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Why Harvard, Stanford should come to India
Shabana Hussain in New Delhi
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January 18, 2007
Foreign Direct Investment in higher education has been a contentious issue for the last few months, ever since the government announced that it was in the process of formulating a bill to allow FDI in higher education.

While the commerce ministry and industry bodies favour the proposal of FDI in the education sector, the human resource development ministry has been opposing the move.

In early 2006, the commerce ministry had come out with a 24-page document supporting FDI in the sector.

The argument of the ministry was that India incurred an annual outgo of $4 billion on education and this amount could be saved by allowing foreign institutions to set up base in India. The HRD ministry has, however, been reluctant in allowing FDI in the education sector.

The Foreign Education Providers (Regulation) Bill, if approved by the Cabinet, and made a law, will allow foreign universities to set up campuses in India. The Bill will also grant deemed university status to foreign universities.

Foreign universities will, however, have to set up campuses on their own and they will not be allowed to adopt the franchisee route. Also, the universities will have to secure the prior approval of the University Grants Commission.

Industry bodies like the Confederation of Indian Industry have requested the government to permit FDI in the education sector to create a team of skilled manpower for meeting the requirements of the rapidly growing economy.

Excessive regulation in the education system has led to a rigid and non-flexible course curriculum, which hampers development of skill sets, the chambers contend. India has one of the largest numbers of universities (311) and colleges (16,000). However, just about 3 million are graduating each year out of 120 million young people in the age group of 17-22 years.

Higher education is accessible to just 1 per cent of the graduates. On the other hand, about 14 per cent of the total students in the US are from India.

According to CII, this is an indicator of the huge supply constraint for quality education in the country. US has also been asking India to relax the norms for FDI to allow American universities to set up base in India.

At present, around 81,000 Indian students, which is the largest from any country, are pursuing higher education in the US.

American universities like Stanford, Harvard and Wharton and the European Business School INSEAD have all shown interest in setting up campuses in India. The Harvard Business School, Stanford and INSEAD are looking at setting up research centres in India.


Beyond MBA
An MBA is not the only option any more for students. With the boom in the economy and markets, non-MBA programmes, which include courses in chartered accountancy, financial planning and financial markets have found many takers.

Placement for these courses is almost 100 per cent with the increase in demand for trained professionals in the financial sector.

For instance, the demand for chartered accountants in the corporate world has shot up with stringent income tax laws, which require compulsory maintenance of accounts by specified categories of taxpayers. It is the same story for courses in stock markets, commodity training and financial planning.

The average salary for the passouts of these courses have shot up by 50 per cent from Rs 2 lakh per annum to up to Rs 4 lakh. In the Institute of Chartered Accountants of India (ICAI), the highest salary that was offered to students in 2006 was Rs 12 lakh.

ICAI churned out 8,000 CAs in 2006, of which 84 per cent have been placed in corporates. This is very unusual considering the fact that CAs, due to lack of lucrative job opportunities, usually start their own independent practice.

Money call
The percentage of GDP spent on higher education in India has remained stagnant in the last two years at 0.37 per cent. This is much below the GDP spend in the US at 1.41 per cent, in the UK at 1.07 per cent and 0.5 per cent in China.

According to a recent study by industry chamber Assocham, Japan and Korea also spend less than 0.40 per cent of their GDP on higher education but 80 per cent of their students seek higher education through non-subsidised private educational institutions.

In India, higher education is highly subsidised and this is one of the reasons that its quality of higher education is often questioned overseas, according to Assocham.

While India attracts only 15,000 to 18,000 foreign students for higher education every year, China hosts more than 1,40,000 foreign students. Singapore and Malaysia attract over 70,000 and 30,000 foreign students respectively for their higher education each year.

As a result of their higher GDP spending on higher education, Singapore, Malaysia and China have emerged as global players in the cross-border higher education, thereby attracting many reputed universities  and hosting a large pool of globally mobile students.

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