Rajat Kathuria: Private players in education

Higher education has expanded rapidly in India in recent years. Most of this growth has been due to the entry of private domestic players. The reasons for this have been essentially twofold: one, the inability of the state to meet the increased demand, and two, the increasing dissatisfaction with the quality of education dished out by many of the public universities, which led to a mismatch between skills created and those required on the job market. However, the domestic private sector's entry into education has also been a mixed blessing.

There have been legitimate concerns about the quality and price of the education they offer, leading a number of people to denounce them as being exploitative. The government has itself been undecided about the role of the private sector in higher education, and this has created entry barriers, and with it, all the side effects of monopolies. The prevailing situation with respect to private domestic providers, therefore, could be seen as a combination of "profiteering" private sector providers and a dysfunctional regulatory mechanism. Let me, however, as a footnote add that not all private institutions are of the fly by night variety and not all regulatory requirements are unnecessary.

So when the debate shifts to the possible presence of foreign education providers (FEPs) in India, the existing evidence against domestic private players is trumpeted to mobilise public opinion against FEPs. Not only is this akin to throwing the "baby out with the bath water", but also misses the point that the entry of FEPs could have a pro-competitive as well as a salutary effect on both the domestic private as well as public providers of higher education.

So before we shut out FEPs on the basis of uncertain future conduct like exploitation, profiteering, repatriation of profits and so on, let us look at the evidence from other countries in the same sector and in other sectors from India itself as a result of liberalisation. South Africa, Malaysia, Brazil, China and Singapore are countries where private institutions successfully coexist with public ones in providing higher education. In fact, some of these countries, as also Australia and Japan, have proposed setting up institutions in India as part of liberalised trade in education services. In India, examples from other service sectors such as telecom, banking and so on indisputably point towards improved quality and price as a result of increased competition in the market place. So where is the rub?

One could be that our mindset is such that it prevents us from thinking about education as a service subject to the influence of demand and supply. And two, is the fear that our regulatory mechanism may not be able to keep pace with the requirements and would, therefore, be subject to "capture" by foreign interests that would eventually end up controlling our education system.

But creating an independent and fair regulatory structure is part of the process of opening up to ensure adequate supply of higher education and to monitor their quality. This is in fact what has been proposed by the National Knowledge Commission last week.Whether we shall be able to create that or not is another story, but presuming that we can't, and basing our policy on it, would be a strategic master stroke likely to benefit the status quo.

The author is Professor of Economics at International Management Institute (IMI)