Explained: What Makes India’s Knowledge Economy Inefficient?

You can read the first part of this article here.

Imparting low quality education and skills not attuned to the market are emblematic of our public institutions. Apart from the elite, centrally-funded institutions, most public institutions offer subpar education. One has to visit state universities in Eastern India to get a sense of the breakdown. While fees are high in private institutions, they are dismally low in public universities. If there is flood on one side, there is drought on the other.

Even in prestigious public institutions, fees are neither mapped to the cost of providing education nor to the ability to pay. For example, the prestigious Hindu College in Delhi University charges a monthly average fee of less than Rs 1,200 (Rs 14,333 per annum). Many students would have paid much more for their high school education! For IIT Delhi, the fees are around Rs 5 lakh per year. It has to be juxtaposed with the average salary of an outgoing IIT Delhi graduate, which is around Rs 17 lakh per annum.

Inability to charge the optimum amount on students attending our elite public institutions is a failure. It robs the monies that could be spent elsewhere. Recently, a Mumbai University professor lamented that non-salary grants from the government is zero for non-elite institutions. This means there is almost no upgrade of any infrastructure nor any upkeep of libraries.

Inability to offer competencies that are in demand in large numbers by keeping the system repressed, neglecting collection of proper fees, not allowing modern facilities to develop, scaring the best talent away from teaching by framing asinine exams like the NET (UGC’s National Eligibility Test) and keeping salaries low for professors, have reduced the four years of undergraduate education, for most Indians, to a period for surviving with friendships.

When it comes to public universities, the government (across the world) has taken upon itself the role of a “moral arbiter of value”. It is neither able to provide high quality education — except in small pockets — nor is it able to guide the private sector with simple, efficient regulation.

Just as Arun Shourie referred to the poor performance of our PSUs as reform through “benign neglect”, one wonders if the transition to an era of a nimble education system driven by certification and technology will be brought about by the “neglect of our public universities”. Nevertheless, it is undeniable that fundamental research without strong public universities is impossible. The market failure makes it a space that government must occupy.

An education standard, which is expected of our universities that offer opportunities to our students to compete in research and to cater to our modern industries, must be set. A budget for accomplishing the objective should be prepared. Fees should be set so as to at least cover operating expenses or even make a small surplus. (The author does not want to start a riot using the P word). Capex could be covered using endowments, loans and some grants. In fact, this is the approximate schema for fully autonomous institutions.

Students should be able to get need-based and merit-based scholarships (especially socially and economically backward sections and women) from universities, corporate foundations, and governments, to fund their education. The rest should be funded through self-financing and loans. Individual ownership should be a part of the decision. To keep expecting a “mai-baap sarkar” to fund someone’s education will only keep the whole education system in the pits.

There is a difference between the education system and the educational opportunities available today. There is almost nothing that is not available on the Internet. New companies are increasingly asking for certifications — like the CFA or our own CA — rather than full degrees.

If a certification can carry with it a chance of fetching a job, why is the youngster still willing to forgo four precious years of his/her life getting a degree? The reason is that degrees signal much more than knowledge. It offers status in the society for the person and his/her family. Notions of self-worth are important for psychological well-being.

Social status takes a beating without a degree. In a more liberal era a person’s education, measured through college degrees, is slowly taking a preference over old measures of sizing up a person’s “standing”. The currency of education is going up in the marriage market (pun intended).

Ira Trivedi, author of“India in Love: Marriage and Sexuality in the 21st century”, said in an interview to Financial Times a few years ago, “As people do marry for love, and they are increasingly marrying for love, women want men who are on an equal educational level to them.” This author recently witnessed a poignant conversation in the metro, where a young Muslim girl was exhorting her friend who was facing pressure of marriage, to not quit studies – “Padhai bilkul mat chorna”!

Also, the old corporates are still fixated on the degree. Job advertisements still call out for a “minimum bachelor degree” rather than just list the required skills. Start-ups are much more flexible and reasonable. When the old corporates start to put a premium on skills rather than degrees, the formal education structure will start to creak louder.

People who are in the education policy business look at the problem purely from a learning or an economic perspective. Politicians understand the psychology better. If the status-craving young people are willing to lap up a degree for a pittance in a poor college unmindful of actual learning, the politician perceives it as an acceptable equilibrium. They believe that a student will learn skills in the “when-the-student-is-ready-the-guru-will-appear university”.

How progressive would it be popularize our own MOOCs (Massive Open Online Courses) and SWAYAM, create a regulatory architecture for certification and create a conducive atmosphere for the growth of skills in partnership with the private sector?! They are low-cost, high-quality and will help prepare our students for the job market. Even the New Education Policy does not enthusiastically promote technology-based learning that could open the window to millions of Indian kids, especially in the remote parts of India. The problem of education loans will reduce drastically too!

If our political leaders can inject a sense of pride into certifications, they will be doing the society a world of good. In fact, it would not be a bad idea to ask our public servants to take a course from SWAYAM to popularize the program.

While the provision and regulation of higher education calls for fundamental reform, no loan waiver in higher education is justifiable in a poor country like India. Just imagine the myriad ways the Rs 68, 000 crore of outstanding loans or a fraction of it, could be put to use. There are ethical questions to contend with, such as, whether higher education benefits the individual more than the society and whether scant subsidies should focus more on school education.

Loan waivers create a moral hazard that tends to devalue individual responsibility, and perpetuates many inefficiencies of the education ecosystem that has given rise to the existing costly and low-value proposition. While flexible long-term payment mechanisms — such as not burdening the borrower too heavily in the few years after graduation etc. could be thought about — striking off students’ loan will only increase the call for similar waiver from much poorer sections.

It is an important business to fix our higher education fiduciary system by prioritizing right, investing right, regulating right, charging right and recovering right. Only on the back of such efficiency can we build the knowledge economy.