Strategy for bringing FDI in EDUCATION
Arijit Goswami
Department of Electronics and Communication Engineering
University Institute of Engineering and Technology
Panjab University, Chandigarh
Mobile no.: +919463334792
Shivam Negi
Department of Electronics and Communication Engineering
VIT University, Vellore
Mobile no.: +918608608163
Abstract: Foreign Direct Investment is a
topic that has attracted a lot of furore in the
past few years in India. With the
government allowing FDI in retail, it is
imperative to think of its significance in the
education sector. This paper analyses the
concept of Foreign Direct Investment, its
role in education sector, the consequential
benefits and challenges posed by it and the
solutions for making FDI in education a
success.
I. Introduction
In the 21st Century, the heat is on
Globalization. Globalization became one of
the most important factors in shaping
economies: both of developing and
developed nations. Many theories has been
proposed which showed various
perspectives of globalization which directly
and indirectly affect the growth and
economy of all the nations .Lifestyle , Gross
Domestic Production , Growth rates
,Education , Per capita Income of nations get
influenced by policies which are in turn are
affected by globalization and international
trade. While many benefits of globalization
is observed when African countries and
Latin American countries are brought into
spectrum but several side effects are also
observed when we try to relate globalization
with local economies which are native to
those regions . African and Latin American
countries possess many natural resources,
often extracted by foreign investors, while
multinational enterprises (MNEs) are
establishing production units all over the
developing world in order to take benefit of
the ample low cost labor(Fujita and Thisse
(2006)), more competitive fiscal
environment or weak environmental norms
(Candau and Musson (2010)).Arguments are
being raised that globalization along with
free trade and liberal policies turned out to
be disastrous for the local businesses which
in turn is widening the gap between rich and
poor people.
II. Significance of FDI
Foreign Direct Investment (FDI) is one of
the channels of globalization which directly
affects several economies. FDI inflow leads
to major change in economies by exchange
of technology, monetary funds, managerial
tactics and several other factor which shape
businesses in multinational enterprises
(MNEs).
FDIs has also proved to be more reliable
than other forms of foreign capital during
financial crises: while portfolio investment
and debts dried up during the East Asian
crisis of 1997-98, the Latin American debt
crisis of the 1980s, and the Mexican crisis
(1994-95), FDIs proved to be an investment
with phenomenal resistance (Dadush et al.
(2000),Lipsey (2001)), even though the flow
was slowed down during the 2008-09 cause
of economic crisis, primarily due to the
freezing of the international banking sector.
Change in human capital is one of the
outcome of globalization which is observed
due to buildup of market, business houses
and new infrastructure in short time period
.Apart from stimulating advancement in
technology, FDI turned out to one of the
biggest factor which improved human
capital due to demand of skilled labors
therefore providing incentives for
participation of general public in higher
education. Human capital accumulation can
be defined as “the knowledge and skills
embodied in humans that are acquired
through schooling, training and experience,
which are useful in the production of goods,
services and further knowledge” (De La
Fuente and Ciccone (2003)). While its effect
of several factors are observed , it is noticed
that human capital accumulation has direct
impact on productivity of labor and also
have significant relationship with growth
rate of a nation (Lucas (1988)).
While Job training and experience regarding
work is considered most important factor for
increasing productivity in the field or in a
particular sector ,however when we talk
about grass root level ,school education is
one of the crucial factor for improving the
accumulation of Human Capital .The paper
takes tertiary education as the primary
variable of interest rather than secondary
education, not only because the higher
education is non-compulsory when we talk
about India and other developing nation but
also cause Higher Education suits more
when we try to relate education sector with
technological and economic advancement
happening in that nation .
III. Indian Education System – Past and
Present
India has witnessed an above exponential
growth in the number of higher educational
institutions vis-à-vis its population when we
talk about time after independence. While
there were just about 20 Universities and
500 Colleges at the time of independence
(year 1947), today these numbers have
grown exponentially. India added nearly
20,000 colleges in a decade (increased from
12,806 in 2000-01 to 33,023 in 2010-11)
which translate into a growth of more than
150%. Number of degree granting
universities more than doubled from 256 to
564, primarily due to deemed-universities
and private universities. India has a complex
affiliation system where universities can
have hundreds of public and private teaching
colleges affiliated to it.
