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EY Reports Higher Education in India

April 3, 2011 by Viplav Baxi During the EDGE2011 conference, Ernst & Young, came out with a report called 40 million by 2020: Preparing for a new paradigm in Indian Higher Education, building on its earlier report with FICCI (Making Indian Higher Education Future Ready, 2009). This post deals with the salient analysis of and in the report. At the outset, overall I really appreciated the rigor of the report. The data supports the arguments and there is a coherent case made for five game changers in Higher Education Financial innovation, use of ICT/technology, focus on research, thrust on vocational education & training (VET) and changes to the regulatory framework. Here are some of the top data points and analyses of the reports. In 2010, India had about 26,500 higher educational institutions compared to about 7,000 in the US and 4,000 in China. This is the largest in the world. Close to two-thirds of these are general education (Arts, Science and Commerce) colleges and these account for about 80% of the enrolments. Engineering is the most preferred professional course, followed by Pharmacy and Management courses. Despite the sheer number, barely 1-2 Indian institutions make it to top rankings such as the FT-Top 100 Global MBA Rankings. Which is also perhaps the reason why there is a growing number of Indians who prefer education abroad. This market is growing at a 24.5% CAGR with close to a 160,000 students going abroad

for studies in 2006. This import of education itself is valued at 0.46% (or USD 3.1 bn in 2005) of GDP or 80% of the government central current spend on higher education! In the last 25 years, Higher Education enrolments have been growing at a CAGR of 6% with the current tally of 16 mn students expected to be 40 mn by 2020. Capacity utilization is a key concern and directly impacts the 33,000 new institutions target of an additional 24 mn students. We have 15-30% underutilized capacity. This is because of quality issues in HEIs which really arises from the shortage of faculty (we need about 45,000 PhDs and an equal number of M. Phils) and poor infrastructure. We have an extremely high student to teacher ratio (22:1) as compared to developed country averages of 11.4 students to a teacher. The Gross Enrolment Ratio (GER) is extremely low (12%) , even as compared with other BRIC countries (Brazil is at 34% and China at 23%), despite having the third highest number of students in the world. Not only that there are regional skews and the system is more or less an elite system of education. And the last 10 years show GER growing at a 3.09% CAGR as opposed to Brazils 13.39% and Chinas 19.24% (2000-2007). Indias 2020 target is 30% GER. Distance Education (DE) and VET have shown about 7% CAGR over the past 20-30 years with ITI/ITCs accounting for 43% while vocational education in senior schools accounting for 33% of capacity. Since India has a large young, independent population with a median age of 25 years, this demographic dividend (68% of population in 15-64 years segment by 2020) has to be capitalized upon using DE and VET. This can enable India to become a global source of manpower aided by the track record indicators such as a third of NASA being Indian. Globally, a shortage of 56 mn workers can be potentially met by the surplus of 47 mn workers from India. VET (a potentially $4bn market in 2012, growing at a CAGR of 25%) has traditionally been a government led initiative, but now the private sector has started making inroads here. However key problems are that enrolment & utilization is low (51% levels as estimated by FICCI). We have about 7,000 ITIs/ITCs (Industrial Training Institutes/Centres) with a capacity of a million students. The kind of budgets being spent on creating quality capacity in the face of a huge enrolment potential we have, in my opinion are ridiculously low, in a country with the state of development that India is in. A look at the National Skills Development Council statistics would be enough to convince anyone of that. The VET problems are essentially teacher quality (61% of teachers with less than 12 years of schooling), lack of effective funding and inadequate infrastructure. The worst finding seems to be that curricula are not consonant with market needs! Other problems include VET being unattractive as an option, poor placement track record and poor employer perception of certifications. The governance structures are also myriad and complex with two different ministries (labor and human resources) involved in VET and low autonomy in ITIs. There is low mobility between VET and mainstream Higher Education, which further adds to the problems. The result today, less than 10% of our workforce undergo VET. The sectoral growth is being pegged at 18% CAGR till 2020, from INR 46,000 cr (USD 10bn) to about USD 50 bn in 2020. However, universal higher education is still a distant dream with most states falling into the elite category as per the Martin Trow classification. Not only that, the

Indian higher Education system suffers from a large rural-urban divide in access, gender inequity, and large differences in GERs in various communities. Private sector spends are 2/3rds of the total spend on Higher Education. Government spends 0.6% (USD 4 bn, Central Government) of its budget on Higher Education which has the potential to grow compared to countries like Finland who allocate 1.6%. The largest allocation of this spend is General Education (about 38%). This share is growing (35%+ CAGR). But there are certain skews in the distributions of central and state funding across general and professional education. For example, states spend the bulk of their budgets on general education while the Centre spends a large part of professional education. The Centres spend is also skewed towards a very few Given that tuition fees are extremely low (accounting for only about 19% of total public plus private education expenditure, 2007; or less than 15% of expenditure of Indian Universities) and the fact that most of the State government spend is on operations rather than expansion, on general education rather than professional education, there is a problem with the sources, distribution and use of funds. Shockingly, scholarships account for only USD 10 mn, targeted at only 2% of the student population. Student financing currently has problems like high interest costs, heavy documentation, high administrative cost and lack of provisions for economically weaker sections. HEIs also underutilize other revenue streams like foreign students at differential fees and research and consultancy services. Fee regulation is an important issue, sufficient political in nature as well. The current regulatory framework is a significant barrier for creation of new capacity (State leads the governance and infrastructure provision for education with legislative and policy barriers to entry). This is changing now with relaxation of these barriers on the cards. The report makes the case that we must replicate the private sector higher education success story, given now that the private sector accounts for a large and growing proportion of the higher education segment (63.21% in 2006, with a predominance in professional education such as engineering and Pharmacy). Technology emerges in the report as an important enabler. And within technology, network infrastructure, management software, content availability, research collaboration and distance education platforms garner a mention. Mobiles, Television and Radio are also mentioned as carrier channels for education. There need to be reforms led by the regulating authority, the Distance Education Council, to facilitate the growth and expansion of distance education in the country. Special Education Zones and Special Knowledge zones are being seen as a mechanism to allow greater autonomy and space for innovation for private players. We have to improve key ratios such as the number of students to a computer, which stands at 229:1 for the average Indian college as opposed to the 4:1 or 2:1 imposed by AICTE. Technology infrastructure is also analyzed in the reports on the basis of indicators such as Internet penetration, PC ownership, computers per 100 (average number of computers per college is 6, according to the UGC survey in 2008) and other parameters. Unfortunately, the

