Saturday, November 12, 2011

Observations on Private Sector Higher Ed in India

My recent visit to India, which included a number of meetings with entrepreneurs, academicians and students in a number of business and engineering schools, has been quite helpful in my inquiry into the business models used in the Private Sector Education in India. Indeed, Indian Private Higher education is nowhere as evolved as the American ones, or even the kind one sees in South-East Asia. However, it is immensely important, because the huge young population of this country may decide, euphemistically speaking, whether Capitalism can succeed globally. Failure of Higher and Adult Education system in India at this time is likely to create a demographic time bomb, which will not only wreck India's future, but potentially the whole region's, and by extension - of the global economic system.

In context, the Indian government, like the governments in other countries, have decided to leave the expansion of Higher Education to the private sector. The political logic is clear: There is no money to be spent on Higher Education, as this is not an electoral priority. The market logic of higher education is clear: There are lots of young people and many companies desperately looking for skilled employees. On paper, this is a straightforward equation which can create profitable businesses. 

To be technically correct, however, the Indian government does not permit For Profit Enterprises in Higher Education. It seemed to living with the notion that philanthropy can be enforced, and it can abdicate its responsibility to provide Higher Education to millions of its young citizens, crucial for social mobility and national competitiveness to a random possibility that wealthy individuals and businesses will jump into the sector, presumably forced by the requirements of skilled workforce in their businesses and to maintain social harmony. If this was the intended model, it has worked out as badly as it should have: A hotch-potch of an industry, deeply corrupt in its recruitment practices, severely limited in innovation and narrow in its offering, has emerged. It seems that the current configuration of the industry is doing more harm than good to India's long term future, and something must be done to correct this immediately.

Apart from the structural problem, there seems to be business problems as well. It seems that, despite the vast demand,  there is a supply glut in the market, arising from the rapid expansion in me-too business and engineering schools offering similar degree programmes. One entrepreneur confided to me that the students doing MBA aren't getting any better jobs than the undergraduates, and many of the MBA seats now are running vacant. This is partially because of oversupply, but also because of the regulatory system that over-regulates the industry. In one of the worst examples of privatization, the Indian regulators tried regulating everything, including prices that can be charged and courses that can be taught, so that the institutions can not make a profit. With this over-riding objective, they have successfully created a system of widespread corruption where bribes are paid under the table to secure places and there is no innovation whatsoever in terms of curriculum and teaching. Indeed, some of the most senior bureaucrats working for the regulatory body, All India Council of Technical Education, ended up in jail last year, convicted of corruption themselves, but there is little evidence any lessons have been learned and any changes to the system has been initiated.

The other pressing issue facing the Indian Private Education sector is the supply of able academicians to teach. There are simply too few qualified tutors to teach at the appropriate level, and for skilled professionals who may otherwise be induced to transition into a career in education, money in corporate jobs is simply too good to leave. Government, which surely has a role to play in easing out such crucial supply bottlenecks, has done nothing to create teacher training or research infrastructure, and have left it to private sector and its clueless regulators to find a solution. So far, this has led to de-professionalization of teaching, with tutors requiring only a Masters degree, often from India's vast dysfunctional public university system, to teach. It is impossible to see how these tutors will ever be able to help their students to be professionally competent, as most of them wouldn't have worked anywhere else and walked straight into teach the MBA students. It should be noted that a Masters qualification in India does not necessarily mean any exposure to research at all, and hence, most of the MBA teaching in India ruefully remains at a very operational, technical level.

Indeed, all these mean that the promise of higher education profits have failed to materialize for most of India's Private sector institutions. The sector seems to be entering a phase of Darwinian struggle for existence, and already a few of the colleges have gone bankrupt or surrendered to trade buyers or venture capitalists. It is most likely that this trend will continue, till the government has woken up to the absurdity of its regulatory mechanism and the industry has found a business model. There is already an ongoing discussion about the inefficiencies of the regulatory mechanism, but it seems all too difficult to change, given the fact that this sector so far has been used to park the politicians' black money and ill-gotten wealth.

I am tempted to contrast the success of some of India's For Profit Training companies, such as NIIT, Aptech and Educomp in more recent times, with the disarray of Private Higher Education sector. These companies faced not inconsiderable difficulties of doing business in a country where education has traditionally been paid for by the state and the Middle Class always had a sense of entitlement that they wouldn't pay for education. These companies changed that successfully and created innovative business models, perfecting franchise models for Indian conditions and innovating curriculum and delivery models continuously. They restricted themselves to certain sectors due to regulation, but one would argue that the students can actually get a better value out of their training in these institutes than they get out of the degree programmes from private sector education institutions. All of that is sadly missing from the Private Sector Higher Education so far, though one would assume, given the difficulties the sector is already facing, that there would be a number of changes in practices very soon.

Apart from a change of heart of the government and some smart regulation, which one should hope for, it is legitimate to expect the private sector will do what it does best - innovate. One obvious area is curriculum: It seems strange that India needs only MBAs and Engineers, and not many Doctors, Nurses, Teachers, Journalists and Designers. I am certain we will see private sector liberal arts colleges quite soon. It is also legitimate to hope that the sector will be freed from the price controls that currently plagues its operations and the bureaucrats will allow them to explore partnerships with global institutions without needing to meddle into it (which the proposed Foreign Education Providers' Bill, currently with the cabinet, wants them to do). It is important that India creates top-of-the-class institutions as well as foster a culture of excellence across its higher education system, and this will need leadership, both in government and at the private citizen level, and new thinking. This need is indeed urgent, and one would hope that an environment conducive to such thinking will come about soon enough.




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