Figure 1: Growth of higher education
institutes in India
The current higher education sector in India
and statistics related to it are discussed as
follows.
IV. Technical Education
Taking into consideration the need for
technical education so that skill is acquired,
the government took steps to open,
Industrial Training Institutes, Polytechnics,
Engineering Colleges and Medical Colleges.
In 1951 there were only 747 technical and
professional institutions and at present India
has 1500 such institutions.
600 polytechnics (with 88,000 seats) and 62
women polytechnics (5900 students' intake)
have been set-up during planning period. At
present there are 230 recognized engineering
colleges with 36,000 seats, 146 medical
colleges (with 14045 intake) and 40 dental
colleges.
Figure 2: Growth of management and
engineering colleges in India (source:
AICTE)
V. Adult Education
The literacy rate has increased from 18.3 per
cent in 1951 to 52.2 per cent in 1991 and 62
percent as per NSSO estimates and 63.1 per
cent according to National Family Health
Surrey of 1998. The National Adult
Education Programme was taken up in 1978.
The aim was to reach 100 per cent literacy
(age group 15-35), by the year 1990.
Central Government gave assistance to
states, voluntary organizations and 39
Universities for adult education programme.
The target was revised to cover 40 million in
1985-90 and balance 60 million in 1990-95.
By the close of 1990-91, about 2.7 lakh
adult education centers were set up.
They enrolled about 80 lakh adults every
year. As a result, the overall percentage of
literacy has increased from 52.2 per cent of
1991-92 to 63.1 per cent in 2000-01.
Figure 3: Growth of literacy rate in India
from 1900 - 2000
VI. Vocationalisation of Secondary
Education
As a result of announcement of National
Policy on Education (NPE) priority is given
to vocationalisation of secondary education
to make education relevant to work. They
cover large number of trades/occupations in
agriculture, industry, trade and services.
Central Government introduced the scheme
from February, 1988 for giving financial
assistance to states/U.T.s. Till 2000-01
sanction has been granted to 10,316 schools
with 4 lakh student's strength. The Ninth
plan ad laid stress on the revision of
curricula to work opportunities.
VII. Improvement in Science
Education
It was in 1988 that Central Government
started a scheme for the improvement of
science education in schools. Financial
assistance is given to provide science kits,
up gradation of science laboratories,
development of teaching material and
training of science and mathematics
teachers.
A Central Institute of Educational
Technology (CIET) was set up in NCERT to
purchase equipment for State Institutes of
Educational Technology.
VIII. National Policy on Education
On the recommendation of Kothari
Commission, first policy on education was
adopted in 1968. It recommended:
(i) Free and compulsory education to boys
and girls up to the age of 14 years;
(ii) Application of three language formula
and development of Indian languages;
(iii) Development of agriculture and
industrial education and
(iv) Six per cent of National income to be
spent on education.
In May 1986 Government prepared and
issued National Policy on Education in the
name of "New Policy of Education." It aims
at evolving pattern of education which may
achieve the objectives of value based
democratic, liberal and secular society. The
government has kept the target of removing
illiteracy in the age group of 15-35 years, by
the end of the year 1995.
IX. Higher Education
Higher education has expanded very fast in
India. Efforts are made to make the courses
more flexible and relevant to the
development needs of the country
particularly the post graduate education,
multi disciplinary studies and research.
The University Grants Commission (UGC)
was set up in 1956 for coordination and
determination of standards. UGC has taken
steps to implement the recommendations of
New Policy on Education such as
establishment of Autonomous Colleges,
Centers of Advanced Studies in Universities,
resurrecting of courses, regular use of media
for higher education, establishment of
Education Media Research Centers and
Audio Visual Research Centers for the use
of media and setting up of Academic Staff
Colleges for training and orientation of
college teachers.
Other steps taken in higher education are:
establishment of 10 central universities,
establishment of Indira Gandhi National
Open University (IGNOU) and assistance to
other institutions of higher learning's like
Indian Council of Social Science Research
etc.During 2000-01 there are 254
universities, 42 deemed universities and
7,926 colleges in the country.
