Is India about to
open up higher education to foreign investments? If one takes the commerce
and industries minister at face value, the answer is yes. Of course,
the forum at which Kamal Nath made the announcement about the Union
Cabinet having approved a bill to that effect is significant. This was
the India Economic Summit, organised by the Confederation of Indian
Industry and the World Economic Forum (WEF). There are reforms one sells
to WEF, in Davos and in Delhi, that subsequently become lemons. Some
time will elapse between the Foreign Education Providers Regulation
Bill (FEPRB) and rules being drafted and their being placed before Parliament
in the budget session, enough time for the human resources development
minister and the Left to torpedo liberalisation. Why do we want foreign
direct investment (FDI) in higher education? Kamal Nath mentioned some
reasons, but there is a better listing in a document (A Consultation
Paper on Higher Education in India and gats: An Opportunity) prepared
by the commerce ministry. First, with 1,20,000 Indian students going
abroad annually, the annual foreign exchange outgo is $4 billion. If
FDI entry leads to supply-side improvements, not only will this foreign
exchange outflow be saved, there may even be some inflow, because students
from elsewhere may come to India.
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Naorem Ashish |
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Evidence
shows that allowing profit-making institutions doesn’t preclude
access to relatively poor students |
Second, since Harvard,
Oxford, the Massachusetts Institute of Technology, Yale, Stanford and
Georgia Tech will come to India, students will have access to better
quality training, research and physical infrastructure. Third, and this
is a slightly different argument, Indian students will have access to
global brands. To these arguments, Kamal Nath added a couple more. Fourth,
the brain drain will be reversed and shortage of skilled manpower eliminated.
Fifth, with access to better quality education, rural educated youth
will become more urbanised, with urbanisation seen as a positive.
The focus then shifts
towards liberalising higher education, to foreign as well as domestic
private sector entry. The colour of the competition (foreign versus
domestic) doesn’t matter. Competition is good not only because
it brings in better quality foreign providers (mentioned by the commerce
ministry), but also because it improves the quality of existing providers
(not mentioned by the commerce ministry). Consider what competition
has done to Haldiram’s and in principle, the response should be
no different for any Indian university. If restrictions on input prices
(salaries) and output prices (fees) need scrapping, as they have been
scrapped for manufacturing, they need scrapping for all entrants, not
just foreign entrants. The licensing raj set up by ugc, aicte, the Medical
Council, the Bar Council and assorted other bodies, should be scrapped
for everyone, including a shedding of the mindset that education shouldn’t
be profit-making. Evidence shows that allowing profit-making institutions
doesn’t preclude access by relatively poor students, since both
public and private loans and scholarships are possible, without necessarily
requiring public sector provisioning of higher education. There certainly
has to be a regulatory structure, with perhaps strict disclosure norms,
since there is asymmetric access to information by providers and consumers
of educational services, and perhaps even external ratings of institutions
(preferably not done by the government).
Why do we need a
FEPRB especially for foreign entry? What is so very extraordinary about
that which is foreign? We will unnecessarily get into debates about
whether 26 percent, 74 percent or 100 percent FDI will be permitted
and what is the definition of FDI for such purposes. There is a parallel
here with what has happened in the retail case. There is a case for
organised entry into retail and resultant dis-intermediation. But by
equating this with FDI in retail, we have ensured that opening up goes
for a six. I suspect that is what is going to happen to higher education
also. This comes from approaching liberalisation through a trade and
investment policy angle. Whether 1,20,000 Indian students are going
abroad or not is not the point. The point is that such cross-border
access is only available to relatively better-off students. We need
to broad-base access to quality right across the socio-economic spectrum.
Four billion dollars annually is not the point, since our balance of
payments situation can absorb the shock. The argument is that a country
that does relatively well, as India is doing, becomes a net importer
of human capital (immigration exceeds emigration), student or otherwise.
By bringing in the foreign adjective, we have ensured the Left, with
a significant presence among higher education faculty, will successfully
shoot down the liberalisation.
Debroy is a Leading Economist
