Universities of India 2008
  
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Introduction

India has a fairly large and diversified education system. Its billion-plus population consists of a higher proportion of children and young individuals, especially in the age group of 6-24 years, which is the most prospective age group in terms of academic inclinations. This age group accounts for more than one-third of the India’s population. According to the National Knowledge Commission, for the first time in this decade, the total number of illiterates decreased from 329 million to 304 million. The literacy rate also increased from 18.3% in 1951 to 67.3% in 2004, as per HRD statistics. The National Literacy Mission aims at achieving 85% literacy at the end of the Eleventh 5-year plan (2007-2012). In order to achieve higher literacy rates, the government has been initiating programmes such as the Sarva Shiksha Abhiyan, which aims at achieving universal elementary education of satisfactory quality by 2010. Furthermore, the development of an Educational Development Index (EDI) for elementary education is perceived as a significant step towards imparting quality education. The country’s present education system comprises elementary (primary: class I – V and upper primary: classes VI – VIII), secondary (high school: class IX – XII) and higher / tertiary education (post-class XII), which consists of undergraduate, post graduate and professional degree and diploma courses.

Steady growth in overall student enrolment

Higher education in India has scaled up gradually from 20 universities and 500 colleges at the time of independence to 416 universities and 20,677 colleges (including 2,166 women’s colleges) currently. These comprise of 251 state universities, 24 central universities, 103 deemed universities, 5 institutions established under state legislations and 33 institutes of national importance established by central legislation. At the start of the academic year 2007-08, the total number of students enrolled for higher education stood at 11.6 million; of which 12.94% were enrolled in university departments and 87.06% in affiliated colleges. More than 80% of the students are enrolled in three faculties of arts, science and commerce/management whereas the rest are enrolled in professional courses with the highest percentage in engineering and technology followed by medical sciences. It is interesting to note that in India, where agriculture and allied constituents play a critical role in economic development, student enrolment in agricultural courses accounts for around only 0.5%.

Enrolment of female students grew phenomenally from less than 10% of total enrolment during independence to around 40% in 2005-06. Likewise, the number of women colleges also increased in the last decade from 1,146 to 1,902 in 2005-06. The faculty of arts accounted for more than 50% of the total female student enrolments. Kerala, Goa and Punjab were the three top states in terms of female student enrolment and their respective female student enrolments in the total enrolments were 61%, 59.2%, and 51.7%.

India has the largest number of academic institutions in the world in terms of higher education and is the third in the world in terms of enrolment, after China and the US. However, only 7% in the age group of 18-24 enrol for higher education in India and this is only one-half of Asia’s average. On a brighter note, however, enrolments have been increasing steadily in higher education in the past 2 decades from 3.4 million in 1984-85 to 11.03 million in 2005-06. In addition to a medium of livelihood, higher education is also now regarded as an instrument of infrastructure for social and economic change. Fundamental policy changes at the grassroots level in issues pertaining to curriculum, infrastructure, governance, and funding are taking place to make India’s higher education a socially and economically viable option in a competitive world. Factors such as e-learning, distance education, public private partnerships coupled with international collaborations and exchange programmes are changing the face of higher education in India. The higher education system in India has changed its unidirectional approach and is slowly transitioning into producing professionals with better quality education. Traditional programmes are adopting innovative measures to encourage enrolment and institutes are promoting researchbased practices. Efforts are being made to move from the theoretical base to a more ‘real-world’ and career-oriented approach. On the flip side, India’s education system continues to grapple with deficiencies such as a rigid system, lack of funding, inadequate infrastructure, demandsupply gaps, urban-rural divide, and scarcity of skilled manpower.

Economic indicators favour general education; rural-urban disparities in higher education

Favourable demographic and income trends in terms of salaries, savings, and expenditure are expected to act as catalysts in boosting higher education. During 2000-07, household sector savings and per capita income grew at a CAGR of by 13% and 9%, respectively, and the gross national disposable income grew by around 11%. Likewise, consumer spending patterns in pursuing education has also magnified in the last couple of years as people’s willingness to invest in education has increased to a large scale. Education is now perceived as a safe, long-term investment rather than a means to sustain oneself. The 300-million-strong middle class consumer base considers education as a part of their basic necessities for securing their children’s future. According to the Central Statistical Organisation (CSO) and the Ministry of Statistics and Programme Implementation, the total private final consumption expenditure (at current prices) in the domestic market grew at a CAGR of 9% during 1999-2000 to 2006-07. During the same time, the private final consumption expenditure (at current prices) on education grew at a CAGR of 13%. The share on educational activities as a part of the total private final consumption expenditure rose from 1.9% in 1999-2000 to 2.4% in 2006-07.

