Four top industrialists are joining hands to establish a new Indian School of Business in Mohali. What is most interesting is that it would have a specialist healthcare management center,

The business leaders will invest either in their individual capacities or through their companies. The campus will include four centres—for healthcare management, public policy , manufacturing sciences and infrastructure . The healthcare management centre will be named after Max India, public policy centre after the Bharti Group, manufacturing centre after the Hero Group and infrastructure centre after Punj Lloyd.[link]

With corporatization of hospital sector picking up pace, India will need more healthcare managers in future.

Setting the agenda

The need for government regulation of higher education is the subject of an interesting debate between Abi and Ravikiran Rao. Abi calls for changes in the regulatory structure to keep out ”crooks, politicians, and thugs” and facilitate the entry of large philanthropic institutions. Ravikiran’s response is to point to blogs: Without an external regulator, readers are able to differentiate between ”good” and ”bad” blogs as technology permits readers to avoid blogs which they may find uninteresting. Abi points out, quite persuasively, that the example of blogs would not be applicable to higher education: Students cannot sample different institutions and then decide which one may best fit their interests–the opportunity cost is simply too high. 

Before dealing with the larger debate, what also must be clearly understood here is that it is immaterial if the motivation for private investment in higher education is purely profit. It is perfectly possible to subscribe to profit motive and yet deliver high quality of education. Indeed, it is how modern marketplaces function. Market forces as represented by free consumer choices forces producers to deliver high quality products. Otherwise, they risk loss of market share negatively impacting their bottomline. Apart from an ideological belief that education must be treated differently, there is little reason why the same paradigm is inapplicable to higher education. Rather than worrying over motives of education entrepenuers, an appropriate policy response would be to incentivize investment in higher quality by making it a pre-requiste for profit maximization. 

The lack of accountability in the state owned educational facilities and failure to incentivize quality in the private sector are the key failings of India’s education regulators. The state’s stranglehold on higher education has created an artificial shortage leading to an acute supply-demand mismatch. Politicians and bureaucrats who have designed the regulatory structure directly benefit from it. The process of regulating higher education has become entirely politicised; no wonder, most private professional colleges are owned by politicians or well-connected business houses. The poor quality of such educational institutions is used to justify even more government regulation completely missing ignoring the fact that the high entry barriers erected by regulators ostensibly concerned over quality had allowed these institutions to thrive in the first place.  A particularly perverse application of this regulatory power has been the successful move by Arjun Singh led Human Resources Development ministry to prevent the entry of foreign universities in India. Concerns over quality, it must be recognized, have only served as smokescreen to promote monopolies. It has not served the interest of any of the important public policy considerations: Access, quality, and equity.  

As the government it self has recognized, a massive expansion of higher education has become imperative if India has to thrive in the knowledge economy.  The government can no longer be the key driver of this change. The onus of expanding higher education is clearly on the private sector with the state playing the role of a facilitator. Does it mean there is no justification for state regulation of higher education? 

External regulation of a consumer good may be justified in case of information asymmetry.  Quite clearly, such a situation exists in higher education: Prospective consumers–students–don’t know as much about educational facilities as institutions themselves. The institutions have an incentive to restrict the information flow or limit it to a form which benefits them.  More importantly, the opportunities for consumers to correct their mistakes are severely limited; a wrong initial choice may adversely impact a student’s entire carrer and indeed, his life. The limited supply of higher education further restricts the student’s ability to make appropriate decisions. 

Government regulation of higher education seeks to remove some of the uncertainty associated with selecting an education facility by guaranteeing–at least theoretically–a minimum standard of education. Government regulatory bodies like the University Grant Commission(UGC), Medical Council of India(MCI), and All India Council for Technical Education(AICTE) apart guarding the portals of higher education, are  entrusted with the responsibility of ensuring adherence to minimum guidelines by existing institutions. However, as explained above, such regulations are not costless.

Is there a better alternative?

(To be continued) 

A Quick Reality Check

Reality check has criticized the decision of the Indian Institute of Management (A) to raise its tuitions. He calls it an ”outrageous move” and goes as far as to suggest that IIMs should actually decrease their tuition to ”make quality management education accessible to Indians”. This argument has little merit.

First, despite the increase, IIMs are merely recovering the amount they spend on each student. In light of the sixth pay commission recommendations, and in order to compete with other management schools, they need more resources. Inflation has impacted the price of almost every good–why should education be exempt from it?

