Ease of Doing Business in Education sector in India

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Pooja Sundaresh[1]

Ever since the World Bank came out with it’s ‘Ease of Doing Business’ Index, several low ranked countries were left red faced. The index positioned countries based on several parameters such as  the ease in setting up a business, time taken to obtain permits and licenses, and the procedures followed for closure of a business, to name a few. Businesses here widely covered commercial activities across all the sectors such as Manufacturing and Engineering, Retail, Information Technology, Infrastructure and Education.

The Education sector is one of the fastest developing sectors worldwide and the second largest industry in India. According to the India Ratings report, India boasts of an education sector market size of nearly $110 billion in 2015 inclusive of 1.4 million schools and over 36,000 higher education institutes.  These numbers however don’t take into account India’s constantly growing demographic advantage. This advantage referring to the dividends arising from having a large population of youth who can become a highly productive future workforce.. In order to accommodate the growing student class, there is clearly a need for opportune investments in this sector.

However, rather than capitalizing on this advantage, the restrictive regulatory environment that exists in the Indian education sector has been forcing out the potential speculation of private players exploring and entering this sector. As Benjamin Franklin once said “An investment in knowledge pays the best interest.” In this respect, the government has to do away with several policy maladies that this sector embodies while simultaneously opening up a freer market to make room for private investments.

The foremost cause that has restrained private entrepreneurs from investing in this sector is the not-for-profit policy. Furthermore, the policy mandates that 85 per cent of the profits earned are to be routed back into the sector. While, the very concept of entrepreneurship is to make money;  questioning this philosophy will only likely keep investments away. Ironically, the not-for-profit rule has also been promoting immoral activities; as education institutes enjoy tax benefits that makes it easier to hoard money. In fact developed countries such as the  U.S and  UK have commercialized their education sector; thereby enabling multiple educational institutes to sprout up and cater to the needs of a growing demand. As per data provided by National Conference of State Legislatures in the US, the numbers of student enrollment among for-profit institutions has increased to 225 per cent in the past two decades. Currently, about 2.2 million students attend for-profit colleges.

India’s education policy also has several other impediments. There are layers of regulatory bodies mandating overlapping rules and regulations. As education is a subject on the concurrent list, policies at both the national and state level also don’t correspond with each other. For example, to set up a private state university, it first needs to be legislated by the state government. Educationalists across India have suggested that the government should work towards coming up with uniform and simple policies that can be comprehended by all. It is in this context that a suggestion was made that a national higher education regulatory board be set up.

The process of setting up an institution is severely unbalanced. An institution cannot come into existence unless affiliated to an existing government university. This approval procedure requires over 30 different documents to be submitted to multiple departments at the state level. This sector also demands large land and capital requirements, which cannot be afforded by all. Land requirements vary between3-5 acres from urban to rural areas. Additionally, the not-for-profit policy adds to the burden of all these financial outflows in the initial stages of setting up.

It is imperative that the state governments adopt a single window system to provide approvals and licenses to set up colleges in our country. Countries such as New Zealand and Singapore have topped the index in this context, as the entire approval process takes only 0.5 days in these countries and all the documents are all submitted to a single government department.

Alleviating barriers in this sector would help recover the sector’s growth rate and contribute to skilling India’s youth. Opening up the sector for pro-profit institutions would attract more domestic and foreign players to set up institutes in India. Reputed universities such as Yale University and Georgia Tech University are in talks to set up universities in our country. Clearly freeing up certain barriers would promote sectoral  growth while further attracting other top colleges from around the globe. In addition,

India, which has the worlds largest student population can directly benefit from such a move ­­– from a restrictive to a more business friendly environment. Encouraging private players in this sector would also ultimately lead to stimulating employment and foster economic development of India.

[1] Pooja Sundaresh works as Managing Associate for CPPR – Centre for Comparative Studies.

This article is a reproduced version of the original article which was published in Pallikkuttam; a Rajagiri Educational Magazine. Views of the authors expressed are personal.

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1 Response

  1. August 31, 2016

    […] article was originally published on Centre for Public Policy […]

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