labels: economy - general
The next battleground: FDI for higher education news
13 February 2007

After insurance, real estate, retailing and pensions, the next battle for FDI is likely to be between the votaries and opponents of foreign universities opening shop in India, reports Nithin Rao.

  • ABOUT 40 international universities, including leading American and Canadian institutions, are in talks with the Maharashtra government to set up campuses in the 'knowledge triangle' encompassing the Mumbai-Pune-Nashik industrial hubs.

  • The Andhra Pradesh government is promoting an 'education district' and has identified 1,000 acres of land in Visakhapatnam, where international universities will be allowed to set up campuses.

  • In Chandigarh, the union territory administration is promoting an ambitious 'education city', and has allocated about 150 acres of land at Sarangpur village; several foreign universities are in talks with the administration about setting up a presence there.

  • High-level delegations from top US universities - including Harvard, Stanford, Purdue, Cornell, Northwestern University School of Law, and American - have been visiting India of late, meeting government leaders, academicians and education officials, and announcing tie-ups with counterparts here.

India's higher education sector is poised to witness dramatic changes over the coming months, as the government plans to open up the 'industry' to foreign institutions. After insurance, real estate, retailing and pensions, the next FDI (foreign direct investment) battleground is likely to be higher education, as votaries and opponents are lining up for the big fight.

Michael Owen, the Mumbai-based US Consul-General, recently urged the Indian government to further relax the FDI norms in higher education, to enable American universities to set up a presence here. While over 80,000 Indians are studying in the US - comprising the largest group of foreign students there - thousands more are unable to make it to campuses there.

Consequently, American universities, and even the US government, want India to open up higher education for FDI, which would result in several foreign campuses in the country.

Forbes, the leading international business magazine, in a 'Sneak Peek 2007,' made a 'bold prediction', "The Indian government," said Ruth David, its Delhi-based writer, "will allow foreign universities to enter India, setting in motion a revolution in education and helping the country meet the growing demand for an educated workforce. Only 50 million of India's 1.2 billion people have degrees past high school. As global companies head to these shores in search of talent, there's an urgent need to increase that number. Foreign institutions will ease the pressure on crowded Indian schools as well as give graduates a chance to specialise in a wide range of fields."

The case for more universities
The National Knowledge Commission (NKC), headed by telecom's whiz kid Sam Pitroda, has also urged prime minister Manmohan Singh to open up the higher education sector.

"We must formulate appropriate policies for the entry of foreign institutions and for the promotion of Indian institutions abroad," the NKC said in its note to the PM. It also called for making "a conscious effort to attract foreign students for higher education. This would enrich our academic milieu," said the NKC.

Congress president Sonia Gandhi is also keen on private sector participation in higher education. So too are many business groups, and also the Confederation of Indian Industry (CII). Commerce minister Kamal Nath is also pushing for FDI in higher education, though human resources development (HRD) Minister Arjun Singh, was initially opposed to the move.

Last year, Nath's ministry came out with a 24-page document, backing the move to allow FDI in the education sector. The ministry argued that every year $4 billion was spent on overseas education by Indian students; with foreign universities setting up a campus here, the nation could save a lot of foreign exchange, and many more Indian students could get foreign degrees.

The HRD ministry had drafted the 'foreign universtiy entry and operation (maintenance of quality and prevention of commercialisation) bill', which was, however, found to be illiberal. A group of ministers (GoM) was set up to study the draft bill; a few weeks ago, the GoM approved a more liberal version.

The 'foreign education providers (regulation) bill' is now before the union cabinet. It envisages foreign universities setting up campuses in India; these institutions could be granted deemed university status by the University Grants Commission. International universities - a few have already set up a presence in India through the franchise or twinning routes - will not be allowed to set up franchisees under the new bill.

The travesty in the current system is that an international institution can offer courses in India - with a local partner - but without getting approvals from the UGC or the All India Council for Technical Education (AICTE). In the absence of any regulation, many students end up being cheated as fly-by-night operators fleece them by charging hefty fees.

Opponents of the move to allow foreign universities to set up a presence in India include the controversial P M Bhargava, vice-chairman of the NKC, and founder-director of the Centre for Cellular and Molecular Biology, Hyderabad, and the Left parties, especially their unions.

But many in the Left appear to have softened their opposition. Sitaram Yechury, the CPM politburo member, has called for regulation of higher education, especially with the private sector having assumed a greater role. Yechury wants the regulator to monitor not just on academic matters, but even on issues like the fees that the private education providers charge, and the salaries they pay to the teaching and non-teaching staff.

