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INDIAN EDUCATION SECTOR: GROWTH AND CHALLENGES

KD Raju∗
1. Where are We Now?
1.1 Background
One of the most outstanding achievements of the past century has been the realization
that education is an indispensable asset of every individual, every community and every
nation. It can accelerate the march towards a better and higher quality of life. Education
alone can convert the dream of peace, freedom and social justice into a practical reality.
The critical, comprehensive and fundamental role of education has been analysed,
delineated and understood. It’s difficult for one to keep himself aloof from the process of
education and educational development. Almost every one is a stakeholder in education.
The National Educational scenario in India, as envisioned in its different education
policies, is a key instrument in ensuring access, equity, quality and relevance of education
at all levels. Education has been identified as a critical input for economic development,
more so, for human resource development. It is considered to be a key instrument of
national development and individual welfare. It not only develops basic skill and abilities,
but also fosters a value system conducive to, and in support of, both long term and
immediate national development goals.
The education sector in India is facing challenges and witnessing sea changes in
the recent past. The number of students and the demand for more educational institutions
are increasing. This includes the entry of foreign institutions and emerging of private
sector as a major player. The increasing demand in the higher education sector along with
growing enrolment rates, government is not able to provide sufficient infrastructure and
make investments in the education especially, higher education sector. This gap is
presently filled by the private providers in the country. As a growing economy, the
adoption of appropriate model is important for the country. It will make important role to
make the country a knowledge economy by the year 2020. This is significant in a time
that more than one lakh students are going abroad for higher studies at the cost of more
than $1.5 billion a year.
The entire world is integrated through trade, information, science and technology
and the recent advancements has necessitated education sector in all the countries to
emphasise on the development of communication skills and adequate knowledge of
information technology. This unprecedented development and the emergence of a new
world wide economic order has immense consequences and has direct bearing on
education policies and strategies across the globe. It is time for all those concerned with
policymaking, planning, administration and implementation of education to revitalize the
very thinking on the subject and put it on the right track.
The objective of the paper is to make a comprehensive analysis of our strategies
and policies since independence in the education sector in the first part. The second part


Deputy Secretary, PHD Chamber of Commerce and Industry, New Delhi. He is also a Fulbright
Scholar and Doctoral Scholar at the Jawaharlal Nehru University, New Delhi. The views expressed are
personnel. Earlier draft of this paper was published as PHDCCI working paper N0. III.

1
examines where we want to reach in the next two decades. This is examined in the
background of the opening of education sector under the General Agreement on Trade in
Services (GATS) of the World Trade Organization Agreement (WTO). The third part
gives some conclusions and policy direction to attain the goal.
1.2 Constitutional Structure
Until the late 1970s, school education had been on the State List of the Indian
Constitution, which meant that States had the final say in the management of their
respective education systems. However, in 1976, education was transferred to the
Concurrent list through a constitutional amendment, the objective being to promote
meaningful educational partnerships between the Central and State Governments. Today,
the Central Government makes the national policies and the States have to follow it. The
National Policy on Education (NPE) was formulated in 1968 and the National Policy
Resolution of 1986, which was later, updated in 1992, where specific responsibilities for
organizing, implementing and financing its proposals were assigned.
The Central Government as well as the State Governments is empowered to make
necessary legislation to control and administer the education system in the country. In
Part III of the Constitution,1 Article 15 (4) provides that nothing in this article or in
clause (2) of Article 29 shall prevent the State from making any special provision for the
advancement of any socially and educationally backward classes of citizens or for the
Scheduled Castes and the Scheduled Tribes. Article 21 (A)2 provides that the State shall
provide free and compulsory education to all children of the age of six to fourteen years
in such manner as the State may, by law, determine. However, this provision is still
waiting for making it operational. To operationally this provision, Right to Education
Bill, 2005 was introduced in the Parliament and still the modalities for implementation
are working on. Article 30 provides for protecting the rights of minorities, not only
religious, linguistic minorities also.
In the directive principles of the state policy, Article 45 provides for compulsory
and free education to children until they complete the age of 14. With the objective of
operationalizing this provision, the 86th amendment is made. According to the
amendment, early childhood care below the age of six is assured by the government.
Article 46 provides for protecting the interests and special needs of scheduled caste and
scheduled tribe. Article 51A (k) provides that it is the duty of the parent or guardian of all
children to give opportunities for education between the age of six and fourteen.
1.3 India’s knowledge Potential
1.3.1 Strength
India has a great pool of young generation which will be the main contribution to the
growing economy in the future. It has great potential to make it into a knowledge
economy by 2020. According to 2001 census, there are 41.2 million are in the age group
of 6-24.

1
Fundamental Rights.
2
Included by 86th Amendment in December 2002.

2
Table I
Population in Age Group (2003)

Age Total SC ST
Group
6-11 13.1 2.6 1.4
11-14 7.8 1.1 1.4
6-14 20.9 3.7 1.9
14-18 9.0
18-24 20.3
06-24 41.2
Source: Department of Secondary and Higher Education, Govt. of India
The National Commission on Population expects working age population to comprise
over 63 per cent of the aggregate by 2016. India has made tremendous progress to fight
against illiteracy and reduced it into a reasonable level. India produces a large number of
skilled workers especially, in the information technology sector and exports them to
various parts of the world. The business exports including professional service exports
reached $15.4 billion in the first half of 2005-06. The share of service sector to the GDP
has increased to 54% in 2005-06.3 However, there is a huge gap between the actual
potential of India and it’s out put and to make it a knowledge economy.
Figure I
Literacy Rate

Literacy rate for the population aged 7


years and above

80 65.38
60 52.21
43.57
28.3 34.45
40
18.33
20
0
1951 1961 1971 1981 1991 2001

Literacy rate

Source: http://www.education.nic.in/stats.asp
The literacy rate of population above 7 years and above has shown an increasing trend
over the period of last 50 years. The literacy rate has increased from 18.33 percent in
1951 to 65.38 in 2001.

3
Economic Survey, 2005-06, p. 3.

3
Figure II
Adult Literacy Rate
Adult literacy rate for population aged
15 years and above

1998 57

1996 54.32

1991 48.54

1981 40.82

1971 34.08

1961 27.76

0 10 20 30 40 50 60

Adult literacy rate

Source: http://www.education.nic.in/stats.asp
The adult literacy rate has also shown an increasing trend. It has increased from 27.76
percent in 1961 to 57 percent in 1998. The OECD countries will face the problem of
aging in their population for the next 20 years, which will affect the workforce and
ultimately the economy. This will give more employment and labour mobility to the
skilled workers from the developing countries. At present more than 35% of the Indian
population is below the age of 15.4 The young generation is the asset for the future, but
to make it as a trained manpower is the task before the country.
1.3.2 Weakness
It is an embarrassing situation to note that only 63 per cent of the population are literate
(male 73% and female 50%). At the time of independence in 1947 the literacy rate was
only 14%. The growth in the past is a good achievement, but nearly 430 million people
are illiterate even now. According to UNDP it is nearly 650 million people, when
compare to China the literacy rate is 93%. The drop-out rate in schools from lower
primary to higher secondary, including those who never attended school is 90% to 94%.5
The Government of India made a promise, reiterated in the National Education Policy
(NEP 1986) and the Programme of Action 1992, to provide free and compulsory
education to all children at least up to the elementary stage and to work towards provision
of education of a satisfactory quality to all children up to 14 years of age before the
commencement of the 21st century. The Right to Education Bill, 2005 was introduced in
the Parliament to achieve this objective. Still the Bill is pending for approval both houses
of Parliament. There should be special initiatives and outreach programmes are required
to bring 100 million children into the mainstream for making India a knowledge
economy. The government spending has to be increased from the present level of 3% to
the suggested 6% in the NEP 1986.
1.4 Government Expenditure on Education in India
The total budgetary expenditure on education by the Education Departments of the
Centre and States has increased from Rs. 644.6 millions in 1951-52 to Rs.33827 millions

4
http://www.rediff.com/news/2004/feb/04inter.htm, 09.06.2006.
5
Iwatch.org.