X. Non-formal Education (6-14 age
groups)
In order to achieve universal elementary
education, this scheme was started on
experimental basis in Sixth Plan but on
regular basis in the Seventh Plan. It is meant
for those children who cannot go to full time
schools.
From the year 1987-88, central assistance
was made available to states and voluntary
organizations for setting up non-formal
education centers in rural, tribal, hilly and
remote areas and urban slums. By the end of
1991, 2.7 lakh centers have been set up with
68 lakh enrollment.
XI. Education for All
A Summit of Nine High Population
Countries on "Education for All" (EFA) was
held on Dec. 16, 1993. According to 93rd
Amendment, education for all has been
compulsory, free elementary education, a
fundamental right for all children in the age
of 6-14 years. In order to fulfill this
obligation, Sarva Shiksha Abhiyan has been
launched.
Figure 4: Distribution of different types of
schools in India
XII. Statistics which shows current
snapshot of Indian Education
India has a total of 610 universities. 43
central universities, 299 state universities,
140 private Universities, 128 deemed
universities and 5 institutions established
through state legislation, 30 Institutions of
National Importance
There are 45 technical institutes, 13
management institutes, 4 information
technology institutes, 6 science and research
institutes and 3 planning and architecture
institutes
Currently ,the Government spends
around 3.8% of its GDP on education
Less than 1% of the $38 bn of
the Government spend on education was
towards Capex (2008-09)
According to the 2011 census, the
total literacy rate in India is 74.04%
compared to the world average of 83.4%
(2008)
The female literacy rate is
65.46 % and male literacy rate is 82.14 %
FDI inflows in the education sector
during May 2012 stood at $31.22 mn
Source: UGC Annual Report 2010-2011-
DGET; Ministry of Human Resource
Development (HRD) Annual Report 2011-
2012; IDFC SSKI 2010; DISE 2009-10
Flash Statistics; MHRD Statistics: Higher &
Technical Education 2010; Planning
Commission: Midterm Review of XI Plan
Figure 5: Indian higher education statistics
XIII. History of Indian education
system:
Let‟s have a brief look at the history of the
Indian education system. Post-
independence, the first education minister of
the nation, Maulana Azad helped
government enjoy full control over the
education system and formulated a uniform
education system throughout the country.
National Policy on Education (1986) and
Programme of Action (PoA) (1986) were the
part of the progress of education sector in
India. The launching of DPEP (District
Primary Education Programme) and SSA
(Sarva Shiksha Abhiyan, India's initiative
for Education for All) also made their best
and significant contribution.
Figure 6: Logo of Sarv Shiksha Abhiyan
But was all that effort worth the final result?
The answer comes out to be a disappointing
„NO‟. In spite of the big strides achieved in
the education sector till date, we have
blindly constructed the fortress of our
education curriculum on the foundation of
British education system. And believe it or
not, the mentioned system aimed always
towards churning out clerks from our nation
and was never meant to endow us with what
is truly called „quality education‟.
Till the first 50 years of Independence,
education was viewed to be a social
responsibility because till then higher
education in the nation was inefficient to
satisfy the need of the hour. The
responsibility of providing feasible access to
education was enforced on the government.
The output proudly showed that the number
of students in higher education rose from
1.73lakhs in 1951 to 84 lakhs in 2001. But
wait a second…! Here is the story behind
the scene. Although the participation in high
schooling grew by a whopping factor, yet
the targeted population of age group 17 to
23 grew by a factor which far outweighed
the rise in the high school participation. That
is, the percentage increase in higher
education remained pathetic.
XIV. Privatization of education
Hence privatization of higher education
could prove to be revolutionary and realistic
alternative to limited resources and logjam
in government regulations. And perhaps the
government understood this fact very well.
The advent of privatization of education
brought a resurgent drive and fresh blood to
the dissemination of knowledge in the
country with the government regulations
keeping a stern vigil on the functioning of
these institutions, sans chipping away at its
autonomy. Perhaps, it was quite expected for
the idea to work well but…but what? Well,
by Murphy‟s Law, “if anything has a chance
to go wrong, it will definitely go wrong”.
And certainly it did go well with the Indian
education sector.
