In the past week, this newspaper carried three related news reports on the business and economics of education. First, we reported that public expenditure on education in the Eleventh Plan period was falling short of the set target. This despite the fact that the prime minister dubbed the Eleventh Five Year Plan as the “National Education Plan”. Second, we reported the findings of the US Institute of International Education that Indian students spent as much as $2.75 billion (Rs 12,500 crore) in the US by way of tuition fees and living expenses during academic year 2008-09. Add to this what Indian students are increasingly willing to pay for education in other English-speaking countries around the world. Third, we reported the decision of the Union human resource development ministry to seek ideas from a group of Indian businessmen on ways in which for-profit private educational institutions can bridge the resources gap in higher education. The link between the three reports is obvious. It would, of course, be wrong to presume that all Indian students going abroad are doing so because of a lack of educational opportunities at home. While many indeed are, an increasing number of young Indians are going abroad because they are able to pay their way, and wish to do so, in search of new life experiences. The sheer thrill of living in a foreign land. But it is possible to argue that if good institutions come up at home in newer fields of education, some part of the forex outflow would be contained. Indeed, good quality Indian educational institutions should also be looking at attracting students from around the world, especially Asia and Africa.
The bottom line, however, is that the government is not yet spending enough on education and not raising enough from the existing investment in it. India is one of the few countries where school education is more expensive than higher education. This bizarre inequity can only be redressed if there is more public investment at the bottom of the educational pyramid and more resource-raising through fee in institutions of higher education. An increase in fees should be balanced by an increase in merit-cum-means-based scholarships and cheap student loans. The entire economics of education financing in India needs reform. An important aspect of such reform will have to be the institutionalisation of private investment in public educational institutions. Alumni-funding is an important source of such private investment. However, this remains constrained by regulatory rigidities. Another institutional constraint in higher education is the existing system of quality certification. The widespread scandal in the functioning of regulatory and certification institutions, highlighted by l’affaire deemed universities, does not inspire confidence in the quality of new institutions. Hence, any policy of easing the resource constraint in education must be accompanied by the reform of regulatory institutions and the creation of credible quality certification systems. Getting more money into education cannot be the only objective of public policy. Getting better students out of the system should also be an equally important objective.