At a macro level, the direct relation between education spending and economic growth reveals a healthy outlook for India’s education system but at a micro level it reveals disparities in levels of acquiring higher education between urban and rural areas. According to the Central Advisory Board of Education’s (CABE) report on financing of higher and technical education released in 2005, population with higher education is directly proportionate to household economic status in rural as well as urban areas. In the bottom quintile (monthly per capita consumption expenditure quintile), only 1% of the population has higher education and the ratio steadily climbs to above 10% in the richest quintile. The disparity between rural and urban areas is highlighted when this ratio between the top and bottom quintiles increases by 7% in rural areas and 15% in urban areas. Furthermore, among every 1,000 persons, urban regions have around 11.0% college graduates or above, whereas rural areas have only 1.6%.

State governments are the backbone of funding in higher education

Higher education system in India is fairly large and complex. Within the system, the Central government is primarily involved in policy decisions and state governments are engaged in funding activities. The central government’s role involves establishment, grants and oversight of institutes of higher education and it discharges its activities through UGC and other professional councils. State governments, which play a major role in funding of institutes through operating as well as capital grants, carry out most functions through the concerned government department or directorate of the respective states. The role of the Central government in funding institutes of higher education is quiet limited and uneven. With a handful of central institutions catering to around 2% of the students getting nearly 85% of central allocation for higher education, state governments end up being responsible for providing bulk of public funding. According to the report of the CABE Committee on financing of higher and technical education, state governments account for more than three-fourths of the total government expenditure on higher education. However, in case of technical education, the Union and state governments share the financial responsibility almost equally.

In the late eighties, state governments grappled with issues related to unprecedented demand for quality higher education for a growing population. Over the years, different states tried various methods for fulfilling this requirement; for instance, they allowed entry of private players and tried out different models of financing based on fees and merit. Some states also drew flak from some quarters in the public who felt the administration was diluting the quality of education by bringing in the commercial aspect in an otherwise social sector. In response to these adverse public reactions, Andhra Pradesh, Karnataka, and Maharashtra enacted laws regulating admission and prohibiting capitation fee in private unaided professional institutions in 1983, 1984, and 1987, respectively, and thus, opened doors for judicial intervention. Presently, state governments are struggling with the ever-increasing financial burden on the one hand and the need to maintain quality of education on the other.

Inadequate financial support for higher education but Eleventh 5-year plan arises hope

Higher education is being regarded as an important constituent of specialised human capital. Investment returns to total factor productivity in higher education are considered to be quite high; however, escalating costs and dwindling public budgetary resources are affecting overall education in terms of quality, development, and infrastructure. According to the National Knowledge Commission’s note on higher education, at 0.7% of GDP the current support for higher education is simply inadequate. It is estimated that government support for higher education should form at least 1.5% of GDP out of a total of 6.0% allocated to the education sector. According to the draft report of the Working group on higher education of the Planning Commission, public expenditure in elementary education went up four times whereas that for secondary and higher education went up by around three times during 1993-94 to 2004-05. During the same time period, public expenditure per student in higher education, in real terms, declined from Rs 8,961 in 1993-94 to Rs 7,117 in 2003-04.

The 5-year plan allocations direct expansions, improvements, and innovations in the country. Although plan expenditures in education are relatively small as compared to huge non-plan expenditures, they set the direction for future development. The share of higher education in 5-year plan expenditures was as less as 0.7% in the First 5-year plan (1951-56) and gradually reached 1.2% during the Fourth 5-year plan (1969-74), the highest till that point of time; however the expenditures have been on a downswing since then. According to the HRD annual report 2007-08, the Eleventh plan outlay for higher education roughly stands at Rs 850 billion, which is nine times more (at current prices) than the Tenth plan expenditure. The plan outlay also aims at achieving a Gross Enrolment Ratio (GER) of at least 15% by the end of the plan period (2007-2012).