Today, one can easily observe the
unprecedented and meaningless rise in the
number of higher education institutions in
the nation. With a large number of
universities and even greater number of
affiliates, indeed education has become so
profitable a business that many businessmen
have also begun investing in this area. The
ever increasing number of colleges along
with the quota system and combined with
the politicization of education has made the
matter even worse and to some extent
beyond repair.
Figure 6: Statistics on school enrollment in
India
Even All India Council for Technical
Education (AICTE) has imposed a policy
barrier to check any further growth in the
number of such private institutions. In terms
of educated mass, India has definitely made
a huge leap in terms of quantity but has
lagged far behind in terms of quality.
Consider this; the national daily “The
Tribune” highlighted the dismal plight of
private universities of Himachal Pradesh.
The senior secondary school pass outs are
opting to join commerce and humanities
streams rather than studying at institutions
of lower repute and even lower quality.
Combined with this the fact that many
private institutes are closing down in the
country, courtesy the awareness among
youths about the abysmal quality of
education delivered there, is a solid
indication of the truth behind the educational
setup in India.
Figure 7: Growth of private universities in
India
Although we are churning out engineers,
doctors etc. at a rate faster than what butter
takes out of milk, yet none of the fresh
graduate is competent enough to handle the
reins of nation‟s development. Lack of job
orientation programs and focus shifting from
personality development towards syllabus
completion are some of the many factors
adding to the woes.
XV. Internationalization of
education
Hence, we must aspire for the international
standard in education. And this would be
possible if the concept of globalization is
accepted in education sector as well. The
government of India has taken forth a step
for the free and easier entry of A-grade
global universities into India sans any major
restrictions. Let‟s have a quick recap of what
all has been done till date regarding the
internationalization of education. Over half a
century ago, University Grants Commission
was set up as a harbinger of planned
development of higher education in the
country. And after a long period of time, a
bill called “Foreign Provider (Regulation)
Bill 2010” was introduced as a milestone to
regulate the entry of foreign education
providers and keep a vigil on their working.
Furthermore, the early 1990s observed
consistent efforts by some renowned foreign
universities attempting to market their
programmes of higher education in India. In
fact, they were all done in collaboration with
Indian partners, Also to be noted is the fact
that 100% Foreign Direct Investment (FDI)
is permitted in education sector via
automatic route since 2000, but the present
legal framework is hostile towards granting
of degrees by foreign universities in India.
But the clearance of the proposed bill would
definitely propel the process of setting up of
campuses of foreign institutions in India.
In the words of Sibal, “Any foreign higher-
educational institution allowed into India - if
unaided by the Indian government -will be
able to determine its own tuition and
curricula. But it will have to seek
accreditation in India, and will not be able to
repatriate profits. We are not going to
minutely look at these things to interfere and
intervene, but we must make sure their
quality is consistent with what we want,
when you set up a course in India it may be
Harvard in the U.S; but it has to be
accredited here."
What is the present trend going on in the
nation? Let‟s have a quick tour of the
ongoing collaborations in India, where the
foreign institutes have made their presence
felt in the domain of academics. For
instance, the IIMs have partnerships with
Harvard and Yale; IITs collaborating with
institutes like MIT (USA) etc. back at
Punjab, one can easily find private
universities like Chitkara University proudly
boasting of student exchange program with
George Brown University. The premier
management institution, Indian School of
Business has also joined hands with
Wharton College, University of
Pennsylvania for giving a cutting edge to
their teaching methodologies. Indian
Institute of Planning and Management
brings out its advertisement in various
national daily newspapers every week,
claiming to produce global leaders and has a
fleet of professors who have previously
worked at giants like Harvard, Cambridge
etc. Last but not the least, the IIMs already
are following the „Case Study Method‟ of
Harvard Business School. This clearly
means that the foreign universities have
already penetrated into the Indian education
system, though not physically but definitely,
virtually.
Figure 8: IIM-A exchange programmes with
foreign universities
XVI. MOOC concept
The last year also observed a brand new
initiative by MIT in online education.
EdX.org is a website where transcending the
barriers of age, qualifications and region,
anyone can opt for a desired course and can
heavily benefit from the lectures delivered
by MIT professors. The successful
completion of the course comes along with a
certification from MIT. This wave has been
a year later by Harvard and Berkeley too.