4
in 1995-96. There were 130 plan schemes with a total Eighth Plan outlay of Rs. 74430
millions.6 But the fund allocation to education sector is steadily declining from a level of
6% during 1990s to a lower level of 3.6 % in 1996-97 and it came to a lowest point of
2.8% in 2002. Presently India spends only 3%, even though the National Policy on
education suggested 6% of GDP way back in 1986. When compare to other countries,
USA spends 10-13% of the budget on education; France 6.5%; Indonesia’s 8.1 per cent
or more; Philippines spends 17%; Malaysia spends 20% and Thailand 27%. OECD
(organization of economic cooperation & Development.) country average expenditure on
education is 5.5%. In the 1st plan the Government of India allocated Rs. 153 crore for
education (0.7 percent of GDP). In the 9th plan, the allocation is to the tune of Rs.
20,381.6 crore (3.7 per cent of GDP). The proportion is much less in comparison with
many countries.
However, there been a significant increase in the real per capita expenditure on
education. In 1993-94, the average per capita spends on education in rural India was Rs.
128, or 1.5% of total expenditure (total expenditure being Rs. 8,533). By 2001-02, it was
Rs. 245 or 2.5% of total spending, measured in constant prices (total expenditure being
Rs. 9,800). For the top 5% of rural households, the increase in real expenditure of
education has been quite spectacular - from Rs. 575 in 1993-94 to Rs. 1,158 per person
per year (in 2001-02).
Figure III
Government Expenditure on Education and Total Government Expenditure on all
Sectors

700000
600000 Government
500000 expenditure on
400000 education
300000
200000 Total
100000 government
0 expenditure on
all sectors
51

59

67

75

83

91

99
19

19

19

19

19

19

19

Source: http://www.education.nic.in/stats.asp
Government expenditure on Education has shown an increasing trend over the last 55
years. The expenditure on education has increased from 64.46 crore in 1950-51 to
84179.46 crore in 2001-02. The compound growth rate of government expenditure on
education is 15.81 percent. However, the compound growth rate of government
expenditure on all sectors is 14.87%. Investment on education must be increased by 25%

6
Department of Education, National Policy on Education, Government of India,
http://www.education.nic.in, 08.06.2006.

5
every year. Investment on science, technology, R & D, if increased, if doubled, will lay a
firm foundation for growth.
In 1995-96, the average expenditure per student pursuing primary education in
rural India in a government school for students going to local body schools, private aided
schools and private unaided schools were Rs. 223, Rs. 622 and Rs. 911 respectively
(National Sample Survey Organization 1998). Educational institutions are classified
according to the type of management by which the institution is run. All schools run by
the state, central government, public sector undertakings or autonomous organizations
completely financed by the government are treated as government institutions. All
institutions run by municipal corporations, municipal committees, notified area
committees, zilla parishads, panchayat samitis, cantonment boards, etc. are treated as
local body institutions. Private aided institutions are those, which are run by an individual
or a private organization and receive a maintenance grant from a government or local
body. Private unaided institutions are managed by an individual or a private organization
and do not receive a maintenance grant either from a government or local body.
There exists considerable variation in the cost of education across the states of
India. The government’s education expenditure as a percentage of GDP has never ever
risen above 4.3% of GDP, despite the target of 6% having been set as far back as 1968 by
the Kothari Commission. Finding the money to bridge this gap will be quite a challenge.
Using 2001-02 figures, public expenditure on education was Rs. 84,179 Crore (at 4.02%
of GDP). So to have achieved the 6% target, we would have had to spend Rs. 125,641
crore, an additional Rs. 41,461 crore over what was spent, about a 50% increase. But the
public expenditure on education as a percentage of government expenditure across all
sectors has been as high as 14.6% and averages 13.5% over the past few years. The
education cess collection in 2004-05 was Rs. 5010 crore.7 The cess collection is targeted
to collect another Rs. 7000 crore per year. This is about 3.3% of GDP. The allocation for
education has been enhanced by 31% from Rs.18, 337 crore to Rs. 24, 115 crore ($5.4
billion).8 However, the ministry of HRD has estimated that another Rs. 40, 000 crore per
year would be required only for primary education sector.
1.5 Household Expenditure on School Education in India
The state of education in India is improving slowly. The literacy rates among poor
households are low and across occupational categories, the lowest is among Agricultural
and Non-agricultural Wage and Self-employed Farm workers in rural areas. The Non-
agricultural Wage earners in the urban areas also have very low literacy rate. Both
dropout and non-enrolment rates are also high in either regions. This is because of the
lack of expected future earnings. Many studies in the literature attribute such poor
performance in the educational sector to poverty, and child labour supplementing family
income is considered to be the main cause for such maladies.
A study conducted by NCAER in 1994 found that the expenditure per household
on educating children aged 6–14 years in rural India was estimated to be Rs. 680 per
household or Rs. 378 per pupil per year. Expenditure on schooling for girls was about 68
per cent of the amount spent on boys. A large proportion of this expenditure was incurred
7
Economic Survey 2005-06.
8
Ibid.

6
on books, stationery and school uniforms, followed by private coaching and fees. This
expenditure increased or decreased with the annual fluctuations in the cost of books,
stationery and uniforms.
The study further found that only about 75 girls for every 100 boys go to private
schools. The expenditure on girls is much lower, especially in private schooling, whereas
parents do not think twice about spending large sums of money on educating boys in
private schools. There is an increasing dependence on private schooling in recent years
that has affected female education more than male education. The household expenditure
was also found to be higher among large landowners, relatively rich and salaried persons.
The patterns of expenditure in rural and urban areas are different. In rural areas,
the expenses are high on uniforms, books and stationery. In urban areas expenditures are
highest on tuition fees and private coaching fees.
The proportion of children going to private schools is highest among the high-
income households. It is interesting to note that over 70 per cent of ST and SC
households study in Government schools. Only about 43 per cent of Christian and 49 per
cent of Muslim children attend Government schools, while most of the remaining
Christian children go to Government-aided schools. The expenditure on education is
relatively low among STs, SCs and Muslims, amounting to about three per cent of the
household income for the respective social group.
Table II
Percentage of Share of Household Expenditure on Education in Total Household
Expenditure
Occupational Rural Urban
Categories
MIMAP*-Only Self – employed 3.7.1% 3.50%
Poor Farm
Self – employed 1.47% 5.73%
Non-Farm
Salary 3.97% 5.58%
Agricultural Wage 2.31% 3.59%
Non-Agricultural 2.47% 3.51%
Wage
Others 3.13% 7.99%
All 2.87% 5.04%

NSSO** Poor 0.79% 1.66%


Total (poor&non- 1.60% 4.00%
poor)
*Note: Micro Impacts of Macroeconomic and Adjustment Policies Survey 1994-
95 (NCAER)
**Excludes Boarding and lodging costs of education and also transport cost.
Source: National Sample Survey Organization

7
However, the MIMAP survey (NCAER, 1998) - an all-India household survey on
demand and supply issues in schooling - shows that the major reasons for such poor
performance of the educational sector are both unconstrained and constrained demand.
Unconstrained demand refers to factors having no constraint but simply lack of
willingness and constrained demand factors are constrained by poverty conditions,
participation in household economic activity, etc. In general, unconstrained demand
factors stand out as the major reason in rural areas while in urban a larger percentage of
poor attribute to constrained demand factors.
Therefore educational reforms in India should basically focus on the demand lead
supply transformation towards skill enhancement. This seems to be missing in the
government-owned and operated educational sector. In this context, the role of the state
should be reduced to provide the basic education.
1.6 School Education
India’s education system has expanded exponentially over the past five decades, and
there has been a considerable increase in the spread of educational institutions during the
period 1950-51 and 2003-04. During this period the number of Primary schools increased
by three times, while the Upper Primary Schools and secondary/Hr. Secondary schools
increased by more than 19 times each. The total enrolment at the Primary, Upper
Primary, Secondary and Sr. Secondary stage increased by 11, 43 and 72 times
respectively. The number of Colleges for General education and Professional education
increased by about 25 and 13 times respectively while the number of Universities
increased by 11 times during the period. But its current achievements are grossly
inadequate for the nation to realize its potential greatness. Developed countries are
characterized by high quality of adult literacy and universal school education.
Figure IV
Primary, Upper Primary and Higher Secondary Schools

