FDI has always spelt trouble for governments in India, and in virtually every segment of the economy. There has been stiff opposition to FDI in insurance, real estate, media, aviation, defence, railways, infrastructure and retailing; the previous BJP-led National Democratic Alliance (NDA) managed to attract FDI in some sectors, and the current Congress-dominated United Progressive Alliance (UPA) government has tried to open up other sectors to FDI.
But despite the opposition – from both the left parties and the rightists – and trade unions, the federal government has succeeded in throwing open key sectors to FDI. Even retailing has been partly opened to foreign investments. The battle-lines are now being drawn for another feisty fight relating to FDI in higher education.
The National Knowledge Commission (NKC), which is headed by US-based Indian, Sam Pitroda, in its report to Prime Minister Manmohan Singh has called for policies that would enable foreign institutions to open up campuses in India.
Within the government, Commerce Minister Kamal Nath has endorsed the suggestion by industry bodies like the Confederation of Indian Industry (CII) to open up higher education to FDI. Even Congress president Sonia Gandhi appears to have backed the move for FDI in education.
But the old, ageing warriors in the Congress – and other parties – including the Human Resources Development (HRD) Minister Arjun Singh, are opposed to the move. So too are some of the left parties and their trade unions, though pragmatic Communist leaders are now amenable to FDI in higher education, as long as the sector is brought under an independent regulator.
The federal cabinet is now considering the move to enact the Foreign Education Providers (Regulation) Bill, after a group of ministers recently cleared the draft. The bill envisages foreign universities setting up campuses, though it is opposed to international varsities setting up franchisees in the country.
Several state governments have already prepared the ground work and are in talks with international universities who are eager to set up their campuses in India. The Haryana government is promoting an ambitious Rajiv Gandhi Educational City on the outskirts of Delhi – and within the National Capital Region (NCR) – and has acquired over 2,000 acres of land.
Haryana has already passed a Private University’s legislation and aims to make the state an educational hub. The government is also in talks with nearly a dozen educational institutions.
The Union Territory of Chandigarh is also promoting an Education City on the outskirts of the city – which is the capital for both Haryana and Punjab – and many foreign universities have shown interest in the new project.
Down south, Andhra Pradesh is promoting an Education District, covering 1,000 acres of land near Visakhapatnam. Again, it hopes to rope in international universities. The Maharashtra government is also busy pushing the state as an education hub; about 40 international universities – including from the US, Canada and the Gulf – are in talks with government officials, and some of them have zeroed in on land along the Mumbai-Pune and Mumbai-Nashik industrial and knowledge corridors.
WITH the ‘knowledge’ sector continuing to dominate the Indian economy, there is growing pressure on the government to open up higher education. The information technology sector, which has been growing by between 30-35 per cent annually, is worried over the expected shortage of skilled personnel.
The industry expects to face a shortfall of half a million skilled workers in just three years, which could act as a brake to its frenzied growth.
Though India has an impressive network of higher educational institutions – 300 universities that awards degrees to three million students every year, besides another 400,000 engineers – the quality of many of the teaching colleges is appalling. But the NKC has suggested to the government that India needs 1,500 universities, including 50 national universities.
In the past, the federal and state governments had invested huge amounts in setting up prestigious institutions, including the Indian Institutes of Management (IIMs), the Indian Institutes of Technology (IITs), Regional Engineering Colleges (RECs) and other degree colleges.
But with the governments unable to even provide primary and secondary education to millions of Indians in rural and semi-urban areas, higher education has been neglected in recent years. In states like Maharashtra, Karnataka and Tamilnadu, the private sector has stepped in, but many of the institutions are money-making rackets, with students having to pay hefty capitation fees.
Many of the engineering and medical colleges in these states do not have basic facilities including workshops, libraries, laboratories, hospitals or even modest classrooms. In most cases, local politicians run the colleges and bring pressure on universities and other degree-granting institutions to recognise the facilities.
Not surprisingly, many affluent Indians send their children abroad for higher education. The US, Canada, the UK and Australia are among the most favourite destinations. There are over 80,000 Indian students in various American colleges, representing the single largest international student community there.
Consequently, US universities are among the most eager to set up campuses in India, or to enter into tie-ups with counterparts here. Top delegations from prestigious universities such as Harvard, Stanford, Purdue, Cornell, American, and Georgia Tech University have visited India in recent weeks, meeting government leaders and heads of local universities, seeking tie-ups and even land for their new campuses.
THE phenomenal salaries that IIT and IIM graduates get after passing out of their schools has resulted in a huge rush for seats in these institutes. Recently, some graduates from IIT Delhi landed in jobs in California and New York with annual compensation of around $100,000.
The seven IITs in the country admit just 5,000 students every year, though over 300,000 apply for the prestigious courses. The Indian government has now decided to set up three more IITs – one each in Andhra Pradesh, Bihar and Rajasthan.
But states that do not boast of such institutions are feeling left out. Politicians in states like Orissa and Madhya Pradesh are grumbling that most of the federal resources are allocated to developed states; besides the three IITs, the central government has decided to establish two new Indian Institutes of Science – in Pune and in Kolkata. Similarly, 20 Indian Institutes of Information Technology and five IIMs are among the new schools that will come up over the next five years.
But all these will be in states like Delhi, West Bengal, Karnataka and Maharashtra, which are far more advanced. And even in states like Andhra Pradesh, which will shortly get a new IIT, there is a controversy over the location of the school. The state government has decided to establish it in Medak, instead of Basar, leading to agitations.
Though the government is investing large sums in setting up these higher education institutes, it has decided to cut down on subsidies. Last week, the IIMs decided to raise their fees by between 10 - 15 per cent for their post-graduate business management programmes. IIM Bangalore will charge Rs200,000 pre annum.
The Planning Commission also warned that higher education will become expensive with university fees likely to go up by 15 to 20 per cent. According to Montek Singh Ahluwalia, deputy chairman, Planning Commission, the present fees – ranging from Rs2,000 to Rs2,5000 a year – charged by public universities barely cover five per cent of the total education expenditure of the varsities.
Even the NKC has emphasised on the need for more realistic fees, and has said that they should meet at least 20 per cent of the total expenditure in universities. Needy students, the NKC pointed out, could be given a fee waiver and scholarships.
India’s higher education sector is in for some dramatic changes over the coming months. And with the sector being opened up for FDI, it will surely bring in much-needed professionalism and efficiencies, just as foreign investments have transformed other sectors, including insurance and real estate.