Can NEP be Indian education’s 1991 moment?

Education is different from industry. But higher funding for research and better university governance can help
Good research universities are hard to scale up because of their human-capital-intensive nature(Saumya Khandelwal/HT PHOTO)
Good research universities are hard to scale up because of their human-capital-intensive nature(Saumya Khandelwal/HT PHOTO)
Updated on Aug 27, 2020 06:21 AM IST
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BySanjay Kallapur

The National Education Policy (NEP) 2020 has laid out an ambitious vision of making India an education powerhouse in the years to come. It has the right thrust: Liberalising regulation (light but tight), inviting truly philanthropic contributions, and increasing government spending. It is the education sector equivalent of the 1991 liberalisation of industry which rapidly improved its performance. For the same to happen in education, particularly for Indian universities to become research powerhouses, which determine reputation and prestige worldwide, however, it will take efforts of a kind that were not necessary for industry. This is because education is different in some crucial respects, quite apart from its non-profit nature.

After liberalisation, the advent of new financial institutions such as HDFC Bank improved the quality of services for customers. Older institutions also shaped up, for instance, State Bank of India and Life Insurance Corporation (whose claim settlement ratio is better than that of private insurance companies). In other sectors, companies that could not shape up, such as Premier Automobiles, shut down. Such changes do not take place so quickly in education because of its special characteristics.

First, there are strong network effects. You, as a good student, want to go to a university which attracts other good students and has successful alumni. But it takes a long time to establish alumni success, and it is hard for you to coordinate your actions with other good applicants. So you end up going to the same established universities which end up also getting other good students who thought exactly like you, which fulfils your expectations. It is a cycle that is hard to break. Only 12% of the Fortune 500 companies in 1955 are still on it; most of the universities on the top 500 list are still on it, and that too, in roughly the same order.

Second, good research universities are hard to scale up because of their human-capital-intensive nature, and because they compete on quality, not market share. That is why the best universities in the world each have a very small market share in terms of the total number of students. It is a fragmented industry. Suzuki or Honda can easily scale up and edge out incumbents to grab a large market share if there is demand. A top university cannot. So even if new universities, homegrown or foreign, come in, they will not be able to create sufficient capacity to affect the intake of existing prestigious universities.

For both these reasons, student exit does not create enough pressure for existing universities to transform themselves. Instead, pressure has to come from other sources, namely from the funding mechanism, and the quality of governance by the board of governors (BoG) and the vice-chancellor (V-C). These are the areas where policies and guidance are needed from the government.

The government should reward high-research performance with disproportionately higher funding, consistent with the greater costs of running such universities, as well as the higher value derived thereof. Making funding conditional on research performance will result in more efficient use of government’s spending, and also help overcome any institutional resistance to change.

The quality of governance is critical. NEP has the right idea that BoG should consist of highly qualified, competent, and dedicated individuals. It does well to refrain from specifying that these individuals be elected by the faculty (as at Cambridge and Oxford) or consist primarily of academics. However, getting competent independent directors, which is hard enough for industry, is even harder for academic institutions. BoG members must not interfere in academic matters, but neither should they leave everything to the VC and his or her team. They must insist on rigorous academic processes and monitor their implementation, but refrain from themselves running those processes. This is a difficult balance to strike. Therefore, not everyone who is a competent director of companies is a competent member of an academic institution’s BoG. High-quality training is needed, even more so than for company directors.

Other steps such as teacher training will be needed too, but the most crucial ones are getting the funding mechanism right and populating BoG and top management with the right individuals. I am hopeful that if we do these well, Indian educational institutions will fulfil NEP’s vision by regaining the prominence they held in ancient times.

Sanjay Kallapur has a PhD in business economics from Harvard University, and was a tenured faculty member at Purdue University before he joined the Indian School of Business where he has been professor, and formerly deputy dean, for the last 15 years
The views expressed are personal
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