ASSIGNMENT

ON

BUSINESS ENVIRONMENT

FDI IN EDUCATION SECTOR POST

2000

SUBMITTED TO: SUBMITTED BY:

Prof. Resham Chopra Sunil Singh Baghel (50)

Apoorva Khare(56)
Shubham Mohabe (3)
Rohit Kumar (9)
Satyam Sharma(15)
 Praveen Mayar (21)
INTRODUCTION:I

Higher education is assuming a growing significance for developing countries.

Higher education is all about generating knowledge, encouraging critical
thinking and imparting skills relevant to this society and driven by its needs.
Education general and higher education in particular, is a highly nation-specific
activity, determined by national culture and priorities. The growth of India's higher
educational institutions has indeed been spectacularly rapid. The numbers of
universities have doubled since 1990-91, and enrolment has become more than
doubled. But this has been at the expense of quality, increased rigidity in course
design, poor absorption of knowledge, and growing lack of access to laboratory
facilities, journals and opportunities for field work, etc. The average Indian
graduate compares poorly with her/his counterpart in most countries, including
many developing ones. The so-called elite institutions are extremely selective, and
well-funded, but pose the problem of relevance and drain of talent. All this calls
for reform, administrative changes, more funding, greater flexibility, quality
improvement, etc. But this daunting task won't be remotely addressed by the entry
of foreign universities. Government has proposed 100 percent foreign direct
investment in higher education and hinted at making reservation mandatory in the
institutions to be set up by foreign universities in the country. Once approved by
the Cabinet and passed as law, the Foreign Education Providers (Regulation) Bill
will grant deemed university status to such institutions.

India has been a major seat of learning for thousands of years.

 While some of the country's universities (BITS, IITs, NITs, IISc, TIFR,
ISI, IIMs and AIIMS) are among the world's well-renowned, it is also
dealing with challenges in its primary education and strives to reach
100% literacy.
 Universal Compulsory Primary Education, with its challenges of
keeping poor children in school and maintaining quality of education in
rural areas, has been difficult to achieve (Kerala is the only Indian state
to reach this goal so far).
 All levels of education, from primary to higher education, are overseen
by the Ministry of Human Resource Development (Department of
Higher Education (India) and Department of School Education and
Literacy), and heavily subsidized by the Indian government, though there is
a move to make higher education partially self-financing.
 Indian Government is considering to allow 100% foreign direct investment
inHigherEducation.
There are broadly four stages of school education in India:
 Primary,
 Upper primary,
 Secondary and,
 Higher secondary (or high school).

The government is committed to ensuring universal elementary education (primary

and upper primary) education for all children aged 6-14 years of age:

 Primary school includes children of ages six to eleven, organized into

classes one through five.
 Upper Primary and Secondary school pupils aged eleven through fifteen are
organized into classes six through ten,
 And higher secondary school students ages sixteen through seventeen are
enrolled in classes eleven through twelve.

In some places, there is a concept called Middle/Upper Primary schools for

students who belong to six to eight standard and classes nine to twelve are
classified under high school category. Higher Education in India provides an
opportunity to specialize in a field and includes technical schools (such as the
Indian Institutes of Technology), colleges, and universities.

HigherEducationinIndia

Knowledge is the driving force in the rapidly changing globalized economy and
society. Quantity and quality of highly specialized human resources determine
their competence in the global market. Emergence of knowledge as driving factor
results in both challenges and opportunities. It is now well recognized that the
growth of the global economy has increased opportunities for those countries with
good levels of education and vice versa. The benefits of globalization accrue to the
countries with highly skilled human capital and it is a curse for the countries
without such specialized human capital. India is no exception to this global
phenomenon. As part of globalization, the economic reform packages were
introduced in India in the beginning of 1991. These reform packages have imposed
a heavy compression on the public budgets on education sector, more specifically
so on higher education. Following the introduction of structural adjustment
policies, that include macro economic stabilization and adjustment:
  A fiscal squeeze is experienced in all social sector investments in many
developing countries, including India. This has down to public expenditure
on education in general and higher education in particular.

 When there was no university anywhere in Europe, Takshasila,

Vikramsila, Pallavi and Nalanda Vishavidyalayas in India were
radiation the rays of higher learning and were able to attract learners
from home and abroad.