1200000
1000000
800000
600000
400000
200000
0
*

-2 *
2*
19 -91
19 -93
19 -94

19 -95
19 -96
19 -97
19 -98

*
00 00
01 1
99 99

0
00
90
92

93
94
95
96
97

20 -20
20 -20
19 98-
19

Primary Schools Upper Primary Schools High schools

Source: http://www.education.nic.in/stats.asp

8
There has been an impressive improvement taken place in school-enrolment in
our country. The Gross Enrollment Ration (GER) in the relevant age group of 6-11 yrs
i.e. class (I-V) is 98.2 percent, in the relevant age group of 11-14 yrs i.e. class (V-VIII) is
62.4 percent and in the relevant age group of 6-14 yrs i.e. class (I-VIII) is 84.8 percent.
However, the dropout rate is quite disturbing at 31.45 at Primary Stage, 52.32% at the
elementary stage. It is 62.69% at the secondary stage i.e. Class (I-X). 9 These high drop
out rates from both primary and secondary school, combined with low enrolment rates at
the higher levels deprive tens of millions of children of their full rights as citizens. Out of
approximately 210 million children in the age group 6-14 years on Sept. 30, 2004, nearly
84.8 per cent were enrolled in schools, compared to 82.5 per cent in 2002-2003 and net
attendance in the primary level is only 66 per cent of the enrolment. Further, less than 7
per cent of the children ever pass the 10th standard public examination.
Hence in spite of the claims of fair work done by the states with regard to
improving access and enrolment in elementary education, any progress made has been
overshadowed by high dropout and wastage rates which, in turn, were the result of
shortfalls in other related elements of elementary education. Unless something is done to
drastically reduce drop-out rates, by the year 2016, there would be approximately 500
million people in the country with less than five years of schooling, and another 300
million that will not have completed high school. In other words, about two-thirds of the
population will lack the minimum level of education needed to keep pace with and take
advantage of the social changes occurring within the country and worldwide. 10 The
target before India at this stage is not only to eradicate illiteracy and bring every child
within the fold of school education but also to ensure good quality in school education.
This alone would lay a solid foundation for a learning and knowledgeable society
Extending the primary school system to over 500,000 villages in India has
brought education to the masses. Unfortunately, this huge quantitative expansion has
been accompanied by a tremendous dilution in the quality of schooling. High drop out
rates in rural areas is one result of single room schools, with few teaching aids and
inadequate instruction both in terms of quantity and quality.
“To improve the quality of education by reducing the class size would require a
further 20 per cent increase in the number of classrooms. Together, this will necessitate
increasing the total number of classrooms by 65 per cent within 20 years. An enormous
increase in the number of teachers will also be required to achieve the alternative
scenario, i.e., eliminating primary school drop outs and reducing the teacher-pupil ratio
from the present high level of 1:42 down to around 1:20, which is the UMI reference
level. Together, this will require an additional three million primary school teachers,
more than twice the number currently employed. Similar increases will be required at
middle and secondary school levels. The training of such large number of teachers will
require the establishment of additional teacher training colleges and much larger budget
allocations for teachers’ salaries. Qualitative improvements in education should reflect a
change in pedagogical methods and lay emphasis on several dimensions.”11

9
Selected Educational Statistics, 2003-04, MHRD, New Delhi
10
Garry Jacobs “ Vision 2020: Towards a Knowledge Society”, paper prepared for Planning Commission
11
Ibid.

9
1.7 Teachers and Teacher Pupil Ratio
Likewise there has been a substantial increase in the number of teachers in all types of
schools. The total no. of teachers in primary schools increased from 5.38 lakh in 1950-51
to 20.97 Lakh in 2003-04 i.e. by more than three times while the number of female
teachers increased from 0.82 lakh I 1950-51 to 8.37lakh in 2003-04 i.e about ten times.
The total number of teachers in Upper Primary schools increased from 0.86 lakh in 1950-
51 to 15.92 lakh in 2003-2004 i.e. by more than eighteen times while the number of
female teachers increased from 0.13 lakh in 1950-51 to 6.48 lakhs in 2003-04 i.e. by
about fifty times. The total number of teachers in High/Hr.Sec/Intermediate schools
increased from 1.27 lakhs in 1950-51 to 20.24 lakh in 2003-04 i.e. sixteen times while the
number while the number of female teachers increased from 0.20 lakh in 1950-51 to 7.74
lakh in 2003-04 i.e. by about thirty nine times.
Figure V
Teachers in Primary, Upper Primary and Higher Secondary Schools

6000
5000
4000
3000
2000
1000
0
0*

1*
99 9*

2*
1

19 98
-9

-9

-9

-9

-9

-9

-9

00

00
-9

-0
-
90

91

92

93

94

95

96

97

98

-2

-2

01
19

19

19

19

19

19

19

19

00

20
19

20

Hr. secondary teachers


Upper primary school teachers
Primary school teachers

Source: http://www.education.nic.in/stats.asp
On the basis of the school enrolment and the number of teachers, the TPR shows
that at the time of independence there was a widespread dearth of educational institutions
in the country and the utilization of institutions was also not optimum. During the year
1950-51 the Pupil Teacher Ratio in Primary school was 24:1, middle school it was 20:1
and in High and Higher Secondary schools it was 21:1. In 2003-04 this ratio has now
increased to 45:1 in primary schools, 35:1 in upper primary schools and 33:1 in high
school and higher secondary school. Though the number of educational institutions has
increased considerably after independence and also the number of teachers, the higher
TPR indicates that the increase in enrolment at each level is comparatively more than the
increase in number of teachers. The increased enrolment at various levels also
underscores the need for opening of a greater number of educational institutions as well
as employing more teachers for improving the quality of education.
“To improve the quality of education by reducing the class size would require a
further 20 per cent increase in the number of classrooms. Together, this will necessitate
increasing the total number of classrooms by 65 per cent within 20 years. An enormous

10
increase in the number of teachers will also be required to achieve the alternative
scenario, i.e., eliminating primary school drop outs and reducing the teacher-pupil ratio
from the present high level of 1:42 down to around 1:20, which is the UMI reference
level. Together, this will require an additional three million primary school teachers,
more than twice the number currently employed. Similar increases will be required at
middle and secondary school levels. The training of such large number of teachers will
require the establishment of additional teacher training colleges and much larger budget
allocations for teachers’ salaries. Qualitative improvements in education should reflect a
change in pedagogical methods and lay emphasis on several dimensions.”12
1.8 Financial Implications
According to official estimates, the proportion of out-of-school children in 1999-2000
was around 24 per cent of the total population in 6-14 age group, which amounts to a
figure between 4.7 to 5 crore according to the population estimates of the Technical
Group on Population Projection (Planning Commission). The HRD ministry is claiming
that 3 crore out of the nearly 5 crore out-of-school children have been brought back to
school after spending Rs 16,000 crore under the SSA. However, the Tapas Majumdar
Committee appointed by the union government had estimated the total financial
commitment required to bring all Indian children in the 6-14 age group under the purview
of school education to be Rs 1,36,922 crore over a ten year period (1998-99 to 2007-08),
which comes to an approximate 0.72 per cent of the estimated GDP during this period.
The year-wise estimates are given in Table below.
Table III
Financial Commitment Needed for
Universalisation of Elementary Education during 1998-99 to 2007-08

Total
Recurring Non-recurring Total expenditure as
Year (in Rs crore) (in Rs Crore) (in Rs Crore) % of GDP
1998-99 100 0 100 0.007
1999-00 1500 2000 3500 0.24
2000-01 4000 3000 7000 0.46
2001-02 6000 4000 10000 0.62
2002-03 8500 4000 12500 0.73
2003-04 10000 4000 14000 0.78
2004-05 13000 4000 17000 0.9
2005-06 16000 4000 20000 1.01
2006-07 20000 4000 24000 1.16
2007-08 27250 1572 28822 1.32
Total 106350 30572 136922 0.72
Source: India Education Report, A Profile of Basic Education, NIEPA

12
Ibid

11
The government is claiming that it has achieved over 60 per cent of the target in
universalising elementary education by spending only 0.11 per cent of the expenditure
estimated by the Tapas Majumdar Committee. Here the need is to reflect on the
commitment towards universalising elementary education.
According to the Selected Education Statistics published by the MHRD, there
were around 18.7 lakh teachers in the primary and junior basic schools in 1998. The
government claims to have appointed 4 lakh new teachers and 6 lakh new instructors over
the past five years, i.e. a 55 per cent increase in the number of teachers. Even if we take
the average salary of the new as well as the old teachers existing in 1998, i.e a total
number of 28.7 lakh teachers, to be a meager Rs 1500/- per month (the salary of a para-
teacher), their annual salary bill would have totalled Rs 5166 crore. The government has
claimed that the appointment of all the primary and junior basic school teachers have
been covered under the expenditure of Rs 16,000 crore spent on the Sarva Siksha
Abhiyan (SSA). This implies that either the entire sum of money spent on the SSA went
to meet the salary bill of the teachers (that too for a little more than three years) or that
the addition of 10 lakh new teachers over the past five years.
In its Interim Budget of 2004 the government has claimed that between 2001 to
February 2004 it has approved the opening of 93,028 new schools, the construction of
50,992 new school buildings and 1,09,399 additional class rooms with 1,06,920 toilets
and 67,803 drinking water sources. The Selected Educational Statistics published by the
MHRD suggests that the number of existing schools till 2000 was 8,45,007. The
government’s claim amounts to suggesting a highly commendable increase in the number
of schools in the country by 11 per cent in the last three years. Here on an average the
government has spent Rs 40.25 lakh for building each school under the SSA. Even if we
assume that the entire amount of Rs 16,000 crore has been spent only on constructing
new school buildings, then the government could have built only around 39,750 new
school buildings and not 50,992 as claimed in the Interim Budget.
1.9 Higher and Professional Education
The participation rate in higher education in USA is 89%, in industrial countries 60% and
in developing countries around 9% whereas in India it is only 6 percent. It is necessary
for us to ensure that higher education is accessible to all, at least to all those who desire
and deserve it.
At the present rate of expansion in higher education there will be students
population of 11.7 million by the end of 10th five year plan and the government has
projected participation for 14% by 2020, and for that as per the governments estimates 8-
10 million seats are to be created in coming 8-10 years with the projected participation as
above.
India has 217 universities, 74 deemed universities, 13 institutions of national
importance, 85 research institutes, 9,427 general colleges, 1,068 engineering, technical
and architecture colleges, 783 medical colleges, 900 teacher training colleges and 1,991
other colleges. The teaching community is 4.57 Lakh. The enrolment in higher education
was more than 10 million in 2005. When compare to other countries Japan have 4000
Universities and China have 900 universities. India produces 10 million graduates,
3,50000 engineers, 25000 medical doctors, 12,000 PhDs every year. India is estimated to

