by Rakesh Mohan
The proposal by Finance Minister Arun Jaitley, called ‘3P India’, to set up an advisory body-cum-think tank for PPPs needs to be revived. The body was initially proposed in Jaitley’s first Budget but never saw the light of day.
Redraw the schedule of risks in a PPP project and how they are allocated. The Ministry of Roads has taken a step forward in this regard with its hybrid annuity model by removing traffic and tolling risks from within the developer’s purview. In the power sector, newer bidding formats address issues such as fuel price risk.
Creating independent regulators is key. Independent regulators give the private sector a level of comfort that their concerns will be addressed in an impartial manner.
The Kelkar Report has laid out a basic set of guidelines on the context and conditions under which PPP contracts can be renegotiated. Create a separate renegotiation commission to handle such cases as and when they come up, as the Economic Survey itself has recommended.
It is critical that the role of commercial banks in infrastructure funding comes down, and a greater proportion of infra funding is raised from specialized lenders, such as insurers, who are far better prepared to handle the asset-liability mismatches and other related risks.
Finally, governments must resist the temptation to bid out projects without all major central and state clearances in place.
The Eleventh Five-Year Plan saw a huge push towards building the world-class infrastructure that India’s citizens deserve and desperately need. The share of private investment in this infrastructure build-out jumped from 22 per cent in the Tenth Plan, to 37 per cent in the Eleventh Plan.
The Twelfth Five-Year Plan projected an investment of about Rs 55.75 lakh crore in infrastructure (at current prices) between 2012 and 2017. It also projected a higher share of that investment from the private sector—at 48 per cent.35
But even during the Eleventh Plan, as investment poured in, the limits and constraints became increasingly obvious, for all the reasons mentioned above. As a result, the shortfall in the first two years of the Twelfth Plan in private investment has been about 43 per cent. The shortfall in public investment has been of the order of 20 per cent.36 According to the Kelkar report, ‘Over the period 2013–30, India is currently projected to have the world’s largest need for infrastructure investment, and the second-largest infrastructure deficit based on its average spending during 1992–2011.’37
Until and unless these problems are fixed, that deficit is unlikely to be met.
VI
HUMAN DEVELOPMENT: MILES TO GO
19
Liberalization sans Liberalism: The Control Raj and the Perils of Ideology and Rents in Higher Education
Devesh Kapur
The expansion of higher education in India in this period has been the most rapid in human history after that of China’s, suggesting that India has overinvested in higher education relative to its income. The biggest question concerning this explosive growth in Indian higher education is the quality of the millions of graduates. The core reason is the absence of quality faculty. The university system in India is the collateral damage of Indian politics. A superstructure of higher education on weak foundations of schooling is bound to fail.
Introduction
In the quarter century since the historic pivot in India’s economic policies, its economy has transformed, albeit with vast unevenness across sectors. In the transportation sector, aviation and highways have seen massive change, but a change in railways has been much more gradual. While the IT sector barely existed a quarter century ago, today it is India’s most dynamic sector, accounting for about 7 per cent of GDP. Agriculture, on the other hand, continues to be shackled by countless government interventions in input and output markets, all in the name of protecting farmers, most of whom continue to live precarious lives.
One sector where so much has changed and yet so little (or as the French would say plus ça change, plus c’est la même chose) is higher education. The expansion of higher education in India in the past quarter century has been the most rapid in human history, after that of China’s. But in many ways, this quantitative transformation of Indian higher education in the post-liberalization period has served to entrench the status quo of government control, which has resulted in enormous rent-seeking and vitiated some of the core purposes of higher education, be it providing a deep pool of skilled labor, creating an informed citizenry or becoming the wellspring of knowledge creation that addresses the country’s myriad challenges.
This paper first documents the rapid growth in higher education in India over the past quarter century. It then examines the characteristics of this growth, focusing on inherent tension among growth, cost, quality and access; mismatches in labor markets and sectoral mismatches in supply and latent demand; and the paradox of a large skill premium despite massive increases in supply, even as underemployment among the college-educated has been rising. The third section analyses the political economy of higher education in India and argues that the deeply entrenched ideology of control that persisted for nearly half a century among India’s political, bureaucratic and intellectual classes with regard to industrial policy continues in fundamental ways in higher education. In many cases, the justification has been equity and social justice; in others, ideological control has been a more important factor. The end result has been a sector that has emerged second only to real estate with the highest intensity of black money, and which has haemorrhaged talent, the very factor fundamental to building it. The paper concludes by suggesting some pathways for reform but is not sanguine in the absence of new political thinking on this vital issue.
Massification in Indian Higher Education
When India became independent, its human-capital indicators were dismal in almost all dimensions. The literacy rate was barely 18 per cent (1951). But relative to this abysmal low level of literacy, India had the foundations of a higher-education system with 0.4 million students enrolled and a gross enrolment ratio (GER) of 0.7 per cent, with thirty universities and 695 colleges (1950 figures). Post-Independence, there was a burst of higher-education institution-building by the central government for about two decades, which petered out over the next two decades. In the latter period, the system expanded through state universities, and by 1980, 2.9 million students were enrolled in 133 universities and 4722 colleges, which increased to 4.9 million students in 193 universities and 7346 colleges in 1990–91, as economic growth increased in the 1980s.