 Bengal had a particular role in the expansion of the scope of higher

education, and the development of modern higher education in India
started with the establishment of Hindu College in Calcutta in 1817.

 Calcutta University was the first to confer the bachelor degree on

women in 1883; Kadambini, Ganguly and another Chandramukhi Basu
were the first recipients of this honour, in the whole of the then British
empire.

 At the beginning of India's independence, there were 19 universities and 591

colleges while students enrolment at the tertiary level of education was 0.2
million

After the independence, there is great advancement in these numbers:

 India is the third largest higher education system in the system in the world
(after China and the USA) in terms of enrolment.

 India is the largest higher education system in the world with 17973
institutions (348 universities and 17625 colleges)in terms of the number
of institutions. This means that the average number of students per
educational institution in India is also lower than that in the US and
China.

 The public expenditure on education is only about 3 percent of the

GNP. More particularly, only 0.37 percent of GDP is spent on higher
education in India and this has been falling in recent years.
Reasons for FDI in higher education

Developing and transition countries are further challenged in a highly competitive

world economy, because their higher education systems are not adequately
developed for the creation and use of knowledge. Converting the challenges into
opportunities depend on the rapidity at which they adapt to the changing
environment. Though, the higher education system and the pattern of financing
higher education vary a great deal across countries, in terms of their size and
strength and degree of diversification of higher education institutions, yet they all
face a severe financial crisis in the public finances available for higher education.
India is no exception to this global phenomenon. The implications of FDI into
higher education are not a simple question as it has its bearing not only in the
higher education per se, but also on the education sector and more broadly on the
whole process of generation of knowledge. Development being dependent on
knowledge, the implications of liberalization has far reaching consequences. In the
era of globalization, nations cannot simply remain isolated. The pros and cons of
liberalization need to be understood before any policy isolated. The pros and cons
of liberalization need to be understood before any policy decision. An effective
voice implies ability to influence the management and not absolute control. Thus
FDI could be desegregated into components of equity capital, invested earnings
and intra-firm loans in the current wave of liberalization, there has been worldwide
shift in the forms of foreign capital.
 Direct foreign investment through involving equity capital of an existing or
new undertaking has been rising.
 Inter-governmental loans and loans from institutions have been declining
and external commercial borrowings have been rising, implying a shift
towards free market based system of attracting foreign capital.
 Technical collaboration involving payments for technology is not a much-
favoured mode. Indian firms are apparently opting for equity linked
technology transfer.
The policy of FDI in education services is through automatic route. In the absence
of any policy in this sector, foreign capital may flow in or out by means of offshore
foreign institutions' campus or through the tie-ups with the private partner in India.
There is also no limit to foreign capital investment in education services. Since the
foreign education providers are coming in unregulated manner, an unregulated
inflow of foreign capital particularly in education sector is a cause of great
concern. It is now felt that FDI in education must be guided by certain norms and
control, as it is a sensitive sector and its implications should be examined before
any FDI policy.

The report on higher education submitted by Sam Pitroda on behalf of the National
Knowledge Commission (NKC) on January 12, 2007 suggests that foreign
education institutions should be allowed in with policies to ensure that there is
incentive for good institutions and disincentives for sub-standard institutions to
come to India. Level playing field must be ensured and all rules that apply to
domestic institutions should also be applicable to foreign institutions.

Recently Shri Arjun Singh, Minister HRD said, "I do not think that there are any
ideological problems about FDI. But some kind of control has to be maintained.
Education is a sensitive area". Before finalizing any policy on FDI in higher
education, there are various issues that need to be discussed.

REASONS FOR FDI IN EDUCATION - As a source of investment

Traditionally education is considered to be non-tradable. The government is used

to fund education through domestic resource mobilization. In the Higher
Education, 90's is the decade of falling percentage budgetary allocation on
secondary, higher and technical education. The resource crunch in these sectors
have adversely affected the public sector and promoted the private sector
participation at almost all levels of education.
 To raise the participation rate for 7 percent to 10 percent targeted by the end
of tenth plan is also an uphill task in view of impending financial shortage. It
may be argued that FDI may be used as a source of investment at least in
some selected sectors.
 Against this view, academia in education sector argues that foreign
investment in education might lead to cultural imperialism. Therefore,
education should be national agenda purely funded through domestic
resources.
QualityIssue:

Argument in favour of FDI in education are as follows:

 Foreign institutions can bring quality programs with market orientation.
  Updated curricula, teaching-learning processes, evaluation of processes may
be internalized within educational institution in India.
 It may also reap the benefits of improved managerial and organizational
skills to run the institutions.
 FDI could promote competitiveness in the education system as a whole.
The critics maintain that the quality could be maintained in certain specific
sectors, where FDI takes place, whereas in mass education sector the spillover
effect of quality may not take place. In fact, it might lead to dualism in education.
Hence, critics maintain that there should be no liberal FDI policy in education.