12
have about 20 million students enrolled in higher learning, with 1.4 million engineering
students, 60,000 medical students and 50,000 PhDs.13 However, the gross enrolment
ratio is only 9 per cent in 2001 which is very low compared to other countries. It is
almost 50% in developed countries and even countries like Thailand (37%) and Indonesia
(27%) have higher enrolment rates.
There is a huge gap between the demand and supply side in the globalized
economy. Our higher education system to be revamped and the institutional promotion
should be in accordance with the industry needs and demands. The gap needs to be
bridged through private participation and investment.
Figure VI
Colleges for General and Professional Education

12000

10000

8000

6000

4000

2000

0*

1*

2*
99 9*
1

8
-9

-9

-9

-9

-9

-9

-9

00

00

00
-9
90

92

93

94

95

96

97

98

-2

-2

-2
19

19

19

19

19

19

19

00

01
19

19

20

20
Colleges for professional education
Colleges for general education

Source: http://www.education.nic.in/stats.asp
The above graph shows an increasing trend in colleges for professional and general
education. The number of colleges for general education in 1991-92 was 4862.
Additional 3875 general education colleges are constructed over a period of 10 years. The
number of general education colleges stood at 8737 in 2001-02. The number of
professional colleges was 886 in 1991-92. To tackle the demand of industry and business
for managerial manpower additional 1523 professional colleges are constructed. The
number of professional colleges stood at 2409 in 2001-02.
The Indian Universities have been established many years back and are starving
for sufficient infrastructure and facilities. The quality of education varies widely from
one institution to another especially in the professional level. Several universities in India
do not have a flexible academic structure and the degrees from these universities will
have a lower value in the job market than foreign universities. The syllabi are obsolete;
there is a lack of multidisciplinary courses, teachers’ apathy, excessive examination
orientation, poor infrastructure, little research to speak of, bureaucratic meddling, etc.
These maladies have been identified by a series of education commissions as the ills that
plague the system. It is true that Indian universities have many problems with regard to

13
India Brand Equity Foundation report on Global Competitiveness Report 2005-06

13
fundraising to match up with the quality of foreign institutions. But the apathy cannot be
excused at the cost of development of the country.
Table IV
Growth of Higher Education System in India

Year Colleges Universities* Enrolment (mn)

1950-51 578 28 0.2


1960-61 1819 45 0.6
1970-71 3277 93 2
1980-81 4577 123 2.8
1990-91 6627 184 4.4
2001-02 11146 272 8.8
2002-03 15343 300 9.3
2004-05 17625 342 10.5
Source: UGC Annual reports and other publications
* Including deemed universities
There is a clear case for tremendous increase in capacity in our existing
institution/Universities, besides the need of many more such institutions. The
Government alone cannot meet this mammoth task nor does it have money, so it is
obligatory on the citizens, industry and the non-governmental/ private education
providers to come forward for sharing this onerous responsibility and provide access to
all those who desire.
Now there is an urgent need to work for the development of the educational sector
to meet the need of the emerging opportunities, increasing younger generation population
and challenges of the 21st century. Knowledge is the base for overall growth and if the
nation has to be competitive and to be at par with the globalisation pace, we will have to
respond to the market forces. Encouraging investment in education both public and
private by itself will also contribute towards employment, as education is labour
intensive.
Supply should cater to all those who aspire for higher education of their choice
and be employable. Accordingly output at secondary level should also be calibrated and
the quality standards through Accreditation should meet the confidence of the market
forces. The demand and supply should be synonymous to future growth. Thus, a long-
term integrated policy on education, which encompasses standards from the school to the
tertiary level, which can deliver the required proficiency, is to be put into place on
emergent basis. To reach and achieve the future requirements there is an urgent need to
re-look at the Financial Resources, Access and Equity, Quality Standards, Relevance and
at the end the Responsiveness.

14
1.10 Technical and Vocational Education
India’s labour force reached 375 million in 2002 and it is continuously increasing and it
is projected to 7.5-8 million a year.14 Skill production and training are the strength of the
growing economy. The technical institutions in the country are working to achieve 10
million jobs in the next 10 years. Technical education in India is considered one of the
best in the world. Premier among the training institutes offering technical education are
the Indian Institute of Technology, Indian Institute of Science, Regional Engineering
Colleges, School of Planning & Architecture, and the International Centre for Science &
Technology. Among the various schemes which encourage technical education are the
Rajiv Gandhi National Institute for Computer & Allied Schemes, University Grants
Commission Schemes, and schemes at National Institute of Foundry & Forge
Technology.
The Technical/Vocational Education and Training is multi-sectoral in nature.
Each department in Central as well as State Governments is responsible for manpower
development in that sector. The vocational higher secondary programme aims to develop
skilled manpower through diversified courses to meet the requirements of mainly the
unorganised sector and to prepare people for specified works through a large number of
self employment oriented courses. At the middle level of the technical
education…polytechnics are running three year to four year courses leading to the award
of diplomas. There are more than 500 polytechnics have more than 65000 enrolment.15
Figure VII
Relative Share of Private and Public Institutions

Private Public

100
90

80
70

60
50
40

30
20

10
0
Engineering Pharmacy Hotel Architecture Teacher MCA MBA Medicine Physiotherapy
Education (Allopathic)
Management

Source: Shaping the future of higher education in India by Pawan Agarwal,Fulbright


New Century Scholar (2005- 06).

14
http://www.ilo.org/public/english/region/ampro/cinterfor/news/gasskov.pdf, 08.06.2006.
15
http://www1.worldbank.org/disted/policy/program/voc-02.html, 06.06.2006.

15
At the lower level of the technical education, vocational training system of India offers
training through Industrial Training Institutes (ITI) and Industrial Training Centers (ITC)
offering certificate courses in more than 67 trades nationally recognised trades, 43 of
which are engineering and 24 non-engineering courses. State governments operate some
4,650 ITIs with a total capacity of 678,000 training seats. Out of this, nearly 373,000
seats are established in some 1,800 government ITIs, and the residual 305,000 are in
some 2,850 private ITCs. The number of vocational training institutes in India has shown
a rapid increase over years, being mostly driven by private training providers.
1.11 Regulatory Laws and Agencies
Indian education sector is mainly regulated by two agencies created through law. The
University Grants Commission (UGC) through the UGC Act, 1956 and the All India
Council for Technical Education (AICTE) created by AICTE Act 1987.
The statement of objects and reasons of the University Grants Commission Act,
1956 says “the Constitution of India vests Parliament with exclusive authority in regard
to “co-ordination and determination of standards in institutions for higher education or
research and scientific and technical institutions.” The UGC (Establishment of and
Maintenance of Standards in Private Universities) Regulations, 2003 specifically controls
the establishment of private universities in the country. Virtually this regulation killed all
the private universities in the country especially more than 100 universities working in
the state of Chhattisgarh along with the Supreme Court judgment in the case of Prof.
Yashpal & another vs State of Chhattisgarh & others.16 The general trend in India is that
all the laws are acting as barriers rather than regulatory in nature.
The AICTE is entrusted with statutory authority for planning, formulation and
maintenance of norms and standards, quality assurance through accreditation, funding in
priority areas, monitoring and evaluation, maintaining parity of certification and awards
and ensuring coordinated and integrated development and management of technical
education in the country.17 Obtaining approval for setting up of a higher education
institution is a lengthy and cumbersome process under the Act.18 The regulation and fees
fixation is based on unrealistic assumptions rather than financial viability. The AICTE
notification19 on regulations for entry and operation of foreign universities/ institutions
imparting technical education in India is acting as a barrier to the entry of foreign
institutions. A draft bill entitled ‘The Private Professional Educational Institutions
(Regulation of Admission and Fixation of Fee) Bill, 2005’ is to be introduced before the
Parliament for defining the parameters for private institutions, domestic and foreign. The
draft Bill allows for 50 per cent admissions under ‘management quota’ and fees
permitting ‘reasonable profit.’ However, it is more controlling in nature rather than
regulatory.
2. Where Do We Want to go?
Education is vital for social and economic growth of every country. A good education
system relies largely on a complex interface of human resources, pedagogical methods,
16
Supreme Court, Writ Petition No. 19 of 2004.
17
http://www.aicte.ernet.in/AboutAICTE.htm, 08.06.2006.
18
More than 30 documents of no-objection to be submitted for approval.
19
AICTE Notification No. F. 37-3/Legal/2005, 16 May 2005.

