Time to liberalise higher education

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: Higher education is assuming a growing significance for developing countries, especially for those like India experiencing services-led growth. In this context, the foremost question that arises is: will the existing higher education system in India sustain its competitiveness in the world economy? Already doubts have emerged on the existing system’s potential to generate required number of high-quality professionals. According to McKinsey (2005) only 25% of engineers, 15% of finance and accounting professionals and 10% of professionals with degrees, in India, are suitable for work in multinational companies. This highlights the differential quality standards existing across institutions in the country.

Differential quality standards in higher education are closely linked to the prevailing excess demand for higher education in India and lack of competition among the providers. The excess demand is apparent from the rising number of students going abroad and spending almost $3 billion annually for higher education. The US, the UK, Australia and New Zealand are the main beneficiaries, being large exporters of higher education. Low competition among providers mainly stems from the structure of financing of higher education. Being a merit good, higher education financing in India is primarily the responsibility of the public sector which is shared between the central (federal) and state governments.

But given the resource constraint of the public sector and prevailing excess demand, the private sector’s contribution has been increasing over the years. However, private sector has not been able to infuse competition in the sector. Till date, no formal private university exists in India, though there are a large number of general and technical private colleges.

Private colleges that form about three-fourths of the total number of colleges are of two types: ‘aided’, which are privately managed but publicly funded and ‘unaided’, which are both managed and funded privately. Substantial numbers of private colleges belong to the former category receiving government aid to meet almost the whole recurrent expenditure. The central government through the University Grants Commission (UGC) and 13 professional councils for different disciplines at the national level is responsible for maintaining quality and standard. Since the universities and councils concerned prescribe courses, set standards, conduct examinations, regulate salaries and student fees, very little scope is left for private institutions to provide differentiated service and compete in terms of the service provided and fees earned.