Export:

It is also argued that there is a positive correlation between FDI and export. Hence
it is argued that:
 Allowing FDI in education might lead to export of Indian education abroad
in which there are large potentials in South East Asia, Africa, Latin America
etc.
 Education may, therefore, turnout to be net exporter and earner of foreign
exchange.
 It is, however, maintained that foreign institutions would be interested to
exploit the large market in India, rather than exporting education form India.
There is also no empirical evidence to show the positive association between
FDI and export. Since nations cannot remain isolated in this age of
globalization, therefore, the FDI policy should be linked to specific sectors
and the specific objectives.
FOREIGN DIRECT INVESTMENT IN EDUCATIONAL SECTOR :

India has to open the education sector as part of its international commitment on
the General agreement on Trade in Services (GATS). Indian government is now
contemplating on the idea of allowing Foreign Direct Investment (FDI) in
education sector of India. Indian government has been carrying out a lot of reform
activities for the economy to attract more FDI in the country. So, why not have
FDI in education too?
ADVANTAGE:

 There are limited seats in Indian colleges and universities. So, allowing
FDI would increase more opportunities to study for Indian students.

 Many students are going abroad to pursue higher education. If foreign

universities come to India, then some of these students will surely stay in
India and study here.

 Indian economy is incurring an expense of more than $4 billion every

year because of the fact that thousands of Indian students are going to
America and Europe for higher education.

FDI in education sector will attract some of the best universities in the
world and open their branches.

It will also ensure world class research facilities for Indian students.

 It will also increase the possibility of Indian students to get jobs in

multinational companies.

 India needs many skilled workers within a short time. Foreign universities
can contribute a lot in this regard.
 If foreign schools and universities open their branches in India then many
students from neighboring countries will come to study in those universities
in India and India will turn into a regional hub on education.
 Indian students will come into contact with some of the top professors of the
world.

 Indian students will be able to have world class labs and libraries.
 Of course, Indian government should set up a regulatory body to oversee the
foreign educational institutes. Indian government must not allow those
 foreign institutes who would want to come here only to earn money from
Indian students.
DISADVANTAGE

It will hurt the nation's culture and character.


The syllabi would not reflect Indian culture and ideas, merely an alien one.

The institutions would be coming to India simply to make money, not work
in the interest of the Indian nation.

OPPORTUNITIES

Foreign universities outside India play a large role in the Indian higher education
scene.
With over 200 Fortune 500 companies recruiting from Indian campuses regularly,
the government now plans to establish India as a brand in the higher education
sector and grab the attention of global education community.

They attract many thousands of Indian students to their campuses each year
— 80,466 Indians enrolled in U.S. institutions alone in 2004-05 and at least
eight other countries actively recruit Indian students.


Graduates of accredited foreign institutions play important roles in the
development of India upon their return home.

Imagine what greater opportunities would be available to Indian students if
accredited foreign institutions offered degree program in India to expand
access to higher education to Indian students!

The Indian student population is growing at a fast pace, and Indian
institutions strapped for funds will be hard-pressed to create seats to
accommodate the demand.

The five most important issues facing higher education in India:

The five most important issues facing higher education in India have been
identified as access and equity;

* Relevance
* quality and excellence;
* governance and management
* funding

According to the Parliamentary Standing Committee on Human Resource

Development, 172nd Report on University and Higher Education submitted on
May 22, 2006. Entry of accredited U.S. educational institutions has the potential to
partially respond to all of these needs.

INFLUENCE OF FOREIGN UNIVERSITIES IN INDIA:

Foreign Institutions can create duality of quality, standards and access.

