Education in India has always assumed a larger than life role in the society. Whether it be the “Guru Gobind Dono Khadey, Kaakey Laagun Paaye…” of Rahim or the twice born doctrine in the Vedas, education has always had that spiritual connection and the business of imparting education was never considered a business at all. Perhaps out of this conceptualization only, education has always received the patronage of the taste and the wealthy through our history and was never a financial burden on the students. Whether it be the Kumaragupta founded Nalanda, or the Gangai Konda Chola Mandap mentioned in the Anaiyyavaram inscription of Rajendra Chola, or the madarassas founded by Sher Shah, the students and the teachers were always comfortably maintained out of the donations and India maintained its distinction of being one of the most sought after destinations of higher learning.
Things changed for the first time under British India where it was clearly felt that “free education would not be valued properly by the natives”, and hence should be changed. But post independence, the Indian conceptualization again took the center stage and the seats of higher learning became the temples of modern India. Nehru knew the central importance of higher education in his vision of a planned economic development and hence ensured that the doors of these temples remained open to the very best of minds – irrespective of their financial capabilities. So liberal state grants were made for this cause and thus the fees were maintained low as well. Within all its constraints such a system functioned remarkably well in serving the needs of the economy.
However, by the 1990s the structure of this economy began to change. State led approach gave way to a market determined pattern of development and the enterprising potential of the economy was unlocked. Naturally the wants of this economy from its education sector were much larger in scale and more diverse and dynamic in character.
To meet these new demands, the higher education sector had to reform as well. First of all its size was simply not big enough. India had a particularly unimpressive record of the penetration of higher education and this was simply not consistent with the ambitions of taking the economy on a high growth trajectory.
Next there was a need to meet the new unconventional needs of the economy. No longer, thus, it sufficed to produce graduates with standard degrees possessing standard skills. One needed to be dynamic. Similarly, as our economy competed on a global scale, we needed human resources who could work with world class technologies and management practices as well. Thus a large scale investment in the sector was needed.
Now this is where the reliance on government could become a constraint. Because public funds are scarce and slow in coming and are just not suited for such a dynamic environment. Thus budget constraints became hard and the sector was forced to rely more on internal resource generation and thus the credit based education system proliferated.
There were other factors driving the change as well. For instance the new economy offered a larger number of better paying jobs. So people were now prepared to pay more for the higher education which could land them with such jobs. And it is always difficult to run against the market forces in full swing. If we hadn’t allowed the higher education institutions to increase their fee, it would simply have created more compliance issues as the higher ‘fee’ would have been pushed under the table, because market forces can’t be resisted on a macro scale without significant costs.
Moreover as the economy became more integrated with the world, so did the people. Migration, specially of the qualified people, increased and if our institutions didn’t offer better terms to the teachers, the more qualified ones would have simply migrated away. Similarly if our institutions didn’t offer world class facilities and education to the students, both the students and their prospective employers would migrate away as well.
Thus there was a clear need for higher investment in the sector and so the credit based system emerged. With time there has been a gradual strengthening of the system as more and more private institutions come up, government institutions increase their fee, private jobs develop more and banks reorient their business to take advantage of the opportunity. Finally as we speak, there are proposals to allow foreign universities into India and a bill to that effect is in the parliament.
Having examined the transition towards the credit based education system, let us pause and ask ourselves what are the implications of such a transition. Can it continue to suit us in future as well? What are the opportunities which lie forward? Or what does it do to the student and to our cherished dream of equal opportunities to all?
Let us look at the opportunities first. Clearly the biggest strength of the model, as seen earlier, is that it is aligned with the market forces. This makes it smooth. This makes it dynamic and this makes it scalable. This gives us the potential of creating world class human resources. The model is capable of generating and attracting resources for developing state of art infrastructure, for retaining top level teachers and students and thus create a positive feedback mechanism. Apart from providing the lubricant to run the economy efficiently the model can also help enhance India’s soft power. As our highly trained professionals go abroad, they will help create the image of a new, rich India. Finally, this model is unique in the sense that it can produce the ‘barefoot engineers’ needed to advise on the MGNREGS projects and can also produce the best investment bankers capable of dealing in complex derivative transactions. Thus the opportunities offered by the model are immense. But before passing the verdict, let us also look at the potential causes of concern.
Given the alignment of the model with the market forces and its potential to serve us, should we then leave it entirely to the market? Well, certainly not. To begin with ECO 101 tells us that education has positive externalities and thus if left to the market, the market will always over price it and provide too little of it. Thus state intervention is needed to correct this distortion.
Then think of what the model is doing to its principal stakeholder – the student. It is upping the stakes. And by upping the stakes it is putting her under a lot of additional pressure. And in an educational system not exactly known for its sensitivity towards the students, add one more woe to her already long list of woes – how will I ever repay the credit if I fail? There is already at least ne suicide every year in my alma mater since at least a decade – do we want to increase that any further?
Next think of the implications in the current context when an effective regulatory mechanism is lacking. One aspect clearly is that this puts the students (and their guardians) in a worse situation since they are locked in and thus subject to being manipulated by the college authorities. Even apart from it, think of the wider context. Higher education is a sphere where there is a clear information asymmetry with the students being at the receiving end. This credit based model will create a classical ‘lemons problem’ since because one would expect the better institutes to charge higher fees, even the worse ones wold charge a higher fee for otherwise they would be considered ‘bad’ by the virtue of charging a lower fee. Then having put so much at stake, these institutes would be inclined to publish ‘paid rankings’ in the media and thus compounding the information problem.
Worse still, what would happen if such institutes come together and form cartels – creating artificial scarcity and higher fee. And in all this let us not forget what happens to the research output in such a case. Clearly having paid so much for the education, students would be inclined to take up jobs in industry rather than donning the scientist’s coat.
And finally the concept of equity – what happens to it under this model. We all know credit flows towards the ‘haves’. It filters out the ‘have nots’. How can we expect a poor man’s child to ever furnish a hundred thousand dollars loan guarantee notwithstanding however deserving she may be. Thus the system automatically weeds out the poor.
Having seen the practical limitations of the model, it is clear that we need to build in sufficient safeguard mechanisms first. This would ensure it contributes to growth – meaningful inclusive growth and not just a number called growth. Clearly there is a need to safeguard the interests of the financially poorer children. Is there any way of doing this without putting a strain on the public funds? Perhaps we can draw upon the Universal Service Obligations (USO) Fund model from the telecom sector. Or we can look towards a RTE kind of feature (25% reservation).
To address the other issues, specially to protect the interests of the students at large and also to prevent a lemons problem from occurring, we need to put in place strong and independent regulatory mechanisms. The proposed bill on the higher education is certainly a welcome step in the direction. Student counseling must invariably be a part of this regulatory package and we need to bring laws which empower the students. And finally, to make sure that research activity is not sacrificed in the din, we would need to put in place larger incentives structure so as to make India a hub for global R&D.
The credit based model is powerful because it is aligned with the trends of the age. It offers tremendous potential to serve the country as well. And certainly we must encourage it. But at the same time we need to put in sufficient safeguards as well. The future awaits…