Decline in researcher numbers threatens growth in R&D space

India is host to R&D facilities of the world’s best and largest companies. It is also emerging as a knowledge-based economy that is witnessing rapid growth in R&D operations across domains such as IT, telecom, biotechnology, pharmaceuticals, chemicals, and consumer goods. As an offshoring destination too India is advantageous for not only IT, but also for industrial R&D and medical research. India treats a huge number of foreign patients every year. Indian hospitals are the most sought after medical destination for offshore patients because of the dual advantage they offer of low cost and a large pool of highly-skilled doctors. In the academic arena of research papers, engineering and technology and medical sciences have emerged as forerunners, accounting for nearly 12% and 13%, respectively, of the total research papers. During 1989-2003, the number of research paper submissions grew at CAGR of more than 5.5%.

In spite of gaining recognition as a prominent R&D hub in the global space, India’s total contribution to the world research papers remained at a dismal 2% as per statistics provided by Ministry of Science and Technology in 2003. India faces serious shortages in qualified research personnel in educational institutions, in national laboratories and in industrial R&D units, and to meet this ever-growing demand for research professionals, it needs to spruce up the quality of its higher education institutions. In India, the number of scientists and engineers engaged in R&D is close to 157 per million. On the other hand, countries like Korea have fifty times more and the US and Japan have about thirty times more scientists and engineers. Presently, India produces around 5,000 PhD scholars in science and around 800 in engineering annually. The Prime Minister’s Science Advisory Council has estimated that if India wants to claim the status of being a knowledge-based economic power, it has to produce 5 times more the number of PhD scholars of international standards .

Hiring at a standstill but demand-supply mismatch expected in near future

India has the world’s largest school-age population and hence, access to quality education could drive the innovation, productivity, and development needed to ensure India’s continued economic growth. In spite of a favourable demographic profile in terms of manpower availability, the Indian labour market is facing a talent supply shortage; however, currently, talent shortage and demand-supply mismatch have been overshadowed by the global and domestic downswing and consequent slackening in hiring in all areas. According to the International Monetary Fund estimates, world growth is likely to slow down from 5.0% in 2007 to 2.2% in 2009. At the national level, the GDP growth is estimated to be in the range of 7.5% - 8.0% during 2008-09 with downward pressures. According to Nasscom estimates, India adds 3 million new graduates and diploma holders to its talent pool annually, of which nearly a third is in engineering and sciences. However, only 25% of Indian engineers, 15% of finance and accounting professionals and 10% of Indian professionals with general degrees possess the requisite skill sets needed by corporate India. Thus, once the economy gets back to its feet, demand-supply mismatch and talent shortage are expected to affect it from a medium to long-term perspective.

India is fast-emerging as a global services hub due to its competitiveness in the services sector; with the service sector’s contribution more than 50% of India’s GDP. Projections from all industries show a widening gap between demand and supply of talented professionals. Continued strong economic growth in India since liberalisation has fuelled demand for talented managers across industries and talent shortage has been driving up salaries across industries. In a service-based economy like India, with high demand for specific skills, salary rise has consistently remained in double digits as compared to China. Across the Asia-Pacific region, India has been consistently reporting the highest average salary increases for employees at professional, supervisory and technical levels. The shortage of skilled talent has cascaded to all industries, and in terms of salary hikes, real estate sector had the most crucial labour crunch in 2007, followed by energy, retail, telecommunications, banking-finance, etc.

All these years, India was able to sustain its competitiveness because of its abundant availability of low cost and talented labour; however, with widening skill shortage and consequently rising salaries, other low cost countries are vying to garner a larger share in the global outsourcing pie. If India’s salary levels keep rising vis-à-vis other emerging economies, it may lose significant opportunities due to talented labour shortage – not just in the outsourcing space but also in other areas. Possibly, the largest obstacle for companies, particularly in India, is the shortage of talent supplemented with increasing opportunities leading to external inequity of pay, higher employee turnover, and attrition.

Retention and recruitment of quality faculty should be on the priority radar

The key issue that is plaguing India’s education system is methods to improve quality of education that is delivered. It’s no secret that the quality of teaching is one of the most important determinants of student performance. A country can have the best of policies, infrastructure, curriculum, high enrolment and low drop out rates, passing percentages etc, but the responsibility of imparting quality education ultimately rests on good academicians. A major shortfall Indian education system experiences on this front is inability of institutions of higher learning to attract and retain qualified and trained faculty. D&B’s survey results gave the exact same picture as the teacher-student ratio, which stood at 1:15 in 2006-07, changed to 1:22 in 2007-08. Besides, India is expected to face a continued shortfall in faculties with PhD and Masters degree, which will affect the quality of education. Consequently, the level of education will also continue to fall short of industry expectations.

