency and exchange controls.
 Recognition of prior qualifications from other countries.
 Quotas on numbers of international students in total and at a particular institution.
 Restrictions on employment while studying.
 Recognition of new qualification by other countries.
For trade via commercial presence (mode 3: branch or satellite campus; franchises; twinning arrangements),
common barriers include:
 The inability to gain the required licences to grant a qualification.
 Subsidies provided solely to local institutions.
 Nationality requirements.
 Restrictions on recruitment of foreign teachers.
 Government monopolies.
 Difficulty in obtaining authorization to establish facilities.
 Prohibition of higher education, adult education and training services offered by foreign entities.
Barriers to mode 4, i.e. presence of natural persons (e.g. teachers travelling to foreign country to teach) are:
 Measures that restrict the entry and temporary stay and work for the service suppliers, such as
immigration barriers, nationality or residence requirements, quotas on number of temporary staff,
employment rules.
 Economic needs test.
 Recognition of credentials.
 Minimum requirements for local hiring being disproportionately high.
 Repatriation of earnings is subject to excessively costly fees or taxes for currency conversion.

Higher Education and GATS

Higher Education and GATS.

Higher Education and GATS

 

Trade in education is organized in five categories of service, based on the United Nations Provisional Central
Product Classification (CPC):
 Primary education, covering preschool and other primary education services, but excluding child care
services;
 Secondary education, including general higher secondary, technical and vocational secondary and
technical and vocational services for disabled;
 Higher Education, covering post secondary technical and vocational education services as well as other
higher education services leading to university degree or equivalent;
 Adult Education covers education for adults outside the regular education system;
 Other Education; which covers all other education services not elsewhere classified; nonetheless
education services related to recreation matters are not included.
During the Uruguay Round only 29 member countries of the WTO (considering EC as a single member
country) made commitments in education and only 21 of these included commitments in higher education. It is
interesting to note that Congo, Lesotho, Sierra Leone and Jamaica have made full unconditional commitments in
higher education, perhaps with the intent of encouraging foreign providers to help develop their education
systems. Australia’s commitment for higher education covers provision of private tertiary education services,
including university level. The European Union has included higher education in their schedule with clear
limitations on all modes of trade except ‘consumption abroad’, which generally means foreign tuition paying
students. Only four (Australia, New Zealand, USA and Japan) of the 21 countries with higher education
commitments have submitted a negotiating proposal outlining their interests and issues. WTO members have
chosen to impose considerably more limitations on trade in educational services in modes 3 and 4 than in modes
1 and 2. This is also the common picture for trade in other services. Furthermore, member countries have in
general put slightly more limitations on trade in primary and secondary education than on higher and adult
education.

Indian Higher Education Sector : Import of Education

Every year a large fraction of Indian students spend large sums of on a foreign education due to the letter system
of education. Some trends relating to import of education are as follows (refer to exhibit 6):
 Indian spend USD 4bn annually on higher education abroad
 The U.S. continues to remain the most popular destination
 71% are pursuing postgraduate courses in engineering and management
 Australia is a popular destination for vocational training and course in hospitality
 U.K.’s popularity is due to the variety of one-year degrees on offer
 China and Russia are emerging as favored destination for medical education.
Traditionally dominated by the public sector, the higher education market in India is being driven by private
sector participation, with several high quality private institutes setting standards and pioneering growth.
Globally some HEIs have rapidly attained scale over the last few years making them models for India HEIs to
analyze and possibly emulate. The expenditure on higher education in India is estimated to be USD 6.5bn in
2008. It is expected to grow at 12% CAGR to reach USD 10.3bn by 2012 according to the 2009 Netscribes
report on Higher Education. Private institutions have been focusing on the area of professional courses like engineering and medicine as well as post graduate courses like MBA. Private set-ups account for 50% of the
total medical seats and 80% of the engineering seats available in students in India.