 There may be the rise of inefficient and languishing public sector and a
dominant private sector

 The presence of foreign providers signal to government that they can

decrease public funding for higher education, thereby jeopardizing domestic
publicly funded institutions

 Commercial presence may entail welfare distortions. Usually foreign

institutions tend to give better and more attractive packages to their staff.
This allows them to employ the best leaving the others to share the rest.

UNION HRD MINISTER ADVOCATES FDI IN EDUCATION:

New HRD minister Kapil Sibal is strongly in favour of allowing foreign direct
investment (FDI) in India's education sector and also plans to "synchronise"
Madrassa education with the mainstream. "FDI must come into India. Entry into
the education sector must neither be limited nor over-regulated.

He says allowing private investment, including from abroad, in education "does

not mean you have fly by night operators." "After all, 160,000 children go abroad
from India at an overall cost of seven billion dollars. Before going they face all
kinds of visa problems while after going abroad, there are issues like the attacks in
Australia," Sibal, pointed out.

The minister said he would take forward the Foreign Educational Institutions
(Regulation of Entry and Operations, Maintenance of Quality and Prevention of
Commercialisation) Bill, which was cleared by the cabinet in February 2007 but
has been hanging fire.

It seeks to regulate the entry, operation and maintenance of foreign education

providers and protect students from receiving sub-standard education offered by
institutions that view it as a lucrative business.

When told that the opposition, especially the Left parties, was against FDI, Sibal
says: "The Left is not against foreign universities per se; they are concerned about
fly by night operators. Everything has to be regulated and it will be."

CONCLUSION:

 The C.N.R. Rao Committee had cautioned against a hasty approach on the
issue. As citizens of India, we have to ensure that the government takes care
of public interests and act to protect public services like education from the
predatory elements that preach the ideology of the marketplace as the
solution to every issue………India is under proposal to open up its higher
education sector to foreign providers and to end public subsidies, with
adverse consequences for the quality and affordability of higher education.

The issue then is largely a domestic one. The impact of opening up higher
education services is shaped not by the WTO but by domestic factors, including
the domestic regulatory framework and the stat of the domestic education system
in terms of quantity, quality, costs, infrastructure and finances. In this context,
evidence suggests that some of the concerns about opening up education services
may not be so misplaced. While there are reputed foreign educational institutions
operating, there are numerous less reputed, second or third tier ones as well who
charge high fees for programmes of dubious quality. Given India's capacity
constraints in higher education, substandard foreign institutions are able to survive
in India. There are instances of foreign institutions partnering with unapproved
domestic institutions. Degrees awarded under such programmes are not recognized
in India. Although, the Association of Indian Universities has laid down guidelines
for twinning arrangement to ensure genuine partnerships and protect consumers,
there guidelines are often violated. There are also instances of false marketing of
foreign programmes, wherein institutions claim to have resources that they don't
really possess or give employment guarantees when there's no international
equivalence of degrees. At times, students in twinning programmes have not been
able to obtain visas to study abroad at the foreign partner's campus. It's also
interesting to note that there has been little or no foreign participation in India's
higher education sector through franchises and subsidiaries, i. e., forms of
participation, which are likely to yield greater benefit to the country's educational
infrastructure. So, the evidence is mixed. But the problem is not liberalization per
se, but the lack of a supportive domestic regulatory framework, which can ensure
that liberalization is beneficial. This is not to suggest that one should add more
layers of regulation in higher education. Already there a plethora of regulatory
bodies duplicating each other's functions, what is required is more effective
registration and certification systems, which prevent unapproved institutions from
partnering, which protect and inform consumers, enable good quality foreign
institutions to enter the Indian market, and which create a level playing field
between domestic and foreign institutions so that the former can compete
effectively in a liberalized environment. Once such a regulatory framework is in
place, India needn't fear scheduling education services under GATS. It could even
inscribe additional conditions on the nature of foreign participation in higher
education, something permitted under GATS commitment structure. Finally, a
point often lost on critics is that India also has gone on the offensive in education
services. A growing number of Indian educational institutions are beginning to
export to other markets. So, globalization of education services should also be seen
as an opportunity and the GATS as a framework to exploit this opportunity. In
short, a pro-active rather than defensive approach is required to benefit from the
liberalization of higher education services, both unilaterally and multilaterally, on
the import as well as export fronts.
Though penetration of foreign universities in India has many constraints, the
prospects stands up making constraints neutral. Hence, the penetration of foreign
universities is must into India.