Doesn‟t all this mean that foreign institutes,
though not physically, have set up their
campuses on cyber space?
XVII. Challenges of FDI in
education
But what is the debate all about? Well, the
critics say that these universities from
foreign lands would definitely not be
coming bearing the torch of quality
education but would also be arriving with
some certain vested interest. The shrink in
the opportunities in employment and spurt in
ageing population has compelled the foreign
universities to look for prospects abroad.
The inflow of international students, which
forms a handsome chunk of their revenue,
has also been hit badly by the incidents of
racial abuse which are escalating day by
day. Hence, the best solution they probably
have found is to set up their campuses in the
foreign lands, where the big market i.e. the
students are.
Another question that naturally arises is that
whether the foreign universities brought to
homeland will be able to create the same
magic as they do abroad. Institutes like
INSEAD in France and IMD in Switzerland
have become global hubs for the youths to
interact with their counterparts from other
countries. All this essentially contributes to
cultural exchange and is by and large a very
learning experience.
Furthermore, it is well known that most of
the students flying away to foreign countries
have to take loans and repay it after the
completion of their studies. Hence, an ample
amount inflows back to the nation as bank
loan and invest repayment. In 2008, there
was a boom in the remittances from foreign
countries and India left everyone behind as a
total of $43.5 billion was sent back to India.
This literally formed around somewhat 3.3%
of the total Gross Domestic Product (GDP).
The phenomenon of internationalization of
education in India would definitely kill this
inflow of revenue.
Besides all this, the gullible young brigade
of India might fall into a mousetrap laid by
fake universities or even universities of low
quality. It is not guaranteed that the students
of these universities would definitely get a
good job after passing out. Moreover, it is
also unknown about the pay scale of the
teachers of such institutes. Who knows that
a professor of Yale, India campus might be
paid much less than his counterpart in
United States? He/she might also be
despised in front of his foreign counterparts.
We are also unaware of the curriculum of
the prospective campuses to be set up in
India. How would you feel if you end up
finding that the courses taught here are not
of the same standard as that of the parent
university? The biggest hurdle which awaits
the internationalization of education is that
these universities will have to shed their
policy of liberalization of education and
would have to adopt quota system in
compliance with the education policy of
India, which is really a pity.
But as it is well said that, “there is hardly
any flower sans a thorn”. We cannot afford
to keep good things at bay just for the fear of
entrance of negative elements. The number
of blessings conferred by the
internationalization of education weighs far
more than the than the troubles posed by
them. The 100% FDI in education would
definitely step up the standard of education
in the country. The competition which
would come along will be quite beneficial as
a culture of vigour and hunger for
excellence would become the order of the
day. The positive aura of the foreign
universities would act like a domino effect
and would incite the Indian counterparts to
improve themselves.
The ever troubling phenomena of brain drain
would also definitely get curbed as adequate
opportunities would become available in the
country itself. Researches searching out for
good facilities and appropriate funding
would also get the same in their homeland
and hence India might well climb the ladder
of success and fame in the field of research.
Moreover, the education from such giants
would come at a much lower cost as many
expenses which have to be met in foreign
lands would be absent and at the same time,
the students will be able to retain their own
culture and ethos, which sometimes
becomes a problem in foreign lands. And
definitely, the campuses would be a major
powerhouse for generating employment
opportunities.
No wonder that this phenomenon would
give birth to resurgence in the field of
education. The government ought to set a
panel or a committee which would look after
the standard of courses taught at these
places. Moreover, liberalization of education
must be done and the foreign institutes
ought to be spared from reservation policy.
The ranking of each giant must be adjudged
only by seeing the cumulative progress and
standard of each and every campus of the
universities. Only then would the
universities maintain the standard of
education in India as they do in their
homelands. The programmes that are
accredited to International standards must be
allowed.
XVIII. Conclusions
Above all, the crux of the matter is that if
the government plays with comprehensive
caution and keeps a stern vigil on the
functioning of these universities, sans
hurting their deserved autonomy, then
internationalization of education can be a
big boon for India.
Top Related