India's million-dollar education questionNEW DELHI - The question of opening higher and elementary education to foreign investment has divided the Indian government, with the Commerce Ministry, which is in favor, at loggerheads with the Human Resources Development (HRD) Ministry.
For political reasons, the government appears keen to offset the cost of reserving places in higher education for "backward caste" students (US$5.4 billion for infrastructure upgrading) by creating more options for general candidates.
The figures presented by the Commerce Ministry look good. The global trade in higher education stands at $30 billion, with Indian students spending up to $4 billion annually on overseas higher education.
Indians and Chinese account for almost 20% of international students, of whom just 6% are Indian, but that ratio is likely to increase rapidly.
Worldwide, the United States, the United Kingdom, Canada, New Zealand and Australia are the primary providers of education, while India, China, the Philippines and Indonesia are the main consumers.
Commerce Minister Kamal Nath and his officials have been arguing in favor of allowing foreign universities - such as Harvard, Yale, the Massachusetts Institute of Technology (MIT), Stanford, and the London School of Economics - to open campuses in India, thus establishing inexpensive (because of competition from Indian institutes) but excellent educational institutions.
Most of these institutions have already declared their interest in setting up campuses in India. Denmark-based Egmont Imaginations has already submitted a proposal to the Indian government to set up 200 playschools.
India allowed 100% foreign direct investment (FDI) in education in 2001, but tough entry regulations and government control have resulted in a poor response. Prime Minister Manmohan Singh has been pushing for more relaxed FDI regulations, with telecom, insurance and food processing already opened up, and changes are occurring in the retail sector as well.
In a discussion paper, "Higher Education in India and General Agreement on Trade and Services (GATS): An Opportunity", the Commerce Ministry has proposed a separate regulatory framework for private education providers, both domestic and foreign.
The ministry is also setting the stage for the ongoing services negotiations at the World Trade Organization (WTO) to promote "Trade in Education Services".
The paper, released this week, says that while India is endowed with a large and growing base of skilled professionals (21.4 million graduate workers in 2000), their quality leaves much to be desired. Only 25% of Indian engineers, 15% of its finance and accounting professionals and 10% of Indians with general degrees are fit to work for multinational companies.
The paper argues that enrolment in India's higher-education system (11%) does not compare favorably with other Asian countries - the Philippines (31%), Thailand (19%), Malaysia (27%) and China (13%). India also has one of the lowest public expenditures on higher education per student ($406), which is well below China ($2,728), Brazil ($3,986), Indonesia ($666) and Malaysia ($625).
An infusion of international capital and expertise could go a long way in overhauling the country's education system, just as Indian industry has become more competitive with the arrival of foreign brands - mobile telephones, clothing, computers, airlines and banks.
HRD Minister Arjun Singh opposes the concept on the grounds that the move would be against the national interest, arguing that few other countries are pushing for FDI in education under the WTO agreements.
Others, however, argue that many foreign universities in India have tie-ups that are not recognized in their countries of origin and award degrees of lower value than those awarded by Indian institutions, hence there is a need for regulation and monitoring. The left-wing parties at the federal level oppose any liberalizing economic moves.
Two conflicting opinions on the subject reflect the nature of the conflict.
Commenting in the The Economic Times, Communist Party of India (Marxist) leader Nilotpal Basu wrote: "Entry of FDI as a solution tends to treat the problem of higher education merely as a financial question. It also completely throws the existing system into complete confusion. It'll undermine the exercise of regulatory control to ensure that FDI-driven institutions remain true to the national objectives that the present higher-education system pursues.'
On the other hand, S C Tripathi, former secretary to the Indian government, said: "We need to remove the stipulation of 'non-profit' nature from institutions of higher, technical and vocational education to invite more and more investment, both domestic and foreign. We may invite 100% FDI in these sectors under a suitable regulatory framework that ensures quality and standards in curriculum, teachers and assessment systems.'
Perhaps India needs to look to the US, which continues to pump billions of dollars into education despite already having one of the finest systems in the world.
There is an attempt being made to change with the times. US President George W Bush is pushing for an international exchange of students to promote cross-cultural interaction. Many business schools in the US have begun to bring groups of students to India.
Recently, a team from California-based Stanford visited software giants Infosys and Wipro. Kellogg School of Management, Northwestern University, has a program called GIM (Global Initiatives Management) and is looking at offshore outsourcing as a subject of study. Schools such as Wharton, Stern, MIT Sloan, and the Boston University School of Management are also studying India to develop an understanding of offshore sourcing. And the US is not alone; Wipro Technologies has played host to a team of students from the Royal Institute of Stockholm and the Stockholm School of Economics.
This year at a summit on international education, US Secretary of State Condoleezza Rice said her country has "never been more eager" to welcome foreign students to its shores and to send more Americans to study abroad. "As the global center of gravity shifts from West to East, and as regions like the broader Middle East struggle to embrace democratic reform, American students must be at the forefront of our engagement with countries like China and India, Iraq and Afghanistan," she said.
In March, during his visit to India, Bush spoke to Indian management students in Hyderabad and said personal experiences of life in the US will help them overcome misperceptions. Bush said making sure US colleges and universities are open and accessible is "one of the most important things" on the US agenda.
With the president himself doing so much to sell US universities, it is no wonder that the US economy earns more than $12 billion from foreign students annually.
The FDI-in-education debate in India is ongoing, and a final decision by the cabinet will likely be three to six months away. It could still go either way.
Siddharth Srivastava is a New Delhi-based journalist.