Growth in higher education accelerated post economic liberalization. By the turn of the century, 8.4 million students were enrolled in 256 universities and 12,806 colleges. A decade later, the number of students had jumped to 18.7 million and by 2014–15, 26.6 million students were enrolled in 711 universities and 40,760 colleges.1 The GER surged from 8.1 per cent in 2000–01 to 23.6 per cent in 2014–15.
In the 1980s student enrolment grew by 0.2 million annually, which increased to 0.35 million annually in the decade after the onset of economic liberalization. In the first decade of the 21st century, enrolments were growing at 1 million annually, which doubled to more than 2 million annually in the current decade—an order of magnitude increase in annual enrolment over three decades.
The surge in higher education masks large variations across the country. While the GER in Tamil Nadu is nearly 33 per cent, it’s barely 10 per cent in Bihar. Despite Kerala’s widely acknowledged leadership in schooling, its enrolment in higher education is the lowest among the southern states and even lower than states such as Maharashtra and Haryana. Among the worst-performing states (as measured by the GER), West Bengal is a surprising laggard, given its lead in this area in the first half of the 20th century
The contrast between India’s record in schooling (where learning outcomes have severely lagged behind growth in enrolments) and the pell-mell growth in higher education poses something of a paradox. Indeed, most countries had much higher income levels when they achieved India’s current GER—about ten times higher
in the case of the UK and about four times in the case of Japan and China, suggesting that India has overinvested in higher education relative to its income.
Four principal factors have driven the expansion of higher education in India over the past quarter century. The first is simply the demographic momentum in the college-age population, with more than 30 per cent of the population below the age of fifteen and more than 5 million people entering the fifteen to twenty-four age group annually.
Second, with the growth of secondary education, this demographic bulge is more prepared for higher education. While India’s record in primary education was dismal in the first half-century after Independence, the new millennium has seen a combination of public funding (notably Sarva Shiksha Abhiyan) and private efforts (both on the demand and supply sides), which have led near-universal primary enrolment. More recently, this wave has been moving downstream to the secondary level; the Rashtriya Madhyamik Shiksha Abhiyan, launched in 2009 to create greater opportunities at the secondary-education level, is resulting in a substantial increase in India’s secondary-school cohort.
Third, rapid economic growth and greater integration into the global economy has sharply raised the demand for people with knowledge and skills, resulting in high skill premiums (see Table 1). And finally, demand for higher education is being driven by major changes in the aspirations of the population as well as by state policy, which has targeted increasing the GER to 30 per cent by 2020.
Table 1: Rates of Return to Higher Education in India
Year
Total
Male
Female
1983
10.8
11
9.9
1993
20.4
20.2
23.7
1999
20.2
17.4
36.5
2004
18.7
17.9
28.4
2007
27.7
26.5
37.4
2009
20.8
19.7
31
Source: Claudio E. Montenegro and Harry Anthony Patrinos, ‘Comparable Estimates of Returns to Schooling Around the World’, World Bank Policy Research Working Paper 7020, 2014.
The implications of this extraordinary growth have largely gone unnoticed. Consider this: between 2000–02 and 2014–15, the number of colleges in India increased from 12,806 to 40,760, which meant an average of more than five new colleges were established every day in this period and the number of students increased by 1.8 million annually (and higher-education teaching staff by nearly 40,000 annually). Clearly, when it came to entry, the regulatory system has been incredibly accommodative, unless, of course, one asks how this really happened and what happens inside these institutions, a point to which we will return later.
Characteristics of Growth
Countries all over the world have had to confront the ‘iron triangle of higher education’. A country seeking to rapidly scale and expand higher education must face the binding constraints of cost and quality. Between the three goals of scale, cost and quality, a country has the autonomy to choose only two. Scaling up rapidly while maintaining quality imposes prohibitive costs. Maintaining quality within limited budgets severely constrains growth. And scaling rapidly while limiting the financial burden on the public exchequer inevitably means a shift to the private sector and has implications for quality as well.
Even prior to the onset of economic liberalization, Indian higher education was in poor shape. The majority of students were enrolled in state universities, which had been severely undermined by student unrest and political interference during the 1970s and 1980s. After the heyday of institution building by the central government in the 1950s and 1960s, there was a hiatus of nearly three decades before the central government committed to expanding the supply of national-level higher-education institutions during the Eleventh Five-Year Plan. This included setting up of fifteen new central universities, including conversion of three state universities into central universities, eight new IITs (Indian Institutes of Technology), seven new IIMs (Indian Institutes of Management), five new IISERs (Indian Institutes of Science Education and Research), two new schools of SPAs (Planning and Architecture), ten new NITs (National Institutes of Technology), twenty new IIITs (Indian Institutes of Information Technology). Additionally, there were plans to build one new ‘model college’ in each of the 374 educationally backward districts (whose GER for higher education was less than the national average). The NDA government, in turn, approved an additional six new IITs and seven IIMs so that by 2016, twenty-three IITs and twenty IIMs were in existence. In addition, large sums were committed to elite vanity projects like Nalanda and SAARC University.
