Trickle Down in Higher Education, Unlike in Economics, Does Work
Prof. Ranjit Goswami, Director, RK University

Guest Author’ Profile:-

Prof. Ranjit Goswami is the Director of School of Management at RK University. Prior to joining RKU, he was a faculty member with Indian Institute of Foreign Trade, New Delhi for five years. He also has corporate experience of more than 11 years in senior managerial positions in reputed companies. Among his leading corporate experiences are the roles of Management Consultant with Siemens Information Systems Ltd, and Associate Director Position with eBay. He has also been involved in various managerial roles, from junior management to senior management, with leading business houses of India, like Tata, Reliance, Essar, etc. Ranjit has obtained his B.Tech degree in Chemical Engineering from IIT-Kharagpur, MBA from IIT-Bombay and PhD from IIT-Kharagpur. He has published award-winning management cases. He has authored several International Journal Papers, and his works have been cited by academicians and policy-makers alike. He has also authored more than 200 articles and a book. He had also been a visiting faculty to IIT Kharagpur, and IFM Tanzania in past.


A lot is said on quality of Higher Education globally. It is more so in developing nations like India, where quantity, as measured through Gross Enrollment Ratio (GER), remains one of the lowest in the world, at around 15%, compared to around 30% of China, or the world average.

Surprisingly, India, a severe infrastructure-deficit, and comparatively poor nation during the couple of decades of reform, has landed in a unique place that remains unparalleled in richer nations too. Today, around 80% of India’s Higher Education and Healthcare is provided by private agencies, without any aid whatsoever from the Government. Interestingly, both education and healthcare belong to soft-infrastructure category. Forget about aid, both higher education and healthcare service providers, operating in private domain and taking care of the 80% of the nation’s demand of 1.21 billion people, need to deposit various fees to regulatory bodies, to get a license to operate. The difference between higher education and healthcare is, higher education barring MBBS remains oversupplied whereas MBBS is tremendously undersupplied. In terms of employment prospect too, in spite of lower number of GER and a huge shortfall of both qualified medical practitioners and affordable healthcare professionals, both face enormous employment challenges in a struggling and slowing economy.

Essentially it means, Government has washed its hands of from the state responsibilities in both the higher education and the healthcare, and looks at both as more of a revenue opportunity by allowing private players to fill up the huge gap. The more number of higher educational institutes are permitted, the more is the fees earned by AICTE, an autonomous body that regulates most of the professional courses from Engineering to Management, and also acts as a revenue stream for the affiliating state-owned university as most of these private institutes, without the status of the private universities and also known as Self Finance Institutes (SFIs) operate as an affiliated college under a state university. Anna University, in the state of Tamil Nadu, for example, has 600+ affiliating colleges, catering to hundreds of thousands of students in engineering, MBAs or in IT courses. On an average, most state affiliating universities have more than hundreds of affiliating colleges, and thereby India has the distinct position of having highest number of Higher Educational Institutes in the world.

A simple arithmetic on the sustainability of these affiliated colleges, most of which are private, will do. An MBA in most of the AICTE approved affiliated colleges typically costs the student a tuition fee of Rs. 1 lakh to Rs. 1.5 lakh (≈ $2000) over two-years, where there is strict state level regulation of fees, seats availability, and a centralized admission process is followed on filling up the same seats. Until couple of years ago, management (trust managing the Self Finance Institute (SFI)) could earn little more, that is until when demand was more than supply, over the management quota of the seats. However, over the last couple of years, supply is more than demand due to an indiscriminate expansion of capacity in private space – and seats now remain vacant. Moreover, a self-finance institute needs to maintain stipulated student : faculty at the ratio of 15:1 (or 10:1 in technical areas), pay them a salary to attract the better talents when quality faculty is on the verge of becoming an endangered species in India,  have global standard library and IT facilities, along with other necessary infrastructure too.

Needless to say, the tuition fee barely covers the salary of a faculty member alone, at stipulated student : faculty ratio. When an institute fails to get the allotted number of students by regulators, or state agencies fail to fill-up the seats through centralized admission, the tuition fees can’t even pay for the salary of faculties.

Effectively, it means that it has no business model as one can never recover even the bare minimum operational expenses.

And when there is no sustainable business model even on the non-profit basis, as higher education in India is as per regulation, it only means that the spurious elements mostly get into it, thereby making life of a few serious private players in education difficult. Often, there is indirect help from Government in bailing out troubling private sector companies in non-education sectors, where protecting stakeholders like employees’ interests and debtors’ interests are of prime importance to the Government. But when an educational institute fails, without any debt to any banks, students and faculties get affected; and Government is not worried. In India, the writing is now on the wall now – many educational institutes have been facing the consequences of operational survival. Only exception is, it would not hit media headlines; nor would it get a comment from the Prime Minister. And no FDI in education or even allowing reputed global universities to set-up campuses in a liberalized environment are being discussed. Nor would it look at the unutilized funds of higher education being utilized in an effective manner to ensure quality education reaches these 80% of young Indians pursuing their academic ambitions in several of these private universities. Although several such recommendations have been made for level playing field and extending financial support system to faculties from MHRD, no concrete action has yet been seen

An MBA, in most IIMs, the premium Government institutes for Management in India comparatively costs anywhere between Rs. 10 lakh+ (≈ $20,000) in tuition fees alone. And capex/student in IIMs is much higher than any of the SFIs, where the management needs to pay for it. In IIMs and IITs, Capital expenditure of infrastructure is/was provided by the Government, in its early years of operations, or even now.

