1. Can the 500 and 1,000 rupee note demonetisation clean up our education system?

Can the 500 and 1,000 rupee note demonetisation clean up our education system?

The path-breaking policy initiative of demonetising 500- and 1,000-rupee banknotes will go a long way in changing how India transacts.

Published: November 28, 2016 6:01 AM
India’s private education sector is the second-biggest generator of black money in the country. (Reuters) India’s private education sector is the second-biggest generator of black money in the country. (Reuters)

The path-breaking policy initiative of demonetising 500- and 1,000-rupee banknotes will go a long way in changing how India transacts. It has also led to a redistribution of national wealth, which has caused a bit of a chaos across the country. In addition, the long queues outside banks and financial institutions depict how used to we are to the cash economy.

However, one of the positive effects of the demonetisation move is that the use of digital wallets and online payments is increasing by the day, which bodes well for the economy as a whole in the long run. In fact, WONK, which is our tutor discovery and tuition booking app, had received 15x more queries in just two days after the policy announcement. Suddenly, parents, who all this while were paying cash for home tutors, realised the benefit of apps such as ours and expressed desire to book tutors on an urgent basis. I must add that apps such as WONK accept payment only through formal banking channels and no payment is received in cash.

Now, the bigger question is, can such a move clean up our education system, especially higher education? My response is a big yes, but subject to conditions.

The National Institute of Public Finance and Policy, in a report published in 2014, had stated the following facts beyond our comprehension:

1. India’s private education sector is the second-biggest generator of black money in the country;

2. The capitation fees paid to private colleges totalled about $1 billion in 2014;

3. The menace was significantly severe in private engineering and medical colleges. Based on my experience, I must add that even management education hasn’t been spared;

4. ‘Low quality’ education is provided in a number of private colleges, and parents are willing to buy a degree.

“Capitation”, loosely referred to as “donation”, has been regarded for decades as an informal method for gaining admission in a private educational institution. It is not only prevalent in higher education, but also at the K-12 level, where money is accepted in cash towards donation/charitable contribution. A very high percentage of this money, and I would stick my neck out to state that it is about 90%, is coloured and continues to retain its colour even after exchanging hands.

In the informal world, and I must add that there is not study yet to prove this, the going rate for an MBBS seat would be in the range of Rs 60-75 lakh, depending on the quality and ranking of the institute. In case of sought-after PG courses such as radiology or cardiology, this rate could jump to upwards of Rs 1.5 crore. With less than 1 doctor for every 1,000 citizens, India offers a long-term, highly-rewarding career for a doctor, quality is not that relevant. In case of engineering and management courses, the cash-for-seat limit is not so high. Even in the case of schools, purchasing a seat is a matter of a few lakhs, depending on a number of factors.

With the latest move, the government has cracked a whip on all black money coffers across the country. The very existence of black money is under threat, and even though use of means and circumstances are under way to save as much black money as possible, its short-term impact will be substantial. For the next at least two academic years, we can expect a significant drop in instances and prices of cash-for-seat. Thus, a temporary solution to this menace has been achieved.

This also provides a breather to the education sector regulators to work with colleagues from the finance ministry to raise significant road blocks in the capitation fees business. The nuisance has been in existence for too long and today is the time to completely eradicate it.

Vidhu Goyal

The author is co-founder, WONK, an app that helps you book verified tutors in your city

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