16
curricula, infrastructure and academic standards. These are all important variables, at
every level and in every field of education.20 Our country is passing through changes and
the transition phase of economic reforms. Where do we want to go or lead our country is
important in economic as well as futuristic terms? It is competing with other countries in
all fields including education. To achieve the objective of a knowledge society in the 21st
century, India has to revamp the whole education system in the country. The Mid-Term
Appraisal of the Tenth Plan (2002-07)21 states that one of the objectives of the Plan was
to increase private participation in higher education. However, the regulatory regimes are
still acting as barriers for private investment rather than facilitating private participation.
The ongoing negotiations under the GATS agreement are giving opportunities as well as
challenges. The challenges facing our education sector are many. These factors and
variables will decide the direction of the sector in the coming days.
2.1 Financial Constraints
One of the most important things that have to be noticed is the issue of financial
constraints before the government. The State Government has already been spending 20-
30 percent of its revenue budget on education. It will not be able/could not afford to
spend more.
It is without doubt that the government has to spend on elementary education,
they have to spend on secondary education and the budget outlays of the government also
reflect that. The government is also moving towards compulsory secondary education and
we applaud that step. But that basically means that even for the secondary education they
are only comfortable with being able to deploy half of that budget for the next five years,
the other half have left to the Planning Commission to manage those resources. This
actually means that there is really very little left for higher education.
In India, at least, the spending per student has been going down over the years.
The share of education in our five-year plan outlay has been falling. The first five-year
plan gave education 7.86 per cent. By the fifth plan, the share of education was only 3.27
per cent of the outlay. Even if you take both central and state government spending
together, it does not get better. Current spending on education in India is not more than
3.5 per cent of GDP. The Center itself concedes that the minimum should be 6 per cent.
Again, out of the amount spent, very less is being envisaged to be spent on higher
education, it is not even 3-4% of GDP. This compares unfavourably with the
international reference level, especially with countries such as South Africa, which
invests 8 per cent of GNP on education. A near doubling of investments in education is
the soundest policy for increasing the country’s GDP per capita by many folds. Therefore
there is a need to evolve policy through which Private/non-governmental resources is
mobilized.
2.2 Autonomy
When we talk of autonomy then it is not just for the private institutions and the self-
financed institutions but also autonomy for the institutions, which are under the
20
National Knowledge Commission, http://www.knowledgecommission.org/focusAreas/concepts.aspx,
1.05.2006.
21
Mid-Term Appraisal of the Tenth Plan, Planning Commission, Chapter 2, ‘Human Development’ page
65

17
government either fully or partly financed by the government. The type of autonomy
which ensures that the stakeholders are protected-particularly the students-against
dilution in quality or being misled. Concerning autonomy, the law must delegate the
necessary decision making power to the institution – for changes in curricula and
teaching methods, for internal self-governance, for interaction with other organisations
nationally and internationally and for economic transactions.
It is also very important that accountability must follow autonomy. In all fields
where the institution has been given the responsibility to make its own decisions, the
decision process should be transparent and results should be made public. On the other
hand quality assurance systems will be important cornerstones in our system of higher
education. The quality assurance system must be independent of political and institutional
interaction and it must have a basis in the legislation.
This means that an effective law on higher education should only regulate what is
essential to regulate, it cannot effectively be regulated in any other way and it should be
written to allow for change, in order to be applicable as the higher education system
develops. Hence in my view there should be full operational, financial and academic
autonomy coupled with accountability.
When it comes in forms of financial autonomy as has been observed by
educationists in the past, the case for subsidy in the supply of education to the individual
consumer is based on the premise that education is a mixed good involving substantial
external benefit. However, it is widely agreed that such external benefits tend to taper off
at higher levels of education and that there should be greater correspondence between
costs involved and fees charged. Such an approach favours enhancement of tuition fees
and other related fees.
Student loan schemes are an essential complement of cost -recovery and the
charging of fees. Many students are unable to afford the cost of higher education out of
their families’ current income, and loan schemes permit them to pay out of their future
earnings. About fifty countries, both industrial and developing, have such schemes,
including more than half the Latin America and countries such as China, Ghana, Egypt,
Jordan, Kenya, Korea, Malawi, Malaysia, Morocco, Pakistan, Philippines, and Sri Lanka.
An elaborate and well-designed scholarship and loan scheme for the needy, to
make higher education, accessible to all, would prove to be an effective mechanism of
financing higher education. Full-cost recovery, however, can be ruled out; just as heavy
subsidization of higher education is theoretically unsound. It may be noted in this context
that even in a highly developed country like the US where private universities charge
much higher tuition fees than state universities, tuition fees form less than 40 per cent of
the costs; the rest come form alumni support, endowments, etc. It can be suggested that:
1. Those who can afford to pay should not be subsidized, particularly in the light scarce
available financial resources. Even if government commits to providing need based
scholarships to all students it is currently subsidizing, at worst, it may be still
spending what it is spending today, but at best, it may have surplus funds to invest in
higher education.

18
2. Those who are subsidized by public funds owe something in return, either by way or
repayment or services.
Other time tested as well as innovative sources may be tapped; some examples include
eased bank loans, innovative financial instruments, mobilization of industry and
individuals to institute scholarships with tax and naming incentives, alumni support and
endowments, cross-subsidization within institutions, but without diluting merit.
When we talk of autonomy then there are other very important issues, which if
dealt judiciously can help the institutions and particularly private institutions in
sustaining and improving their quality. The issues of reservation and admission are very
important in this regard.
2.3 Accessibility, Affordability and Equal Opportunity
The matter of access and equity of higher education is another very important issue in the
management of higher education. This should be based on the simple principle that has
already been stated ‘No talented and deserving person should be denied access to higher
education’. This guiding code presumes a lot of things.
1. Sate with the help of private sector, should take primary responsibility of
financing higher education, as fees will not be able to play a central role in the
higher education economics.
2. A different system of screening beyond two-digit percentage shall have to be
worked out to ensure merit.
3. Education has to be freed from political and other influences.
4. The concept of earning while learning or exchange of labour or skills for
education needs to be promoted.
5. Acquiring of multiple degrees and diplomas simultaneously has to be encouraged.
6. Standards of evaluation have to be strengthened.
7. Disparities and discrimination of age, gender, and socio-economic background
need to be tackled.
8. Return to the system for continuing or additional degrees/diplomas. The list may
go on with no full stops.
Other things vis-a-vis fees, which have again been a very contentious issue looking at
market forces as the determinant of fees rather than trying to have them imposed by some
committee per se. Here we can seek an example of industry, though education cannot be
equated with industry as it has a public good element in it. Nevertheless there is no harm
in learning from the experiences from the other sector. If one does some learning from
the private sector one finds that with the post liberalisation era one has now access to
many more number of goods in a particular category and they are available at a much
cheaper price and on demand. Something simple as getting a two-wheeler, which is an
important thing for any common man and is not something that one, is talking about cars.
There used to be a waiting list. There was a premium on it and there were whole lot of
malpractices, one had to wait for one or two years and without much choice left either to
take it or leave it. Similarly with so many other goods, today the dealers fall after the

19
customers and try their products for someday and pay only if they feel satisfied. Similarly
in education we need to strongly look at increasing supply because one of the demands of
equity also is that all those who would like to have access to education can have access to
education. And when there is sufficient supply definitely it will ensure competition, and
prices slash (cost of education).
2.4 Need of an Independent Accreditation System
There is a need of an independent accreditation agency with a conglomerate of
government, industry, academia, society etc. means all stakeholders of the education to
ensure that the stakeholders particularly the students are not taken for a ride. They should
be able to know whether a particular institution delivers value or not, then things can be
under control to some extent. Equally important is the question in terms of being able to
see that each institution would have different standards of quality. Therefore it has been
found that when you go into a price fixation mode you tend to reduce all institutions to
the lowest common denominator and that is not in the interest of the nation and least of
all in such an important area as education. And if there is an accreditation agency that
will ensure that the stakeholders are aware of the quality institutions, the most important
issue, which troubles us, is that it needs to be seen that each institution would have a
different quality level and a different vision and mission.
The institution, which excels in obtaining Accreditation, should be encouraged to
levy higher tuition fees from those who can afford, compared to those who do not receive
Accreditation. It is also important that all institutes of higher learning must make public
the acceptability of their courses and degrees. (i.e. the status, recognition and
acceptability of their courses by other institutions). Any misrepresentation of facts to the
general public, should make the institute and its promoters, directors and staff liable for
civil prosecution
Technical education, both vocational and professional, constitutes the foundation
for development of science and technology, and business. India is rightly proud of the
international standing of its IITs, and IIMs, but a handful of world-class technical
institutions are not sufficient. A large number of the country’s engineering colleges,
medical colleges, business schools, other science and technology institutions need to
standards and given the required autonomy.
2.5 The Effect of Globalization
Globalization is a term which is frequently discussed not only in the academic field but
also in the economic development and policy studies. The spread of connectedness of
production, technologies and communication in the world is the generally accepted
definition of globalization.22 Through the globalization process, education is also
considered as a commodity and corporatization and branding is already started in the
higher education field. Many argue that if the education sector wants to be more efficient,
it should be leave it to the market forces. This argument mainly undermines the
consideration of education provided as a public and social good.
There has been a very aggressive approach by USA, UK and Australia in few
decades on spreading their education outside the country and these countries have taken
22
INFED, Globalization, http://www.infed.org/biblio/globalization.htm, 1.05.2006.

