Should FDI be Allowed in Higher Education

The ‘India Vision 2020’ envisages the transformation of India into a knowledge superpower. To achieve this vision, the higher education sector has to play a key role. At present India is producing highest number of doctors and engineers every year. But, if one considers the quality and quantity of higher education in India. It is worse. In US and UK, percentage of enrolment in higher education is 82.4 and 60.1 respectively. In India, despite recent increment due to private players, current enrolment is merely 12 %. Even South East Asian countries have higher enrolment rate like 31% in Philippines, 27% in Malaysia, 19% in Thailand and 13% in China. According to United Nations Educational, Scientific and Cultural Organisation (UNESCO), public spending on higher education in India is merely US $400 per students. If we consider public spending of US on higher education, it is $9629. It may be argued that the spending of India could not be compared with that of US. However, even other developing nations like Brazil, China or Russia have much higher public expenditure per student, in excess of $1000.

India’s higher education system is the third largest in the world, after China and the United States. The main governing body at the tertiary level is the University Grants Commission (India), which enforces its standards, advises the government, and helps coordinate between the centre and the state. As of 2009, India has 20 central universities, 215 state universities, 100 deemed universities, 5 institutions established and functioning under the State Act, and 13 institutes which are of national importance. Most of these institutions are public funded. Some of these institutions have been globally acclaimed. However, India has failed to produce world class universities like Harvard, Stanford, Oxford, Cambridge or MIT.

The state of higher education is very bad in India. The education system in India is often criticised for being Rote Learning, rather than problem solving. The status of teaching in most of the public run colleges in India is ill. If we see the situation of colleges in metros and cities, it may come under average level. But, the situation of colleges in small cities is very bad. The main aim for the students here is to get certificate. Corruption and negligence could be easily found in the examination conducted by these colleges. Some private universities have started operations in India. But, most of them are not giving the quality, they are for money making. In the recent years, many of the new private institutions have opened in India. But, most of them are for engineering and B-schools. The scenario is this that India is producing almost 750,000 engineers and 100,000 MBA graduates every year. But, if we see the skill in this army of graduates only 20-30% of them are doing the particular course due to interest or skill. Rest of them are there just because it is going to give them good jobs.

India in the process of becoming a developed nation needs to be technologically independent. Right now, India is dependent on other nations for technology. We are not spending a lot on Research and Development. In fact, if we see the track record in many sectors we are dependent on technology imports. Like India is the largest importer in the world for defence equipment. For the current 3G mobile technology, India is looking towards China and US for imports of machinery. India needs to spend a lot on research work. But, the atmosphere here is not research oriented. Even, in IITs, many professors find it hard to get funds sanctioned for researches.

Every year nearly 0.4 million Indians go abroad for higher studies spending approximately $ 12bn. This leads to not only loss of foreign exchange, but also ‘Brain Drain’, as most of these rarely comes back to India after completing their courses. The primary reason for a large number of students seeking professional education abroad is lack of capacity in Indian Institution. There is no doubt that the situation in public universities in India is not so good. Also, with increasing enrollment in higher education, it is not possible for the government to provide higher education on its own. But, the private institutions are themselves sick. Many don’t have experience and many are trying to just gain money without quality. Foreign investment in this field will not only check brain drain, it will also help to balance the demand supply ratio. It will develop competitiveness among private universities to deliver better quality. It will also generate employment and result in inflow of money instead of outflow. Further, the infrastructure will improve. There will be better scope for research as foreign university have different methodology to run and generate revenues. They are more research based universities. Plus India may move towards practical study based learning rather than rote learning. Other than that, India could develop itself as a provider of higher education for developing nations.

At present India is allowing 100% FDI in higher education through automatic sector. But, still no university have established a campus here, due to a large no. of guidelines and regulation. Also, many rules are unclear. Indian government is trying to pass a bill, The Foreign Educational Institutions Bill, in the parliament to directly allow 100% FDI in higher education. Right now 106 institutions are running programmes in India with collaboration with foreign universities. But, only 2 out of 106 are approved by AICTE. Indian government does not allow foreign universities to award any separate degree. It could only provide dual degree with collaboration with local institutions. Currently, many degrees given by these foreign universities are not even recognized in their own countries. Most of the universities which have tie ups with local institutions are small private universities in their own countries. If The Foreign Educational Institutional Bill will be passed, it will not only allow foreign universities to set-up campuses and award degrees in India, but simultaneous facilitate Indian government regulation of their operations.