Nonetheless, while central-government institutions continue to be the leading higher-education institutions within the country, about 94 per cent of all students enrolled in government institutions are enrolled in colleges and universities run by state governments, and more than half of all students enrolled are in private colleges (many affiliated to state universities), especially in professional degree programmes such as engineering, business and pharmacy.
India had about 3000 seats in engineering at the time of Independence. By 1968, the number had increased by an order of magnitude (to 28,000), and by 1985, there were 57,888 seats, but already 58 per cent were in private institutions, mainly in South India and Maharashtra.2 By 2016–17, the number had increased almost twenty-seven times to 1,553,711, of which just 67,571, less than 5 per cent, were in government colleges.3 At the onset of economic liberalization, India had about fifty business schools, mainly in public institutions. In the 1990s, the number rose sharply to about 700 in 2000 and then ballooned to about 2,000 in 2009. Seats in business schools increased fourfold from 94,704 in 2006–07 to 3,85,008 in 2012–13. Barely 1 per cent of business school seats are in India’s IIMs and about 10 per cent or so in postgraduate business programmes in public institutions.
The private sector-led-supply response has made education an important economic sector in its own right, with value addition in education services in India soaring from $6.9 billion in 1990 to $44.6 billion in 2012. Increasingly, the rapid expansion of private higher education has meant that access depends on the ability to pay. Policy changes in the early 2000s led to a credit boom in bank loans for higher education, which grew from Rs 300 crore in 2000 to nearly Rs 62,000 crore in 2014, with escalating demand, presumably due to (at least in part) high rates of return in higher education. In addition, both the central and state governments introduced a range of schemes, such as interest subsidies on educational loans from scheduled banks for low-income students, a Credit Guarantee Fund Scheme for Education Loans, and massive increases in funding for fee reimbursement and scholarships by state governments.
One major consequence of the dramatic expansion has been increased access, especially to hitherto excluded social groups. An important goal of higher education in socially hierarchical and stratified societies has been to serve as a ladder of social mobility. India’s constitutionally mandated ‘special provision’ or ‘compensatory discrimination’ (popularly known as ‘reservations’ based on caste) has preoccupied debates on higher education in India. Unequal representation in Indian higher education can be measured either as a stock variable (the college-educated as a proportion of the underlying population), a flow variable (the college-educated as a proportion of those in the college-age cohort) or a flow variable conditional on completing high school. The unequal representation in Indian higher education is increasingly largely due to inequalities at the lower rungs of the education ladder and only secondarily due to unequal access to tertiary education per se. In 1999, the higher-secondary completion (which is a necessary condition to enter the portals of higher education) rates for India’s low castes, tribals, upper castes and Muslims were 4.9, 4.4, 22 and 7.1 per cent respectively. By 2009, these had climbed
to 9.4, 8, 33 and 10.6 per cent respectively (per cohort).
The effects of affirmative-action policies on higher education have been extremely contentious, from its supposed ‘crowding out’ effects on better-prepared students from non-reserved categories, to the possible effects on less well-prepared students in the reserved categories in elite institutions. However, a study of affirmative action in engineering colleges in Maharashtra finds that the policy has largely worked, increasing attendance among the targeted students, improved results in exams and with little adverse effects on graduation rates, especially for SC, ST and women, but less for OBCs.4 Indeed, some of the strongest gains from the expansion of higher education are manifest in the participation of women in higher education, critically important in a strongly patriarchal society such as India’s. In 1950, just thirteen girls were enrolled in higher education for every 100 boys. This climbed to fifty-eight in 2000 and then jumped to eighty-six in 2014–15.
At one level, the expanding role of the private sector in supplying higher education reflects a more dynamic economy, with rapidly growing service sectors that are more knowledge intensive, which in turn, create a greater demand for higher education. High private returns then justify the higher costs students are willing to incur to obtain that education. However, this understanding of changes in Indian higher education is incomplete. In terms of numbers, the demand for labor in services has been greatest in sectors such as construction (with demand for electricians and plumbers), restaurants and retail, all of which require skills but by no means a college degree per se.
The labor demand–supply mismatch is both occupational as well as sectoral. If India’s agriculture universities were important in developing the new seed varieties that underpinned the Green Revolution, the meagre growth in productivity in Indian agriculture can at least in part be attributed to their neglect. To take an example of where higher education intersects with rural India, let us consider the supply of veterinarians. India is home to about 1.5 billion farm animals (including 700 million poultry). Annually, there are only 1735 graduates of veterinary medicine programmes—approximately 1 per cent of the number of engineering graduates—amounting to just over one student per million animals. A state like Bihar, where agriculture and the rural economy is still critical for the majority of its population, has less than five vets per million farm animals.