20
some of the issues in their parliamentary bills to expand and develop the vocational and
higher education outside the country. In Asia, Singapore, Malaysia, Dubai are such
places, which have made few locations of Education offering with quality while
providing minimum infrastructure. As commented by Dean, London Business School that
‘India lacks in offering basic infrastructure and location to offer quality education from
the reputed universities of the world’. There is a need of very clear view on Education
Policy on the internationalization of the higher and other level of education in either form
by inviting the foreign players in the Indian education and by providing the Indian
education players through and official channels to the countries, which have opportunities
for Indian educational institutions.
2.6 The World Education Market
It has been estimated that in the 1990s 1.5 million students were studying abroad. Out of
the 5,14,000 foreign students who were studying in US, more than 54 per cent are from
Asia. In 1996, the US provided exports of education and training services had reached 8.2
billion dollars, and its trade surplus in education amounted to 7 billion dollars.23 Higher
education was the fifth largest service exported by the US. The U.K, Germany, Australia
and France are the other leading exporters. In 1995 global market for international higher
education was estimated at $ 27 billion.24 In 1996, education and training services
generated $7.5 billion in export. This proves the US interest in the liberalisation of this
sector. In many countries, service sector contributes the main export earner. Education
services were the third largest service in 2000-01. In New Zealand also it was the fourth
largest service sector in 2000.25
Some of the regional groupings like OECD countries are targeting international
student mobility as a focal point of revenue, which came to $30 billion in 1999. Out of
these, 1.5 million foreign students were in OECD countries, of which 56 per cent are
from non-OECD countries. Most of the international trade in higher education services
takes place within the OECD countries, which received 85 percent of the world’s foreign
students. Out of which 45 percent are from Asia especially India which had sent 48,515
students which contribute 3 percent of the total.26 Recent estimate given by Global
Alliance for Transnational Education indicates that about 27 billion dollars worth of
higher education is exported to Asia and Pacific by three countries namely USA, UK and
Australia. A business of 37 billion dollars trade in tertiary education services in Asia and
Pacific region is projected for future. The data shows that education has huge markets,
especially in Asia.
2.7 Trade in Education Services Under the WTO
Trade in education is a billion dollar business and it is increasing every day. The demand
for higher education is growing and the developed countries are looking the emerging
23
Vijender Sharma, WTO, GATS and Higher Education in India, Peoples Democracy, vol. 26, no. 6,
2002, p. 1. http://pd.cpim.org/2002/feb10/02102002_wto_edu.htm, 03.05.06.
24
G.D. Sharma, Trade in Education Service Under WTO Regime – An Indian Response, (New Delhi:
2001)
25
OECD Centre for Educational Research and Innovation, indicators on Internationalisation and Trade
of Post-secondary Education, (Washington, D.C. USA: Department of Commerce, 2002).
26
Kurt Larsen and Stephen Vincent – Lancrin, “The Learning Business: Can Trade in International
education Work,” Centre for Educational Research and Innovation (CERI), 2003.

21
economies as a potential market. Since the conclusion of the General Agreement on
Trade in Services (GATS) in 1995, education is also one of the category of services come
under the agreement. The GATS established a multilateral framework of principles and
rules for trade in services with the objective of expansion and progressive liberalisation
of such trade as a means of promoting economic growth of all trading partners and the
further development of developing countries. It provides for disciplines on transparency,
most favoured nation (MFN) treatment, market access and national treatment. Education
is one of the twelve services included in the Uruguay Round. The whole education sector
is divided into 5 sub-sectors categorized by the United Nations Provisional Central
Product Classification (CPC). These sub-sectors are: primary, secondary, higher, adult
and other education services.27
GATS and Education Services under Article 1.2 of GATS28 classify four modes
of supply in educational service trade. They are:
• Cross border supply: Under this mode services are supplied across the borders
without moving students and service providers. It includes courses through
distance education, online courses, educational testing services and educational
materials that are provided overseas. It also includes sale of books, educational
materials and CDs, service provided through satellite transmission, and audio
video conferencing, which can cross national boundaries.29
• Consumption abroad: This includes students or consumers travelling from one
country to another. Under this category India is one of the largest importers of
education services i.e., sending students abroad like US and other countries. It
exports services when students come to India for study.
• Commercial presence: It means an actual presence of an education provider
through the establishment of offshore campuses or facilities or partnership
agreement with institutions in the host country.
• Presence or movement of natural persons: As the title suggests, it means the
movement of teachers or researchers travelling to another country in order to
provide educational services to the foreign students. For example visiting lectures.
According to Article 1.3 of GATS, government services remain outside the
purview of GATS, provided that they are neither supplied on a commercial basis nor in

27
Division 92, Groups 921, 922,923, 924 and 929 respectively.
http://unstats.un.org/unsd/cr/registry/regcs.asp?Cl=9&Lg=1&Co=92, 2.05.2006.
28
Article 1.2 of GATS provides that:
(a) from the territory of one Member in to the territory of any other Member;
(b) in the territory of one Member to the service consumer of any other member;
(c) by a service supplier of one Member, through commercial presence in the territory of any other
member;
(d) by a service supplier of one Member, through presence of natural persons of a Member in the
territory of any other Member.
29
Duc Nguyen-Hong Robert Wells, “Restrictions on Trade in Education Services: some Basic Indexes,”
Productivity Commission Staff Working Paper, Canberra, October 2003.

22
competition with one or more service suppliers. Under the GATS, education services are
classified into five categories,30 which include:
Primary Education Services: These include services related to primary and pre-school
education but exclude child day-care and adult literacy programmes.
Secondary Education Services: These cover high school, vocational education and
technical training.
Higher Education Services: These include two areas. The first relates to teaching of
practical skills (training) after 10+2 level and also includes pre-degree, technical and
vocational training institutes like (polytechnics). The second category relates to
conventional education provided by Universities and colleges in the country including
professional institutions.
Adult and Continuing Education Services: These include adult learning and continuing
education programmes in general and vocational subjects and also refresher and training
programmes.
Other Education Services: These cover all other services not mentioned or defined above
but ultimately fall under the purview of learning and training.
India has received requests (for opening up of services) from several countries
(Australia, Brazil, Japan, New Zealand, Norway, Singapore, USA) in education services
in the new round of service trade negotiations launched in January 2000 (GATS 2000
round), which mostly focus on higher education, adult education, and other education
services. USA also specified training services and educational testing services and Brazil
has also requested in primary and secondary education services, while there were no
requests from the European Community. All requests to India are for full market access
and national treatment commitments in modes 1, 2 and 3.
2.8 India’s Import Interests in Education Services
• Mode 2: Indian students studying in foreign universities (US, UK, Australia)
o Over 60,000 studying in US courses
o Several thousand in Europe
• Mode 3: foreign institutions entering India through twinning and franchise
arrangements
o Indian students getting foreign degrees, doing professional courses at local
branch campuses of foreign institutions in India
 UK-based Wigan and Leigh College
 Indian School of Business tie up with Kellogg, Wharton, and London
Business School.
 Western International University,Arizona.
 NIIT tie up with ITT Educational Services, USA.

30
The classification of educational services under Unite Nations Central Product Classification System
(UNCPC) 1991 includes all these categories.