The combined costs (nation + student), for each graduate from IIMs/IITs, effectively come to be a minimum ten times more than the costs to the student graduating from most of the private universities and SFIs, who now produce nearly 80% of India’s engineers and MBAs. There is a natural tendency to examine the affairs in these private institutes with a jaundiced eye, which partly is justified, because of obvious short-term commercial reasons many sensed in education space in its early years. Even when one compares, the not so premium state government universities producing engineers and MBAs, and look at their costs incurred versus the number of students produced, per unit cost for them is likely to be many times higher than the private colleges. In terms of quality of students, the IITs/IIMs/NITs/State Colleges get the better part, because of infrastructure, reputation, quality of faculties, and costs.

The non-aided higher educational institutes largely cater to the lower 80% of the students, that too at a cost of a fraction of that at IITs/IIMs/State Colleges. An emphasis is to be noted here on this 80% of the number of students pursuing higher education in India pursues same now in these Private Universities or in the SFIs. Given the above set of facts, what should one expect about the quality of engineers/MBAs coming out of these unaided private colleges? Therefore, it at all is not surprising that study after study finds that only 21% of MBAs are employable, or 25% of engineers are employable whereas 29% are MBAs actually are employed.

One must congratulate the grit and determination of few of the students, and that of the faculties in such unaided colleges, who, in spite of all adversities, still do well. If a complex measurement system over input quality of students, costs incurred during program and output quality of student is measured with common scale; the private players may come up as the better performing ones in spite of all the odds, and thereby be more effective than many of the so-called state owned players, in terms of value addition in quality of student/unit cost. Value addition is defined as the difference between (the average output qualities of the students after the program – the average input qualities of same students in the program).

India’s neo-liberal economists, after having their learning curves with the Washington-consensus reform process in India, have lately started admitting that the trickledown effect, as such does not work in a nation like India, where poverty still remains high, unlike that in China now. However, as an academician, there is no denying that trickledown effect in higher education always works. If you want to set the quality of your engineers, MBAs, and all graduates/postgraduates high, first thing to set right is to have right pool of faculties. But in India, it becomes a chicken and egg story as we do not have adequate number of good faculties. And even in most of the Government policies, faculties are a forgotten link as the focus is more on hard infrastructure (like land/building/library/number of computers, etc.) than on soft infrastructure, which primarily is the quality of faculty. Point is, good soft infrastructure, in the age of Internet and information-age, can make up for the absence of other hard infrastructures; however, hard infrastructure in the absence of a good faculty is not only costlier, but useless too as it normally leads to catastrophic failure. An excellent Parliament building is neither necessary nor sufficient for excellent parliamentary debates or for excellent democratic governance; what is necessary and sufficient are quality of Parliamentarians who can make whatever best use the Parliament offers. Similarly in all the policy-making and media debate, one obvious and vital piece of the puzzle that hasn’t been figured into the equation of quality of education from primary levels (plight of thousands of para-teachers) to higher education (contract faculties, and often exploited ones) in India is on quality of faculty, and ensuring work remunerations and conditions (motivational and hygiene factors) attract average talent, if not the best.

To produce adequate number of faculties, the government policies have been to produce a large number of PhDs. Today, the same new generation private universities have taken up this task again, probably more enthusiastically, sensing both an economic opportunity as well as a market demand. But when the existing set-up and infrastructure do not have adequate number of good quality faculties, as academic guides having active research focus, having academic supervisors of quality to these PhD scholars become another bottleneck. Government policies here again have followed democratic practice – a faculty, irrespective of being a good or bad researcher himself/herself, can have 8 PhD students. Unfortunately, one may not find all faculties with active research focus having 8 research students, whereas many faculties from not so reputed institutes or research background may have 8 students. This has also resulted in mainstream academic media focusing on absolute dilution of academic degrees like that of the PhD too.

Unfortunately, in most cases, the student and the guide are not in regular touch. Following an assembly line with no value addition, missing vitally on how to be an independent researcher as the focus of PhD essentially is, after a few routine years from registration, the PhD is granted. Although statistics may not be available today, it may not be wrong to state that a large number of PhDs in India are pursuing their PhDs on the distant education mode at present, both from state-owned institutes as well as from Private Universities. And the scholars fund their own PhDs 100%.

