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End the State Monopoly on Higher Education

Arvind Panagariya

            Last month, when I wrote that public-sector monopoly in India had been abolished in virtually all sectors except railways, I made one major error of omission: higher education.

            Under the University Grants Commission (UGC) Act, 1956, an institution can award degrees only if it is established under an act of Parliament or a State Legislature, or specially empowered to award degrees through legislation, or deemed to be a university by the Commission. 

Accordingly, the institutions of higher learning fall into four categories: (i) universities established by an Act of Parliament or State Legislature; (ii) degree-awarding institutions of national importance, such as the Indian Institutes of Technology (IIT), which are established under Acts of Parliament; (iii) institutions “deemed” to be universities, which are given university status under a provision in the UGC Act; and (iv) diploma-awarding institutions such as the Indian Institutes of Management that are neither established by legislation nor deemed to be universities.

            India has no private universities.  Three fourths of the existing 10,600 colleges are classified as private but to award degrees they must be affiliated to one of the approximately 240 central or state universities.  All but a handful of these colleges depend on the government for recurrent expenses.

            None of this will be of concern if resources were plentiful, the UGC was able to administer the education system efficiently, and higher education had been flourishing.  But the situation is grim on each front.

            The resource crunch faced by the government has brought the total expenditure on higher education from its peak of 1 percent of the GDP in 1980-81 to less than 0.4 percent currently.  The share of higher education in total educational expenditures has fallen from 25 percent in the fourth Plan to 8 percent in the Eighth Plan.  Given the fiscal pressures and the high priority we must assign to primary education, the financial future of higher education is bleak. 

The UGC bureaucracy is simply unable to administer its diverse set of responsibilities over the vast network of institutions.  It has the sole responsibility for coordination and determination of standards in these institutions.  It also disburses over 1,000 crore rupees among central, state and deemed universities for wide–ranging needs including staff, equipment, books and journals, buildings, campus developments such as roads, power, water and sewage lines, health care and student amenities such as canteen.

In the 50s and 60s, when the number of universities was small, such micromanagement may have been defensible.  But with nearly 280 universities and 10,600 colleges, the ability of the UGC to perform its various functions efficiently is in grave doubt.  For instance, though the need for a system of accreditation of institutions of higher learning had been recognized in 1988, the National Accreditation and Assessment Council (NAAC) was not established until 1994.  More strikingly, at the end of 1998, the latest year for which I was able to find information, despite some progress, NAAC had not completed its accreditation review of a single university or college!

Indeed, the rapidly declining standards across universities suggest that the key justification behind the delegation of the effective monopoly power to UGC over higher education—maintenance of standards—is no longer valid.  Even the reputation of the Delhi University, much reduced from its peak level of the 1960s, is being preserved by the sheer brilliance of its students rather than the UGC.  And the reputation of an institution such as the Rajastan University, where I received a Master’s degree in the 1970s, has been tarnished so badly that recently employers have barred its graduates from even applying for jobs they advertised.

            We ravel in thinking that India is the powerhouse of higher education in the developing world.  And, indeed, it is a source of some pride when we are able to say that only those students who fail to qualify for entry into an IIT choose to go to MIT. 

Nonetheless, the overall picture is gloomy.  At 7.01 million, the students enrolled in colleges and universities account for only 6 percent of the population in their age group (17-23 years).  The corresponding enrolment ratio stands at 10 percent in Malaysia, 19 percent in Thailand and 28 percent in the Philippines. 

Though China lags behind with an enrolment ratio of less than 5 percent, it is fast closing the gap.  Its marginal enrolment ratio, representing the proportion of new college-age population going to colleges each year, is 10 percent.  The dramatic improvement in the quality of the Mainland Chinese students coming to the United States that I have observed over the last ten years suggests that our advantage in this area may be fast eroding.  The incoming Chinese students now speak English almost as fluently as their Indian counterparts.

               There are no magical remedies for current ills of our higher education system.  But given the resource crunch faced by both the central and state governments, one obvious necessary step would seem to be the entry of private universities.  While the key role of the state in higher education is beyond question, the ban on private entry into it has no more justification than into the heavy industry. 

               The vast pool of talented Indian youth longs for quality education and many parents will be glad to pay for it, as they indeed do when their children go to various coaching institutes.  Many successful Indian entrepreneurs within as well as outside India are eager to invest in this area.  The only missing ingredient is the willingness of the government to let go of its control.

                The availability of high-quality private-sector education may also generate side benefits.  It may lead public-sector universities to better appreciate their moral obligation to deliver high-quality education.  It may also help build support for increases in tuition fees in the public-sector universities.  When even Chinese universities charge fees ranging from 10,000 to 20,000 rupees annually, how can we afford to provide education virtually free?

Economic Times, March 28, 2001