23
 Tata Infotech tie up with Hertfordshire University, UK.
• Mode 1: Prospects for distance education and degrees from foreign academic
institutions
• Mode 4: Foreign faculty and scholars teaching in India
2.8 India’s Export Interests in Education Services
Mode 1: Prospects for tele-education in management and executive training.
o Experience with distance learning, use of new technologies (IGNOU).
o Education process outsourcing with remote tutoring from India.
Mode 2: Students from developing countries studying in Indian engineering and
medical colleges.
o Around 5,500 students from neighbouring developing countries (2001)
o Exchange programmes and twinning arrangements
Mode 3: Setting up of overseas campuses, franchising by Indian institutions
o MAHE, BITS, Central Institute of English and Foreign Languages
o Over 100 CBSE schools abroad, catering to diaspora.
Mode 4: Indian teachers, lecturers teaching abroad in Middle East, Africa,
researchers/scholars on visiting arrangements abroad
o Some 10,000 secondary school teachers overseas
o Recruitment of Indian teachers in Maths, Science, English
• Potential as a regional hub for exporting higher education services
There is a high demand for Indian teachers in the US and other countries.
Unsurprisingly, given that the annual remuneration package of a school teacher (with
three years experience) in even the most highly rated English medium CISCE and CBSE
schools averages a modest Rs.80,000-100,000 against the $35,000 (Rs.16 lakh) offered
by American and British local governments (with private schools offering better pay and
perks), there’s considerable excitement within India’s long-neglected teachers’
community about this new development which many regard as a golden opportunity.31
Recently the Ministry of Human Resources asked the Ministry of Commerce to remove
education from the list of services to be opened.32 Withdrawal means that the free entry
of foreign institutions will be subject to new law and regulations.
2.9 Foreign Institutional Presence in India
There are 131 Indian institutions collaborating with foreign institutions, 107 providing
vocational courses, 19 technical courses and only 5 for general education. Some of the
foreign institutions have been operating in India before the guidelines for foreign
educational institutions came into effect. In July, 2005 India committed to the WTO that
foreign educators would be allowed entry to India with the sole condition being that their
31
India School News, March 3, 2006.
32
Indian Express, February 4, 2006.

24
fees would be fixed by the government. Foreign direct investment (FDI), even up to
100% in education, including higher education is already being allowed under the
automatic route.33 All the foreign institutions working within the country neither is
taken permissions accordance with the law of the land nor registered with concerned
governments. It was reported that some of the providers are not recognized even in their
own country of origin. The recent AICTE Notification34 spells out regulations regarding
entry as well as operation of Foreign Education Providers, such as no-objection visa from
embassy of country of origin, collaborations and partnership only with already
operational Indian partners, vague clauses for clearing of curriculum with government,
penal clauses etc.
The CNR Rao Committee appointed by the Ministry of HR for studying this
subject submitted its report. In response to the report, the government is expected to be
considering a proposal to set up a two-phase approval system for foreign universities. It
will require foreign universities to get approval prior to setting up Indian operations. In
the first phase, foreign universities will be given a limited period trial, a sort of probation
period. On the basis of performance in the trial period, these universities will be allowed
to set up long-term operations. The proposed system will apply to all modes of operation-
franchisee agreements, twinning programmes, study centres, programme collaborations,
and offshore or branch campuses.35
The proposal also calls for strong disincentives, such as forfeiture of substantial
security deposits. This has been suggested to ensure that foreign players and their
partners do not discontinue their operations after a few years, leaving students in the
lurch. A short-term approval will be extended to those varsities that are accredited in their
country of origin. The institution will be expected to submit the latest audit report of the
accreditation agency.
The following points have to be taken into consideration with regard to foreign
institutions.
• Foreign institutes should register with authorities.
• Appropriate regulatory framework should allow entry of only good quality foreign
institutions with recognized degrees and working in their own country.
• Provision for merit cum means scholarships for students in these institutions.
• Transparency should be ensured by providing reliable information about the institute.
• Mutual recognition of the degree should be ensured.
• Following the global leaders in education like USA, UK, and other countries
competition between institutions should be encouraged.
• License and quota on the foreign education providers should be discouraged to
enhance quality.
33
Lok Sabha starred question No. 11, was answered by Arjun Singh, Minister for Human Resources on
February 21, 2006. Order No.7(4)/2000-IP dated 11 February, 2000, issued by the Department of
Industrial Policy & Promotion.
34
No. F37-3/Legal/2005.
35
The Economic Times, July 27, 2005.

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2.10 Foreign Students in India
India’s foreign student enrolment has dropped in 2003. In contrast, that of China has
swelled from around 22, 755 in 1995 to 1,11,000 last year.36 In comparison, while India
boasted of 11,888 foreign students in 1995, the figure fell to 8,145 in 2003. Nepalese
students formed the largest foreign component in India, with 873 students, in 2002. This
was followed by 550 students from Mauritius and 548 from Kenya. India’s eastern
neighbour Bangladesh sent 545 students to study here while Ethiopia, where a large
number of Indians teach at school level, had 281 students here.
Table V
Major Consumers of Indian Education
Sl. Country 1992-03 2002-03
No.
1 North Korea 52 108
2 Yemen 146 242
3 Bangladesh 565 372
4 Bhutan 112 227
5 Iran 348 336
6 Sri Lanka 487 391
7 Nepal 725 837
8 Malaysia 597 788
9 Thailand 160 293
The main attraction of students from these countries is good quality education at a
cheaper cost. The marketing of Indian education in other countries are not effective and
the government and Universities are not doing anything in this direction. However,
recently UGC has initiated a programme for the Promotion of Indian Higher Education
Abroad (PIHEAD), which will run through the Tenth Five-Year Plan (2002-07). Besides,
Educational Consultants of India (EDCIL) has taken up schemes to promote Indian
education abroad. It is in the coming years to prove whether these initiatives will increase
the enrolment of foreign students in Indian universities. The information about courses
and universities should be readily available on websites. Some integrated efforts can be
made to attract neighbouring foreign students to inform them in a cost-effective manner.
2.11 Indian Institutions and Students Abroad
Many Indian institutions are setting up branches abroad and are considered high quality
institutes. Government of India has taken various initiatives to promote Indian education
abroad. In April 2002, the Committee on Promotion of Indian Education Abroad
(COPIEA) was constituted to monitor all activities aimed at promoting Indian education
abroad. A system of registration was introduced under which institutions would have to
furnish information on operations and adhere to certain guidelines relating to publicity,
maintenance of standards, charging of fees, granting of degrees etc. However, COPIEA
has not been effective even though Indian education has been able to establish a brand
image. Efforts should be made for greater market access to other countries.

36
Business World, April 10, 2006. See also Silicon India.com

26
Very few institutions from India are used the chances of globalization. The Birla
institute of Technology and Science, Pilani and Ranchi have opened institutions in Dubai
and Oman respectively. The Universal Group in Nepal and the Central Institute for
Languages, Hyderabad opened centers in Kyrgizstan. Incidentally, all are Deemed
Universities and privately financed except the last one. The Indira Gandhi National Open
University (IGNOU) is focuses on distance education and is planning to spread its
operations to many countries. Movement of faculty and researchers to foreign Countries
are small in number and the foreign teachers in India are negligible.
India accounts for 4% of the world’s overseas students, the second largest
exporter of students after China. More than 66 percent of Indian students are studying in
the US and pursuing post-graduate degrees; only 22 percent are undergraduate students.
Business, management, engineering and computer science students account for more than
75 percent of all Indian students in the US. The flows of students from the developed
countries to India are meagre. India is now exporting more than 1,00000 students every
year at the cost of more than US $1.5 billion. These students in the US are along
contributing roughly $1.27 billion, out of which 75% are funded personally or by family
(i.e. $950 million, Rs. 4280 crore).37
Table VI
Country wise Number of Indian Students Studying in Foreign Universities: Selected
Countries
Sl. Name of the 1999-00 2000-01 2001-02
No. Country
1 US 39084 47411 66836
2 Australia 4578 6195 9539
3 UK 3962 4302 6016
4 Germany 1282 1412 2196
5 New Zealand 201 355 952
6 Japan 195 202 199
Source: http://www.education.nic.in/stats.asp
2.12 Vocationalization of Education
There is a gap between the need of the employment terminals i.e. industry and the
academic institutions. With the reducing government employment opportunities and
increasing economy-oriented employment, close links need to be fostered between
vocational institutions and user industry and also technical and professional institutions
and industry. It is important to recognize the level of involvement of the industry and thus
create interest of the industry in developing the quality, financial support, acceptance of
the produce, creation of more employment etc. The higher education systems have very
controlled way of qualifying the recognition of offering the degree or the diploma. These
systems do not allow majority of the institutions to offer quality developmental
programmes, which are needs of the economic manpower. There should be an
independent accreditation body to assess the purpose, quality and offering of the