The NKC has suggested the setting up of an independent regulator for higher education, which would also have degree-granting powers.

Many are also opposing FDI in higher education, as they fear that India is committed to do so under its World Trade Organisation (WTO) obligations. Though the 'general agreement on trade in services' (GATS) covers all aspects of education - from primary through higher - India has not committed itself to opening up the education sector to foreign service-providers.

Experts point out that India has no multilateral obligation under the WTO to open up higher education to foreign participation. It did not offer education services either in the Uruguay round, or even in the ongoing Doha round.

India has an impressive higher education system, but much of it dominated by publicly funded universities and institutions. There are over 300 universities in India, about 17,000 colleges, 450,000 teachers and 10 million students. Every year, the higher education system churns out three million graduates and about 400,000 engineers.

But in a country where half the population is below the age of 24, demand for higher education is soaring, and the existing institutions are unable to provide quality education. There are an estimated 120 million Indians - in the age group of 17-22 - many of who are hungry for higher education.

The information technology sector in the country is facing an enormous shortage of talented employees; just one out of four engineers who graduate out of colleges are found to be employable.

Nandan Nilekani, the chief executive officer of Infosys, highlights the disconnect between the needs of the IT sector and what the education system produces. A study by McKinsey and the National Association of Software and Services Companies of India (NASSCOM), warns the IT sector would face a shortfall of half a million skilled workers in just three years.

The NKC, in its report to the prime minister, has called for the setting up of 50 national universities, with at least 10 to be established within three years. India, the NKC feels, needs 1,500 universities, not just 300 as of present. This would enable a gross enrollment ratio of at least 15 per cent by 2015.

Not surprisingly, there's a clamour for prestigious universities and institutions of higher learning. There are just seven Indian Institutes of Technology (IITs), six Indian Institutes of Management (IIMs), three Indian Institutes of Information Technology (IIITs), and 20 National Institutes of Technology (NITs - formerly Regional Engineering Colleges). The government is adding just three more IITs, increasing their total intake from 4,000 to 7,000.

In fact, there were widespread protests in Andhra Pradesh recently after the government announced that the new IIT would be set up in Medak, instead of in Basar.

Interestingly, many state governments and politicians are eager to attract foreign education service providers. A few years ago, Maharashtra lost the race for the prestigious Indian School of Business (ISB), when politicians led by Bal Thackeray, the fiery 'sons-of-the-soil' votary, demanded reservation of seats for local students.

The ISB, which has had strong ties with the Kellogg School of Management, the Wharton School, and London Business School, was welcomed with open arms by Hyderabad.

This time, however, Maharashtra is in the race, along with many other states, to attract the largest number of foreign universities. According to V K Jairath, principal secretary (industries), about 40 international universities have sought land for their campuses, along the Mumbai-Pune 'knowledge corridor' and also in the Mumbai-Nashik-Pune triangle.

A Gulf-based institute wants to invest $300 million in a new campus, while others are planning facilities along the Mumbai-Pune expressway. Several IT and software parks have come up along this 100-km stretch, and new special economic zones are also being promoted here.

A couple of the foreign institutions - including the Georgia Tech University and the Schulich School of Business, Canada - are in an advanced stage of negotiations for acquiring land for their new campuses on the outskirts of Mumbai. The American University, Washington DC, is also considering a tie-up with an Indian business group, for a campus also near Mumbai.

Chandigarh's Education City has attracted players such as the Design Institute of Milan, the University of Frazer Valley, Canada, and the Wayne State University from the US. The administration has received bids from 30 education service providers, including a few Indian groups, for campuses in the new city.

Top American universities including Stanford, Harvard and Wharton, and Europe's Insead Business School, are also keen on offering courses to students in India.

While many international universities are awaiting the final clearance from the Union cabinet relating to FDI, some have already gone ahead with tie-ups. They include Stanford University (with IIM, Bangalore), Columbia University (with IIM, Ahmedabad), and Purdue University (a delegation is visiting the country shortly).

The George Washington Law School University is helping IIT Kharagpur with its new, Rajiv Gandhi School of Intellectual Property Law, while Chicago's Northwestern University School of Law, and Australia's Deakin School of Business and Law, are also seeking tie-ups with law schools in the country.

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The next battleground: FDI for higher education