The purpose of the bill is to regulate entry, operation and quality of education by the foreign universities. The bill will allow them to earn the status of Deemed University, which in turn will make them come under the domain of University grant commission (UGC). The foreign university then have to invest at least 51% of the total expenditure for such establishments. There will be large amount of money allocated only for the development of higher education. Plus scientific research will not be in the stage of shortage of money.

Features of the Foreign Educational Institutions Bill:

• No foreign institution can provide degree to Indian student unless such institution is confirmed as Foreign Educational Provider by Indian Government
• At least twenty years of establishment in its own country
• Have to maintain a fund of at least 500 million rupees
• Quality of education, curriculum, method of imparting and the faculty employed will be in accordance to guidelines of UGC
• At max 70% of the income raised from the fund can be utilized in the development of institution in India and rest should be added to the fund. No part could be used in any other purpose other than growth and development of the institution established by it in India
• Institution has to publish prospectus writing clearly about fee structure, refund norms and amount, number of seats, condition of eligibility with min and max age, detail of faculty, process of admission, min pay payable to each category of teachers and staff, infrastructure and other facilities, syllabus, rules and regulations, etc. at least sixty day prior to date of commencement of admission
• In case of violation of any guidelines a penalty of min 10 million and max 50 million rupees along with tuition fees should be refunded to the student
• Any foreign institution not confirmed by Indian government as Foreign Education Provider which is awarding any certificate to Indian students should submit a report regarding course to the commission

The academics, educationists and politicians are sharply divided on whether this will be a good move for India or not. As till now the experience with the foreign universities is not so good. Foreign investors in higher education have so far brought just commercial products, and may be in the future too, will bring copyrighted courses and workshops modules in order to make money. There courses will be less in accordance with the need of the Indian students or requirements of Indian science and research. Also, questions are raised about the Intellectual Property Rights, who will own the IPR? How the benefits of any research will be shared? Also, India should choose the area in which investments be invited. We should invite investments in the field where we have something to learn, where we need to build ourselves not necessarily where we are leaders ourselves. For instance, India is already doing top class research on stem cells and could collaborate with other top class institutions, but not necessarily invite FDI in this field.

Right now India discriminates its students on the basis of caste. A student’s scholarship mainly depends on his/her caste. Foreign institutions will find it hard to get inferior quality on the basis of caste. A scholarship program for economically backward students could be facilitated, but caste will be problematic for them.

The main concerns with the Bill are as follows:

• The bill envisages regulation of fees to tackle commercialization of education which will definitely deter entry of quality foreign universities, reared in an environment where commercial success and good service quality go hand in hand.
• It provides for government monitoring on admissions criteria which again might deter entry by high quality foreign universities which believe in using their own set of criteria.

A clear cut government regulatory policy which balances the need for freedom of foreign education providers with national interest is necessary. In other words, the accent should be on optimal regulation and the avoidance of over or under regulation. Also, Indian universities either public or private should be improved in order to compete on the same level with foreign giants.

If we see the approach of Indian government at present is to gain good quality education environment by suppressing profit motives. But, actually the correct approach should be attainment of high quality with, in accordance, profit motives. If India wants to attract world class universities in India it should have to give some liberty to foreign universities too. It should not look like exploitation of foreign university just for the sake of our profit. We should use profit as a channel to raise the quality of education.

We could take example of Singapore in the matter of framing the policy for foreign investment in scientific research. Singapore allows only world-class institutions to enter, and that only when they bring their own money. For instance the Massachusetts Institute of Technology (MIT), a leading technical institution in the US, has collaboration with the National University of Singapore. From Australia, a country with which it other-wise has close contacts on several fronts, it is only the University of New South Wales, considered a premier institution, which was permitted to establish a campus solely on the basis of its own investments. As a result of its policies on foreign investment in education, Singapore has successfully achieved two goals, one to make itself an educational destination for neighbors in Asia who can now go to world-class institutions in Singapore rather than go to Australia or the US; and two, to bring in top-quality programs and skills to upgrade their own research.

If we look at the problem India is facing in development of higher education, one may say that FDI are being allowed just because we don’t have enough money to spend on this area. But, the problems are others too which FDI will focus. FDI in higher education will solve the problem of enrollment rate as we are in a situation of less supply high demand. Indian money and talent going abroad will come in check. India will become educational hub for at least neighboring countries. Infrastructure will improve. Some new methods and technology will be used in teaching. Also, it might happen that India may develop one of its own world class universities. Lastly, India needs to fill the technological lag as fast as it can to compete with China.

There are a lot of fears regarding the future of FDI investment in higher education. But, all in all on larger scale, it is going to benefit India. With better guidelines and rules, we can overcome the minute problems we assume may arise. But, in no way FDI in higher education should be discouraged. Foreign Direct investments should be allowed in India.