37
IIE fact sheet on India. Open Doors Report.

27
programmes for undergraduate programmes, from one-year masters to three year of
masters or even higher education.
2.13 Public-Private Partnership
There has been some effort both by the government and the private education institutions
to develop the teaching staff at various levels. However, this needs to be intensified with
appropriate attention to all the aspects related in order to prepare quality and sufficient
number of educational staff. Such efforts need a very serious structuring for the research
base institutions.
It is a very popular and known fact that funding of the institutions either private or
the government, is not going to be supported by the state or central governments for long.
A public-Private Partnership Model should be developed and encouraged by the
government to create a self-sustainable model of education in times to come.
2.14 Institution-Industry Interface
Looking at the whole scenario, there is a need for interaction between universities,
academic institutions of higher learning, industry, R&D institutions and funding
agencies. This could be achieved by a synergy process wherein they will be partners in
various activities, complementing each other in reaching their visions, objectives and
goals. Generally, this is perceived as an activity for interaction but there is need to re-
look in order to develop such a process wherein there will be more than interaction. This
could be achieved by Partnership. A few interventions needed are (i) Develop a database
of facilities available in the university, Industry and R&D institutions. (ii) Involvement of
Industry in the curriculum development and also implementation of the curriculum (iii)
Faculty exchange and participation in industry and vice-versa in university and
specialized institutions (iv) Participation of executive who have Ph.D., involve them in
research and development both in industry as well as universities (v) Industry to utilize
the human resource and infrastructure available in the universities for problem solving,
testing, certification etc. (vi) Conducting advanced programme in technical, management
and other need-based areas, tackling contemporary issues of mutually beneficial nature
(vii) setting up a business development cell on partnership and (viii) Promoting
entrepreneurship in education system
We have to be optimistic that private-public partnership and the Industry interface
will take place in the field of education at all levels, and particularly in the backward
regions, which is the need of the hour. To achieve excellence, we thus need to create a
real partnership between government, educators and industry – Partnerships that can
provide our high- tech industries with skilled workers who meet the standards of their
industry.
It is important to mobilize resources, arrest the process of declining resources,
liberalise the conditions and procedures for grant of autonomy to institutions of higher
learning, adopt new ways and means to raise funds to make the system more efficient,
responsive and accountable and encourage participation of private enterprise for creating
a network of institutions.

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3. How Do We Achieve the Goals?
There is no doubt that Achieving the goal of a knowledge economy is not an easy task. It
needs considerable additional financial investment and planning. Not only is there an
overall shortage of funds, there are also several competing demands on the slender states
finances. But education is an investment in human resource development, and all future
development essentially revolves around the quality of the human resource. While a part
of the financial requirement can be met by mobilizing and judiciously utilizing local
(community) resources, a large part has to come from the state funds. But the most
important is that private education providers should be encouraged and they should come
forward to invest in education in these areas. But for that a favourable environment has to
be created. Private participation in the financing and management of education should be
encouraged also in semi-urban areas to bring about efficiency in the system and make it
more effective and relevant. The government needs to adopt the pro-active approach and
should increase the present level 3% spending to 6% of the GDP.
With the changing scenario at a much faster pace including service sector playing
vibrant role, the system should aptly respond to dynamic flexible and innovative practices
at a matching pace. The flexibility, responsiveness, timely action would be detrimental to
market forces trying to occupy larger share in the name of innovation and become the
expertise for larger market share. Information Technology advances is a very good
example for our country whereby responsiveness could result in greater market share.
The National Commission on Population expects working age population to
comprise over 63 per cent of the aggregate by 2016. India has made tremendous progress
to fight against illiteracy and reduced it into a reasonable level. India produces a large
number of skilled workers especially, in the information technology sector and exports
them to various parts of the world. The business exports including professional service
exports reached $15.4 billion in the first half of 2005-06. The share of service sector to
the GDP has increased to 54% in 2005-06.38 However, there is a huge gap between the
actual potential of India and it’s out put and to make it a knowledge economy. At present
more than 35% of the Indian population is below the age of 15.39 The young generation
is the asset for the future, but to make it as a trained manpower is the task before the
country.
In India 65% of people are engaged in the agricultural sector; 26-30% are below
the poverty line and 36-40% not literate. Out of every 100 children joining primary
school, only 60 complete Class V; 40 complete VIII; 25 complete X; 15 complete XII
and only 8 reach to college. High levels of financial and institutional commitment are
required to ensure basic infrastructure in schools, bolster teaching quality and improve
academic standards. Secondary education needs to be recognized as a crucial
intermediary step between elementary and higher education. Innovative strategies are
required to make secondary school education more productive, less strenuous, skill
oriented and more appealing to students. The reforms in India should basically focus on
the demand lead supply transformation towards skill enhancement. This seems to be

38
Economic Survey, 2005-06, p. 3.
39
http://www.rediff.com/news/2004/feb/04inter.htm, 09.06.2006.

29
missing in the government-owned and operated educational sector. In this context, the
role of the state should be reduced to provide the basic education.
It is now understood that the largest share of new jobs in India would be created
in the unorganized economy that employs up to 92 per cent of the national workforce and
produces 60 per cent of GDP. Technicians and other skilled workers and craftsmen form
the backbone of manufacturing and infrastructure development. A larger and much more
dynamic system of vocational education is required to train and equip them in greater
numbers. The objective of the future technical and vocational training should be to train
and create the skilled labour force which is needed for the un-organized sector, key to the
economic growth.
The Indian Universities have been established many years back and are starving
for sufficient infrastructure and facilities. The quality of education varies widely from
one institution to another especially in the professional level. Several universities in India
do not have a flexible academic structure and the degrees from these universities will
have a lower value in the job market than foreign universities. The syllabi are obsolete;
there is a lack of multidisciplinary courses, teachers’ apathy, excessive examination
orientation, poor infrastructure, little research to speak of, bureaucratic meddling, etc.
These maladies have been identified by a series of education commissions as the ills that
plague the system. There is a huge gap between the demand and supply side of higher
education in a globalized economy. Our higher education system to be revamped and the
institutional promotion should be in accordance with the industry needs and demands.
The gap needs to be bridged through private participation and investment.
India is one of the countries sending large number of students abroad for studying
and thus there is a large flow of foreign exchange outside the country. This can be
prevented if there is commercial presence of world famous institutions in India. On the
other hand, foreign students coming to India is very less when compared to countries like
the US or UK. Indian education should be marketed all over the world and thus it can
make an education hub in the next 10 years. When considering the fact that India is the
second largest provider of higher education in the world, it should be able to exploit the
possible markets all over the world. Some of the Indian institutions like IITs and IIMs
can establish their presence in other countries and take advantage of the liberalisation of
the market.
3.1 Recommendations
• Create a facilitative environment for private higher education.
• Private encouragement in skill creation and industry participation.
• Move away from restrictive entry procedures towards a less cumbersome and
efficient system to create a supply surplus education system.
• Build bodies such as UGC and AICTE into strong accreditation and
comprehensive quality assurance regulators.
• Set adequate minimum appropriate intake to balance cost and revenue streams,
estimated through proper economic modelling.

30
• Help deserving students unable to afford education through scholarships and
grants. Alternatively, develop credit market for soft educational loans.
• Grant appropriate autonomy to continuously evolve curriculum, introduce new
courses and upgrade existing courses.
• Give incentives for investments in higher education through tax holidays and
other means.
• Develop appropriate entry and regulatory framework to encourage entry of good
quality foreign institutions.
• Encourage foreign students to come to India by providing information and
publicity and make India an educational hub.
• India may commit for all modes of trade in higher education, provided it should
undertake massive restructuring of Indian higher education institutions.
• India may include specific proposals to other countries to commit in the areas of
commercial presence of Indian institutions.
• The inclusion of teachers and researchers may be included under mode 4 of the
GATS with the increasing demand for Indian teachers at the secondary and higher
education level.
• India should develop a strong communication and technology network for Cross-
border supply of education through e-learning method. This can be implemented
through the well-known open universities like IGNOU and other 9 open
universities.
• There should be unification of regulators and regulations in the country and to set
up a “National Education Regulatory Authority” for this purpose.
• The accreditation and recognition of foreign degrees and professionals can be
entrusted to the proposed “Authority.”
• India should take stock of the domestic situations and try to upgrade the whole
education system especially the higher education sector to compete in the
international level.
• Provide adequate financial facilities to Universities that are already identified by
the government with national importance.
• A clear policy for private education sector in the country is a necessity. So far
various states and central government have different policies and the judiciary
intervened number of times to interpret the same.
• Undertake innovative ideas like Education Zones as recommended by the UGC.
• Develop integrity and responsibility as institutions of higher learning and follow
an ethical code of conduct for reasonable, not super, profits.
• Encourage competitive forces among private education providers to lower prices
and raise quality.

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• Promote equity by ensuring diversity management for all sections of society
including SC/ST, women, disabled, and disadvantaged and economically weaker
students.
• Work with central and state governments for contributing to policy.

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