Profit from education PDF Print E-mail
Tuesday, 30 August 2011 00:00
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India needs to add another 25,000-30,000 colleges, roughly the number it has right now, if it wants to increase the proportion of college-going kids from around 13% right now to the Chinese level of around 25%. The fact that China has managed a scorching GDP growth rate for so many decades and India is spluttering after less than a decade of high growth is testimony to just how badly India needs to increase its college-going population. Does the government have the funds, and managerial capability, to do in the next decade what has been achieved in the last 65? Clearly not. Theoretically, the private sector can step in, but can it under the current set of laws?

This is where the Planning Commission’s approach paper for education in the 12th Five Year Plan comes in. According to a newspaper report, the approach paper suggests the government re-examine allowing of for-profit educational institutions. This has been talked of in the past, and shot down by educationists who argue that for-profit education is nowhere as good as not-for-profit education. They’re probably right, even though the fact that the only IIT which was on the list of the world’s top 500 universities has just slipped off it is hardly a great testimonial for what government funding can achieve. A good example to cite in this context is that of the for-profit University of Phoenix in the US and the not-for-profit Harvard. No one even thinks of the University of Phoenix when it comes to top-quality education, but it has 200 campuses and nearly 5 lakh students versus just one Harvard after 375 years that has a total of 21,000 students. And yes, universities like Harvard and MIT have operating budgets of around $2bn a year.

It is true private education in India, even though it is not-for-profit, has been expanding dramatically. But the not-for-profit status has to be taken with a pinch of salt—many institutions have devised under-the-carpet ways for taking back the profits. To be sure, there will be, and there should be, genuine philanthropists who will set up colleges, but finding them in sufficiently large numbers is not easy—in any case, having for-profit colleges doesn’t mean India cannot have not-for-profit colleges. Since India’s biggest challenge right now is to get scale, this requires the large sums of money that stock markets will find it easy to give—even PE investors who are getting in to fund private colleges and universities right now, are doing so keeping in mind an eventual exit route through listing. Once for-profit education is allowed, this will drive down borrowing costs and make raising money easier—along with the attendant benefits of greater transparency that listing always brings.


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