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Rejuvenating education through FDI

Education in India is undergoing an overhaul. Starting with the recently enacted right to free education statute, the HRD ministry is already working on legislation for an education tribunal (to resolve disputes between students, institutions and teachers) and a Bill to establish multiple private accreditation agencies, monitored by a regulator. Deliberations are also on to set up the National Commission for Higher Education and Research (NCHER), a single autonomous body to replace the existing education councils, something also suggested by the Yash Pal Committee.

And while recent reports about the PMO’s intervention on the proposed Foreign Education Providers Bill may require the legislation to be vetted afresh, but when Kapil Sibal advocates FDI in the education sector as a priority for the government, one can assume he has convincing arguments in support of foreign participation. The proposed Bill will help supplement government spending on higher education and is generating a lot of excitement among potential investors.

Traditionally, education institutions in India have been set up either by a public trust or administered as a society. The role of private, for profit, enterprise isn’t contemplated under the regulations. Further, although currently 100% FDI is permitted in the education sector, under the automatic route, foreign institutions providing services have heaps of regulatory hurdles to cross.

Depending on the subjects offered, educational institutions need to register both at the state level and in most instances with the relevant education council which overseas their area of training. The biggest challenge, however, is the requirement for these institutions to be run as not-for-profit. While this is not entirely uncommon in the education world, in most countries government spending on higher education is far greater in comparison to India.

The proposed Bill will seek to create norms, processes and structures for entry and accreditation of institutions offering higher education. It will also look to regulate the ongoing operations of foreign education providers to ensure that students receive quality education and that learning is not treated only as a profit-making exercise.

While promoting FDI in the sector, Mr Sibal is unequivocal that educational institutions cannot be set up only for money and the profits they generate need to be put back into the system.

The Bill also proposes that universities set up their own campuses and will not be allowed to adopt the franchisee model. All such establishments will require prior approval of the University Grants Commission (UGC) and will operate under its administrative umbrella ensuring UGC oversight over their admission process and fee structure. Additionally, to ensure quality, the embassy of the home country of foreign institutions will have to certify their credibility.

Critics are quick to state that the opening of foreign universities in India may not help improve the standards of higher education. They recommend the government considers drastic measures to improve local educational establishments. Concerns are also expressed that FDI in this sector will lead to commercialisation of knowledge and may deprive the economically weaker communities from access to learning.

This criticism appears to originate from a nationalistic perspective to prevent foreign control of school curriculum. But in higher education, where FDI will be seen, it appears that the opposition is mainly to prevent the traditional state-run institutions which may not be able to match up to foreign competition.

However, what finally needs to be accepted is that competition is healthy and eventually helps improve the services on offer and provides the people, whose interests are supposedly being protected, the power of choice. While no one can question the necessity for safeguards, it is important to recognise that today’s decisions affect the future of tomorrow, a fact that finds supports when over 30% of our current population is between the ages of 10 to 24.

Investment in the creation of our human capital is essential and it is important to bridge the gap in capacity that currently exists in higher education in India. While concerns about quality are compelling, what is more important is to have a set of rational ground rules monitored through a transparent regulatory system, for which the NCHER is proposed. Although, recent intervention from the PMO may somewhat delay the process, it appears that the observations are largely to have the proposed Bill reflect some of the reform-centric recommendations of the Yash Pal Committee.

In the long run, as the third largest higher education system in the world, time has finally come to introspect if India can internally meet its demand for higher education. And if there is any doubt, then it is important to shed all ideological oppositions to foreign and private sector participation in education.

First Published in Economic Times on October 16, 2009

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