FDI in Higher Education: Understanding The Pros And Cons

Posted on December 8, 2011 in Education

By Ritika Chawla:

Higher education in India has lagged behind due to a variety of reasons. According to statistics of 2003-04, hardly 7-8% of the population is enrolled in the institutes of higher education in the country. Moreover, public expenditure on higher education is just 0.37% of the total GDP. Statistics also show that there has been a 28% decline in expenditure per student in just 12 years!

Higher education has suffered from both quantitative and qualitative constraints. Given the population that we have, the number of institutes for higher studies is highly inadequate. This has caused a large number of Indian students to look abroad for their higher studies. In fact, India is one of the largest importer of education at present. In 2004-05 US had 80,466 students from India, higher than those from any other country. Along with huge outflow of money capital, this also leads to a drain of human capital.

Given this backdrop, the education ministry came up with the proposal of 100% foreign direct investment (FDI) in higher education in the country, in 2007. This would then allow foreign universities to set up their campuses in India. Since then this topic has been hotly debated by academicians.

Arguments for the proposal

  • There is a shortage of funds in higher education sector. And there are not many ways in which this investment in this sector can be increased domestically.
  • Since a large number of students go abroad for their higher education, it is sensible to allow foreign universities to set up their campuses here, in India. This would help in arresting the outflow of monetary and human capital.
  • Further, foreign higher educational institutes would create competition with the local institutes making them internationally competitive.
  • Also FDI in education would create new institutes and infrastructure and generate employment.

Arguments against the proposal

  • FDI in any field does not have an attached objective of fulfilling social agenda of the welfare state. It is guided by profit and market. This would result in commoditization of education.
  • As per past observations, most foreign institutes invest in technical courses which market needs rather than in quality education and research which is important for creating and developing human resource.
  • It has also been observed that only 2nd and 3rd tier universities are interested in setting up their campuses in the country.

Conclusion/ Solution:

There is thus an urgent need to address the deficiencies facing our higher education sector. However, one sided response to it won’t solve the problem. The best option is the middle path. Government should allow foreign universities to invest in education sector but under strict regulation. It should shortlist the preferred universities for investment and then invite them to set campus in India. Low grade universities should not be allowed entry in the country. Moreover government should provide incentives to foreign universities to setup institutes in areas of research and academics, which is much needed in the country. Thus government needs to act with strictness and discretion in development of higher education.