My argument here is, irrespective of the bottleneck with lack of faculties and PhDs; all institutes should have and must have highest level of quality control with our PhD students. It is assumed that a significant part of these PhDs will come back and join academics. If the quality control with the PhD students fails systematically; the quality control with our higher education, secondary education and primary education fails for generations – because all of the rest are linked directly with the product quality of the PhDs, and essentially are byproducts of it. This has been a vicious cycle of Indian education so far. An academician having gone through the academic rigor during his/her PhD produces many other good PhDs, and many more master-level and graduate students – who, in turn, are again engaged in teaching secondary and primary level students, or in other economic activities.

The cost of producing a PhD in any of the IITs and IIMs, or in state-owned universities is again many times more than that of the cost of producing a PhD in the Private Universities. There as such is no incentive given to the scholars pursuing their PhDs in Private Universities, who in many cases may have qualified national level eligibility tests (NET or others, as applicable), and have been pursuing PhD in Private Universities. The discrimination faced by Private Universities is everywhere for students and faculties, and it simply does not provide a level playing field in the space of higher education, in spite of these private institutes catering to 80% of the national demand.

Indian policy-makers have been driven myopic by the global cult of GDP numbers alone, and they extend this in education also – with focusing on numbers alone – be it numbers like enrollment (GER), or that of the number of PhDs, in an imaginary competition with China. They have wrongly tried to apply trickledown theory in national economy to have inclusive growth to improve the lifestyle of the underprivileged in India, and have vastly failed. Had they applied this in higher education, by following China where China has been nurturing a few universities with unlimited resources to bring them at par with the best universities of the west, had India focused on quality of the PhDs rather than quantity of the PhDs or GER alone; India could have been better placed in Higher Education compared to its lackluster present performance.

And it means treating the Private Universities with equal level playing field as that of the state owned universities. Funding higher education with tax-payers’ money essentially is an outcome of the debate that higher education is a public good. Now, if public good is produced by private sector, they should have equal right to the same funds. A public good does not necessarily become a private good if it gets produced by private sector. Public and private companies in fertilizer, power, infrastructure sector get an equal playing field in subsidies here. Only exceptions are Oil Marketing Companies (OMCs), and that’s why private OMCs do not sell subsidized petro-products in India. Other apparent exception may be healthcare, but here Government does not regulate the fees, nor other strategic or operational business decisions. 

Examining quality alone, without looking at the costs the different categories of the institutes of the nation incur in producing its graduates, post-graduates and doctorate students is stupid. One can’t compare a Tata Nano with a BMW – although both are commercial four wheelers that can be found on Indian roads, providing same basic need-satisfaction with different levels of quality features. Unfortunately, Government’s step-motherly approach in treating private players in higher education with suspicion, not allowing reputed players/foreign university to enter the space as it applies to other sectors of economy where government-owned companies and private players compete under same rules, having excessive regulation only for the private players that throttles the sector from progressive growth – all augur badly for the next generation of teachers and students alike.

And it affects 80% of the students pursuing higher education now, and that number has been rapidly growing. In banking, power, and mining – nowhere one sees 80% of the contribution coming from private players in Indian economy, although private players with less economic capacity there significantly influence government policies through various organized lobbies. Because of pressure from private investors and lobbies in these sectors, government is found to favor private players through backdoor policy-manipulations in these non-educational sectors. However, in higher education, in spite of producing 80% of nation’s output, private players are treated in a grossly unfavorable manner. Educational institutes of private sector are treated differently from their state-owned counter-parts, where regulations largely apply only to these SFIs or the private universities, and the regulations often lack clarity due to multiple regulators from central ones to state level ones.

If one still remains skeptical, it would be nice to see if the best of the policy-makers from the MHRD, UGC, AICTE, State Regulatory Bodies can set-up an SFI/private university, abiding by all the rules and directions of these various bodies, and produce quality end products, on a non-profit basis, but remaining commercially sustainable – meaning being able to recover its operational costs, and invest further surplus in additional necessary infrastructure for the future. If they can’t, even on paper, they should have no right to make policies that determine quality of higher education that is received by 80% of Indian youth pursuing higher education, the students themselves. Unlike the trickledown effect of the economy, in higher education, it should be all about quality, and it indeed trickles down from higher quality of PhDs to higher quality in primary education. Once you get the process right, scaling up the number is not the challenge. And as agents of this trickledown effect in higher education, where private universities are today engaged in all activities as any state-owned universities have been for decades, let there be an equal playing field – in terms of having an academic freedom to an equal share of the aid in the form of tax-payers money.

As it has been observed in many other areas of economy, with equal playing fields and transparent policies, over a period of time private sector players in education is likely to prove that they are more efficient, productive and quality-focused than most state-owned universities. If they are not, they will meet their own fate, as would any organization in a competitive market, which must apply to state-owned universities also.

(This is an edited version of the article, “Private Universities in India need a level playing field”, first published by the University World News.)

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