The last student that got into Delhi University?s Shriram College of Commerce (SRCC) this year got 94% in Class 12. So the 81% that got me into this college in 1987 would not be good enough for admission today. What is going on? There are three possible explanations. The first hypothesis is that today?s kids are smarter than my cohort. Based on a recent visit to the SRCC campus and, at the risk of sounding like an old crank confusing nostalgia with amnesia, I can testify that today?s kids are not smarter than us. Better dressed for sure, better looking maybe, thinner possibly, but more intelligent?not really! The second explanation could be that there has been hyperinflation in the way exams are scored and the new 81% is 96%. The third and most logical explanation is that higher education capacity (supply) has just not kept up with the number of students applying (demand) so the cut-off percentages reflect the price of a bag of rice in a famine i.e. it?s not a fair price but reflects an acute shortage. This famine in Indian higher education is set to accelerate because of the combustible combination of stronger school enrolment (powered by Sarva Shiksha Abhiyaan and rising incomes) and our demographic dividend?about 75 lakh students took various Class 12 exams last year.

I argue that the only sustainable solution to this famine is a massive expansion in capacity i.e. ending the license raj which breeds an adverse selection in education entrepreneurs. This deregulation-driven capacity expansion will facilitate thousands of statistically independent tries in education. But we must be realistic in our expectations about a massive capacity expansion without a short term drop in quality. In fact, solving our higher education famine may require us to accept three painful truths in the short run: a) a bad college is better than no college, b) the most expensive college for a child is no college, c) it?s easier to improve quality in an existing college than to create a new college.

But as horrifying as these truths sound, educational institutions are not like Athena in Greek mythology who sprung fully formed from the head of Zeus?they need time and competition to mature. In fact, we may be seeing the first signs of competition and oversupply in engineering colleges in South India; we have had a flood of them approach us to understand employability criteria and figure out ways to attract employers for campus recruitment since children are talking with their feet (20% of the seats are vacant). It?s hard to be patient with bad quality but MohanDas Pai of Infosys reminds us that most of the goofy engineering colleges started in the 1980s in the South went on to become the supply chain of the Indian IT industry.

Choosing quantity over quality brings us to the unenviable and unviable expectations from the proposed National Commission for Higher Education and Research (NCHER). As NCHER destroys the licence raj in education, stakeholders (governments, parents, students and institutions) must recognise that expectation of simultaneous quantity and quality expansion without compromises is misplaced. Deregulation will create opportunities for birthing many good institutions but the flood will let in some goofy institutions, some cheats and some thugs. But these bad institutions are not an argument against deregulation?just as drunk driving is not an argument against cars or obesity is not an argument against food. The painful journey from quantity to quality will take five years but this does not mean that NCHER has an impotent or limited role; free markets need effective regulation, informed customers, pressure to improve quality and audits that keep suppliers honest but do not degenerate into blackmail. This requires carefully balancing multiple, often conflicting, objectives and NCHER?s job is complicated further by regulating institutions where outcomes are hard to measure. Few doubt that an honest and effective NCHER will have the most difficult regulatory role in the country.

The difficult choices of quantity, deregulation and fee freedom required of the education regulator are bound to horrify parents and policymakers but our situation is not very different from Winston Churchill in the Second World War who said: ?I know the difference between right and wrong and I can tell good from bad. I also know the more difficult decisions come when we have to choose between good and better. But the toughest calls of all are between bad and worse?. Years of myopia and corruption in higher education force us to make the bad choice of quantity over quality because a worse choice would be to waste our demographic dividend. Effective and inclusive higher education will be the difference between a demographic dividend and a demographic disaster. It will also be the difference between busy children and restless or jobless youth. Most importantly, it could be the difference between peace with prosperity and crime with civil unrest.

The author is chairman, Teamlease Services