Foreign Direct Investment (FDI) in higher education.
Education without borders
In this column, we invite experts to describe what they think is the most pressing issue in higher education in India
PROBLEM: India’s rapid economic growth has put a spotlight on the huge imbalance between supply and demand for quality education, particularly in the
India needs 35,000 more colleges and 800 universities by 2020 to increase the percentage of students pursuing higher education.
higher education sector. The importance of addressing this imbalance is
highlighted by the fact that there are an estimated 550 million people
who are under 25 years of age. The human capital loss resulting from an
inability to educate such a large group is unimaginable and has
catastrophic consequences for India’s economic future. According to
recent government estimates, India will need 800 more universities and
another 35,000 colleges by 2020 in order to increase the percentage of
students pursuing higher education from the present 12% to 30%. Given
that the investment in higher education is a paltry 0.4% of the GDP,
this acknowledgment has focused a lot of attention towards Foreign
Direct Investment (FDI) in higher education.
While numerous publications have extolled the virtues of FDI for
the education sector in India, the pros and cons of liberalisation need
to be carefully examined. The National Knowledge Commission report
(2007) recommended that foreign education institutions should be
permitted to enter the market so long as quality controls could be put
in place in order to ensure that only quality institutions were allowed
to operate. While there are reputed foreign educational institutions
operating in India, it is frequently alleged that there are others that
charge high fees for programmes of dubious quality. In addition, there
are genuine concerns associated with FDI, as captured in this quote by
Hillary French (1998): “As investors search the globe for the highest
returns, they are often drawn to places endowed with bountiful natural
resources but are handicapped by weak or ineffective environmental laws.
Many people and communities are harmed as the environment that sustains
them is damaged or destroyed—villages are displaced by the large
construction projects, for example, and indigenous people watch their
homelands disappear as timber companies level old-growth forests.
Foreign investment-fed growth also promotes western-style consumerism,
boosting car ownership, paper use, and Big Mac consumption rates towards
the untenable levels found in the United States—with grave potential
consequences for the health of the natural world, and the stability of
the earth’s climate, and the security of food supplies.”
SOLUTION: Foreign Direct Investment (FDI) in Indian higher education
Having spelt out the problem, it is necessary that we have a
supportive domestic regulatory framework that can ensure that
liberalisation is beneficial, instead of giving in to the claims of
cultural imperialism and banning such investments altogether. It has
been argued, quite correctly, that reputable foreign institutions, with
their extensive research infrastructure, have the capability and
capacity to impart cutting-edge knowledge in the critical fields of
science, engineering and business. These institutions can also mobilise
resources in order to train existing college and University teachers in
India, many of whom lack doctoral degrees. Besides updating curricula,
these institutions can also help train Indian teachers to familiarise
themselves with and integrate online pedagogical tools into their
curriculum. This is an effective short-term fix for the severe shortage
of well-trained teachers in India, particularly in higher education. FDI
can be beneficial for the higher education sector in other ways. For
example, allowing FDI in education may lead Indian institutions to
export educational services to other countries in the future,
particularly those in South East Asia, the Middle East and Africa. Of
course, government policy needs to balance these benefits with the
concerns for dualism in education which may occur if the spillovers from
FDI are restricted and do not occur for mass education. However, given
the paucity of public sector investment in this critical sector, there
is no other alternative but to allow such investments, albeit with a
careful eye towards quality control.
SOLUTION: Foreign Direct Investment (FDI) in Indian higher education
Having spelt out the problem, it is necessary that we have a
supportive domestic regulatory framework that can ensure that
liberalisation is beneficial, instead of giving in to the claims of
cultural imperialism and banning such investments altogether. It has
been argued, quite correctly, that reputable foreign institutions, with
their extensive research infrastructure, have the capability and
capacity to impart cutting-edge knowledge in the critical fields of
science, engineering and business. These institutions can also mobilise
resources in order to train existing college and University teachers in
India, many of whom lack doctoral degrees. Besides updating curricula,
these institutions can also help train Indian teachers to familiarise
themselves with and integrate online pedagogical tools into their
curriculum. This is an effective short-term fix for the severe shortage
of well-trained teachers in India, particularly in higher education. FDI
can be beneficial for the higher education sector in other ways. For
example, allowing FDI in education may lead Indian institutions to
export educational services to other countries in the future,
particularly those in South East Asia, the Middle East and Africa. Of
course, government policy needs to balance these benefits with the
concerns for dualism in education which may occur if the spillovers from
FDI are restricted and do not occur for mass education. However, given
the paucity of public sector investment in this critical sector, there
is no other alternative but to allow such investments, albeit with a
careful eye towards quality control.
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