Reality Check further argues that IIM have repudiated their original agenda–after all, they are ”government aided institution in a developing country.” But that is precisely why this increase is justified. Why should the taxpayer, in a poor developing country, where millions have no access to primary education, fund the expensive education of a few hundred? That they are government owned is immaterial; the correct response in that case would be to free them from stifling government control and force them to generate their own resources. Their dependence on the government funding has only meant constant political interference.

If the argument is that IIMs are benefiting from the non-competitive nature of management education, then the government should be asked to permit entry of more players–especially foreign universities. Let the students decide if IIMs fees are appropriate or not; if they feel the value of education is not worth the cost, the students will choose institutions which offer better value for money. It would illustrative to remember that there has been absolutely no protest in any of the IIMs–perhaps, the students realize that they will recover their investment in a few months.

Admittedly, the question of affordability for students belonging to the poorer sections of the society is an important one. The IIMs have responded to such concerns by increasing the money available for financial aid twenty times and increasing the eligibility criterion for aid from Rs 2L to 6 Lakh. Reality check believes that it is not enough and every student should be guaranteed financial aid with nominal interest rates. Sure, the procedures may require simplification and in case of poor students, the government may guarantee the loans. However, it is not quite clear as to what obligation does the tax payer have of funding the interest bill of IIM students and that too without any means testing at all. An offhand chance that deserving students may be denied financial aid due to extraneous considerations or students may feel ‘’streesed” by the process can not be a justification for a free lunch.

Reality Check has been a tireless critic of government’s reservation policies. Yet, he fails to understand that such political maneuvering would only stop if the government interference in higher education was minimized. Yet, he thinks that the state should actually fund management education! As this blogger has written on the prevailing confusion within middle class India,

The answer strangely enough is paradoxical. At one level, the middle class is deeply suspicious of the government and yet it thinks by closing its eyes, it can eclipse the all pervasive influence of the state. On the other hand, it stills craves for state largesses unable to cut the Gordian knot which ties it to the government.[link]

In a welcome gesture, India’s premier management institute, IIM Ahmadabad, has hiked its tuitions,

The Indian Institute of Management, Ahmedabad (IIM-A) on Saturday decided to effect a sharp hike in fees for its post graduate programme from next year.

The fees for post graduate programme have been increased to Rs 5.50 lakh for the first year and Rs 6 lakh for the second year of the two year post-graduate programme for the batch joining in June 2008.[link]

IIMA is merely following the lead of other IIMs who have all hiked their tuitions in recent months. Considering that placement in high paying jobs is virtually guaranteed for IIM graduates, there can be absolutely no justification for any subsidies. The IIMs must charge the full price for education from every student with loans extended to financially indigent.

Interestingly enough, the move was opposed by the government nominees in the IIMA board of governors. The essential issue here is of autonomy: As long as the educational institutions remain dependent on the government for money, true autonomy is virtually impossible. That the Board of Governors went ahead with its decision despite government opposition is heartening indeed.

Kanpur Medical college is experimenting with distance education,

The students of GSVM Medical college could soon access all the important lectures of the expert professors of AIIMS and Chandigarh PGI in their own college, thanks to distance learning.With country’s medical colleges facing a shortage of teachers, the Central government is planning to connect them through distance learning centre [link]

With medical schools chronically understaffed especially in poorer states, this move is indeed welcome.  

Arjun Singh imposed quotas. Ramadoss threw out Venugopal. What’s the difference?

After nearly year a struggle, the union health minister, Anbumani Ramadoss has finally managed to dislodge the director of the All India Institute of Medical Science, Dr P Venugopal from his post. There is little Ramadoss hasn’t tried in the last one years: media war, arbitrary decisions by the health ministry controlled governing board of the A.I.I.M.S and repeated interference in the functioning of the premier medical school. Finally, in an act of sheer desperation, he bulldozed through a bill in the parliament which retrospectively fixed the retirement age of A.I.I.M.S director at 65. Since, Dr Venugopal had already crossed the age of 65, it is clear that this provision was specifically directed at him.

Who is the real sufferer in this sordid drama? Venugopal’s term would have ended in July 2008; for him it was little more than an ego war with the minister. Ramadoss, having established his authority, can go back to his pet role of playing the patronizing father to India’s youth. It is A.I.I.M.S whose functioning has come to a virtual standstill in the last one year; whose reputation as a center of excellence lies in tatters; and whose institutional autonomy has been compromised irrevocably which has suffered the most damage.