reports leave out mentioning the fact that the underlying infrastructure is also very weak basic needs, electricity and telecommunications in many areas of India, which need to be solved before we even start discussing computers per college. Local language content/interactions are also a huge challenge identified by the report. English is an understood medium for only 17% of the 368 mn rural literate Indians. Interestingly, the reports have data indicating that there has been rather poor administration and implementation of technology led schemes like IGNOUs radio/TV programmes which is eminently believable. It is perhaps here more so in any other part of the reports that I find the core problems being addressed directly. On the Research aspect, Higher Education spent 4% of its total budgets on R&D (much lower than other countries in Indias peer group such as China with 10%) in the context of an already low national expenditure of 1% of GDP. The number of researchers are also abysmally low with the HE sector contributing to only 14% of the research manpower in the country. Only 18% of the research manpower have PhDs, another shocking statistic. In terms of the number of research papers that are published, India is 13th in the world, 1/15th of the number in the US. Whats worse is that there is a huge skew with 10% of the institutions in India contributing to 80% of the research papers. The same grim picture holds true for patent filing. The reasons for poor levels of research have to do with the quantity & quality of PhDs (less than 1% of total HE students complete a PhD and these numbers are declining), the existing quality of teacher-guides being an important factor along with the time spent on research activities. Grants for research are at a miserable USD 0.25 bn, about 5% of Harvard Universitys spend on research in 2008! Specialized government interventions in research have virtually isolated themselves from Higher Education, adding to the malaise. Interestingly, private HE sector R&D is not performing too badly in comparison to public HE counterparts. Key issues are funding, system of rewards, IP frameworks, collaboration and raising the quantity & quality of manpower for research. On the aspect of governance, the reports make a strong case for streamlining the administration. It is a valid point, which is recognized by the Government and steps are being taken there to make the system more efficient. The key groups of stakeholders are Central Government, State Government, Regulatory bodies & professional councils and Accreditation bodies. There are too many of them, sometimes with conflicting or duplicate objectives and jurisdictions, some of which I have covered earlier in other posts. So far, this complex systems, which allows only notfor-profit entities (all others are unapproved), has been inimical to the balanced growth of the HE sector making them unattractive for high quality players with high entry barriers. Obviously a politically charged arena, HE also suffers from lack of strong managers and low operating flexibility. The three pillars to focus the growth on, according to the report, are Access, Equity and Quality. Recommendations include:

HEI Quality: Mandatory accreditation, better governance, branding & marketing, development of international centers of excellence Privatization: create special frameworks and conducive state policies, PPP arrangements, tax concessions for infrastructure providers, relaxation of Foreign Direct Investment restrictions to encourage foreign capital, legislative improvements for enablement, efficient governance and transparency. Innovation: Enhance use of technology, promote new distance delivery methods, encourage industry focused models such as education cities and innovation universities Financial: Increase capacity with a focus on low GER areas, world-class infrastructure provision, enhanced student financial support, performance based funding component, rationalise tuition fee structure, monetize revenue through other sources (such as IP), attract higher fee paying foreign students, improve existing utilization/processing Technology: promote development and free delivery of quality tested localized educational content; improve infrastructure & IT systems; help create communities of practice (!); and provide a way to tap expert internal knowledge through indigenous eJournals Research and Development: reward research systematically, connect research centres to HE to industry for collaboration, build a conducive environment (time devoted to research, infrastructure, grants, resources, connections), improve quantity and quality through special measures VET: Streamline administration & governance, build VET-HE bridges, make VET align to market needs, give public VETs more autonomy and improve infrastructure Regulations: Simplify and reduce, more transparency, promote autonomy and accountability, encourage foreign universities and correct structural flaws/skews.

These reports are not quite comprehensive insofar as they do not bring out certain systemic aspects of failure of the HE sector in India such as that of a heavy weight curricular structure, absence of basic livelihood infrastructure, deficiencies in teacher training, systemic shortcomings in educational planning, education management capability, innovation in learning technology, weak educational data collection and analysis and so on. The malaise that threatens our educational futures is not manifested in just lack of innovation, financing models, R&D, VET and regulations, it goes deeper than that to a mindset whether private or public that is far more critical to change immediately. Once the mindset changes, it will be easier to design and implement a transformation strategy. This mindset is a chalta hai mindset (everything will do) and a reluctance to deal with the harder issues. In fact, if you really think about it, the answers have less to do with jobs that need to be done and more with doing correctly the jobs we have right now. We need to work on the 3Cs of education Capacity, Capability and Conscience. More on this later
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