The government has approved expansions in secondary and higher education, and has proposed to set up eight new IITs, seven IIMs, five Indian Institutes of Science, 16 Central Universities, 14 world class universities, 20 Information technology institutes, 10 new National Institutes of Technology and 1000 polytechnics. The gap between learning through the education system and employers expectations has widened. Attracting and developing high-calibre teachers is one of the solutions of improving the quality of education. The country also needs transparent performance-management systems to ensure that teachers are judged with equity to encourage the intake of skilled individuals in the teaching profession. Monetary compensation is another vital factor to be considered for retention of skilled faculty. The funding problems faced by the universities tend to create wide disparity between the pay levels in the corporate world and the university level, thus, driving away talented teachers. Thus innovative initiatives are required for education planning at faculty recruitment and retention levels.

Education loans emerging as a lucrative business opportunity for banks

Education loans have emerged as a significant business opportunity for banks providing student education loans worth more than Rs 200 billion. Disbursement of education loans has risen from 2% of the total personal loan portfolio in 2005 to almost double in 2008. The education loan portfolio of the banks grew by around 35% in 2007-08 and expected to reach 40% in 2008- 09. Apart from adopting various educational schemes to reach out to students and the rising interest in academics shown by the younger generation, the lower number of non performing assets (NPA) in the education loan segment is acting as a positive factor too.

Education loans are already considered to be a component of the priority sector advances and further growth of this portfolio is expected once Basel II norms are implemented from Mar 2009 for domestic banks. According to the Basel II framework, educational loans would no longer be treated as a part of consumer credit but shall be considered as a component of the regulatory retail portfolio with the risk weight lowered from the current 125% to 75%. Consequently the chances of banks cutting down on the interest rates of these loans seem to increase in the near future.

Hurdles arising due to inability of providing collateral security soon might be a thing of the past if the proposed Higher Education Loan Guarantee Authority (HELGA) scheme for the under privileged students comes through. The scheme intends to facilitate the education loan process by providing collateral security by the Government of India (GOI). At the same time, since more than 70% of the higher education budget is met via state expenditure, this scheme is expected to increase the Centre’s role in higher education areas.

Time to look at private investment as an alternate source of funding

In most universities, plan or investment expenditure is less than 5% of the non-plan or maintenance expenditure such as salaries, pensions, overhead charges etc. Such a small amount of investment proportion is an indication of underinvestment for development of the university. Apart from relying on the traditional methods of government grants, universities have to reorient themselves in terms of financial strategies. Increase in fees is the most easy and common method for additional income. On an average, fees constitute less than 10%, of the total expenditure for universities. Although universities have the right to increase their fees and thus shorten the financial deficit, it seems that majority of them have preferred not to use this instrument as a means of additional income generation. One of the probable reasons for this phenomenon could be the fact that an increase in fees could affect the grant-in-aids supplied to bridge the difference between income and expenditure. Other sources that could lessen the financial burden of the governments could include public private partnerships and attracting more international students.

Private investment is another area to be considered where two-thirds to three-fourths of the seats are in private institutions of engineering, medicine and management institutes but private investment is actually negligible. China has implemented private participation through a national legislation in 2002, and proactively involved the private sector to contribute and invest in higher education. India could follow a similar model. Most times more than 90% of the recurring expenditure of government aided colleges is met through public funds and hence really not helping to ease the financial responsibility of the government. On the other hand self financing colleges which are set up as a result of private enterprise and initiative have their own mode of funding and act as commercial institutions. As per CABE, around 85% of engineering colleges in the country are self financing.

However, conflicting views on this topic prevail where, on one hand, such institutes help to provide education whereas on the other hand unplanned growth without proper regulation and poor quality education leads to mismatch between skilled demand-supply in the labour market. Privatisation without commercialisation seems to be a midway to overcome the challenge. 60% of the primary schools in Kerala, which ranks among the highest literacy rate in the country, are run privately through public funding. Similar models of Public Private Partnership (PPP) can be replicated in higher education too for infusing the required investment through private sector. Provision of tax exemptions for corporate and individual contributions is one more way of attracting private investment into the higher education sector.