It would be facile to look at this episode as an isolated incident. It is consistent with a larger pattern in which the U.P.A government has repeatedly assaulted some of India’s finest institutions for narrow political goals. Arjun Singh imposed O.B.C quotas with an executive fiat. Worse, the government looking for quick political damage control, unilaterally increased the number of seats by 50% without even bothering to consult those who actually run academic institutions. All concerns about lack of faculty, infrastructural needs e.t.c were simply brushed aside.

Or take the I.I.M admission fiasco. Expecting the Supreme Court to vacate its stay on the O.B.C quota, Arjun Singh’s ministry made the Indian Institute of Management (IIM’s) wait a full month before allowing them to declare their results. It wasn’t only the fate of lakhs of students which was hanging in balance-how can IIM’s ever hope to be truly world class institution when even as basic a function as admission is controlled by its political masters? Arjun Singh is currently a piloting a bill which would take away I.I.M’s financial autonomy making them perpetually dependent on government handouts.

The imposition of quotas implied a larger shift: Academic institutions did not matter. Their existence could be held hostage to political considerations. If they were harmed in the process; if their excellence was compromised–then so be it. Publicly funded need not mean government owned. There is a huge difference between A.I.I.M.S and the ministry of Human Resource Development. This important distinction is increasingly getting blurred.

What is particularly surprising is the almost complete lack of resistance shown by the academic institutions. Instead of guarding their independence, they have meekly acquiesced. The principle that academic institutions should be allow to govern themselves independently without executive interference has been well-accepted the world over. This freedom is zealously guarded -indeed, it is regarded as an essential pre-requisite for their proper functioning. Why have India’s leading academicians failed to protest in the same manner in which they resisted the B.J..P’s government attempts to reduce the fees of I.I.M’s?

It is not merely a lack of sprit. Over the last 60 years, a cabal of academic-politicians has lorded over India’s institutions. Blinkered by ideological considerations, and fattened by government largesse, they have virtually turned into stooges of a particular political ideology repeatedly compromising their institutions for narrow personal gains. Therefore, while they will stoutly resist B.J.P’s government’s attempts to turn N.C.E.R.T into a virtual sangh publication but will never condemn the doings of their own political masters. It is hard, if not impossible, to ever expect the Irfan Habibs, Romila Thapars and the motley group of J.N.U intellectuals to stand up to their political masters.

Modern India does not have a proud record of producing great public institutions. Only few have escaped government clutches and have managed to build a reputation for them selves among the elite of the world. (1)U.P.A government is hell-bent upon reducing them to the status of failed institutions which litter India’s academic graveyard. It is incumbent upon those who have devoted their lives to these institutions to stand up and show some spine. They must be backed by the civil society. It is distressing to note that even academic bloggers have offered no comments on the A.I.I.M.S bill. They surely realize that silence tantamount to endorsement in this case.

One final thought: There is little one expects from India’s academic prime minister. Still, even by Dr Singh’s standards, it is painful to watch how the educationist prime minister has allowed small-time ministers to destroy elite institutions without even a slap on their wrists? Can Dr Manmohan Singh show, for once, that he is genuinely concerned about India’s future?

1. That many of us, including this blogger, believe that higher education shouldn’t be funded by public money is immaterial to the case. As long they are funded by tax-payer’s money, all of us a have a vital interest in ensuring their continued welfare.

With the booming demand for MBAs , increasing number of doctors are enrolling themselves in management schools,

Having admired themselves in surgical gowns, medical students now want to don business suits and lend surgical precision to business strategies. Booming corporate sector and demand for domain specialists has got doctors and medicine graduates smitten by management bug. What was a trickle till now, has turned into a regular phenomenon, according to the Indian Medical Association. As many as 1,000-1 ,500 doctors are enrolling themselves for management programmes each year across the country, IMA says.

While ISB has got 10 doctors in its current flagship programme in management, FMS’ Healthcare Administration has seen the number of seats go up from 15 to 25 in the last two years because of growing demand. “Doctors in the country are taking up management courses to further their careers in a big way and the figure is on the rise,” says IMA Delhi chapter president KK Agarwal.[link]

With the rapid expansion of corporate hospitals, the demand for doctor-managers would only increase. But merely management education is not enough. It is high time universities in India offered doctoral programs in Health Policy and Research. Surely, some of these doctors would be interested in research and in shaping the health policy.

The Manufacturers of One Laptop Per Child (OLPC) which has been rejected by the Indian government have raised their price again,

The vaunted “$100 laptop” that Massachusetts Institute of Technology researchers dreamed up for international schoolchildren is becoming a slightly more distant concept.Leaders of the nonprofit One Laptop Per Child that was spun out of MIT acknowledged Friday that the devices would cost $188 (€136) if mass production, expected to begin this fall, were to start now. The last price the nonprofit had announced was $176 (€127); it described $100 (€72) as a long-term goal.[link]

The OLPC project made no sense even at the low 100$ price considering the abysmal quality of primary education in India. One suspects that the situation may not be entirely different in other developing countries who have been targeted by the OLPC. With constant price jumps, it is questionable if the project is viable anymore. Perhaps, it is time to scrap the entire project and invest the resources in things which would benefit the students more; blackboards for example.

In a very interesting piece, economists Gary Becker and Kevin M Murphy argue that inequality can have a positive effects if it can create an incentive to tackle its root cause: rising payoff of college education.

Why is the earnings gap widening? Because the demand for educated and other skilled persons is growing. That is hardly surprising, given developments in computers and the Internet, advances in biotechnology, and a general shift in economic activity to more edu­cation-intensive sectors, such as finance and professional services…

This brings us to our punch line. Should an increase in earnings inequality due primarily to higher rates of return on education and other skills be considered a favorable rather than an unfavor­able development? We think so. Higher rates of return on capital are a sign of greater productivity in the economy, and that inference is fully applica­ble to human capital as well as to physical capital. The initial impact of higher returns to human cap­ital is wider inequality in earnings (the same as the initial effect of higher returns on physical capital), but that impact becomes more muted and may be reversed over time as young men and women invest more in their human capital.

We conclude that the forces raising earnings inequality in the United States are beneficial to the extent that they reflect higher returns to invest­ments in education and other human capital.(empahsis added) [link]

This is indeed a persuasive argument. Studies have demonstrated that the difference in income between college graduates and others has consistently risen. However, as the Economist blog points out, it also calls for policy measures including increased funding which would ensure that higher education is accessible to all and not just a tiny elite.

What lessons it may hold for India? One, rapid expansion of higher education by facilitating the entry of private sector. Currently, the government measures are designed to restrict higher education to a tiny elite. Second, provision of easy student loans e.t.c so the poor can easily pay for their education. For there can be no doubt: Higher education in a country as poor as India is still a privilege.

While attention is frequently focussed on lack of research in basic sciences, the picture is even more abysmal in case of social sciences. S.l Rao, formerly of the National Council For Applied Economic Research explains why,

Distancing from teaching, spreading a thin layer of good academics over teaching and research institutions, the principle of the lowest common denominator that places mediocrity over merit comprise the work culture in social science institutions.

Teaching and research in the same campus expose students to current work. Researchers can test ideas on raw but good minds. Science education in colleges also suffers from poor laboratory facilities because funds are limited. Those universities that are better equipped suffer because of the growing drain of good scientists to independent research laboratories in India, mostly started by foreign companies, and to overseas facilities. Many scientists pretend in government laboratories to do ‘basic’ work when even applied research is of poor quality and application.

In the social sciences, private corporate research and financial undertakings take away good teachers and researchers too. Most social scientists in India work on sponsored research, not on hypotheses or concepts they have developed. They are poor disseminators of their work and regard popular writing as dumbing down. They depend on government largesse, and make no effort to find funding for work that interests them. Most have little connection with public policy formulation arising out of their work. Increasingly, as government freezes its funding, social science research is becoming sponsored research and the attention to basic research has declined. We need to redress the balance by increasing government funding in relation to ‘contract’ funding.

The best social scientists go overseas, or join companies. Because the best students have gone abroad and the teachers are poor scholars, the flood of mediocre graduates and PhDs of very low quality continues. Most PhDs are mediocre, they become teachers, and mediocrity is recycled.[link]

I will make one additional point: the mediocrity in built into the system from the very beginning because of the low status accorded to social sciences in India. Even at the school level, only students with the lowest grades opt for social sciences–with the possible exception of economics. College merely confirms this trend and quite naturally the available pool for academics is quite mediocre. While more government support for basic research may help, the long-term solution would have to await better economic conditions where it is possible to earn a decent living from non-science fields or to be more accurate, non professional courses.