Liberalize the Indian Education Sector

This is a true story. The faculty member involved emailed me yesterday. Scene: an IIT professor interviewing a potential candidate for PhD in a technical subject.

“Suppose you have two integers, each between 0 and 5. You add them up. What is the range of their sum?”

“It can vary.”

“Sure, it can vary, but what is the largest possible value of the total?”


“I said sum, not average. What is the maximum possible value of the sum?”


[FYI, my original intention was to say these two random numbers were uniformly distributed and ask what the distribution of the sum was. This person had traveled to IIT by train, possibly using IIT money, to do an interview like the above, with the hope of doing a PhD some day. Your tax rupees at work here, folks. Lest you think there was a language problem here, I give another example below.]

“Consider the loops below:
for i = 1 to n
for j = 1 to i
loop body
How many times will the loop body execute?”

“n times”

“How much time does it take to sort n items?”

“Big oh of 1.”

[“Uh oh”]

Let’s remember that this student has spent at least 16 years of his life in school (four of which in undergraduate studies). This is a telling vignette which is indicative of how woefully inadequate our educational system is.

Allow me a personal anecdote. Some years ago, my friend and thesis advisor Peter Berck at UC Berkeley requested me to receive a visiting faculty from Delhi University at San Francisco International. The visitor was coming to Berkeley for a summer teaching and research appointment. I went to the airport and hung about for about three hours fruitlessly. The guy was not on the flight.

Later that day I received an email from him from Delhi. It seemed he needed permission from some Indian governmental bureau to take up the summer appointment at UCB. They kept him waiting and denied him permission at the last moment. He did not get on the flight. He was severely disappointed as he was looking forward to being back, however briefly, in Berkeley where he had received his PhD.

Governmental policies matter. And they differ from country to country. Peter told me later that Israel not only allows their faculty to take short-term positions abroad, but that they actually encourage it. They give their faculty full pay even when they are working abroad short-term. They consider it a win-win situation: the faculty member grows professionally through contact with the outside world. The country gains because the terms of employment include the freedom to come and go as they please and therefore a professional is more inclined to work in the country.

I can imagine that really competent professors give up on trying to build a career in India after a few years of struggling with the bureaucratic machinery of India. Not only are the teachers paid poorly but to add insult to injury, they are arbitrarily denied the freedom to pursue their professional goals. The list of top-notch economists (just to take one small sample) that the Delhi School of Economics has lost to the US makes dismal reading.

The hollowing-out of Indian universities should be a major cause for concern. Without the foundation of great universities, it is unlikely that India will ever be able to compete in the world. We should take a break from patting ourselves on the back about how many BPO call centers we have and take a serious look at what ails our education system. Granted that many non-resident Indians are returning to India by the droves, at least as compared to before when the traffic was mostly one-way. But the picture does not look quite as rosy under even minor scrutiny.

The returnees are mainly those who come to India as ex-pats employees of multinational corporations such as Yahoo, IBM, and others. They are managers and executives whose contribution to the economy certainly cannot be ignored but is nothing as substantial as those of professors and researchers. If there is any flow which can be termed as “brain-drain,” it is the one-way migration of those who form the cornerstone of a modern economy, namely, top-class highly educated researchers and teachers, and who not just make the university but are the university. Ultimately they are the ones who train the thousands of bright young men and women who go on to build society in all its aspects—social, commercial, political, and educational.

Clearly, those returning are doing so for personal and professional reasons, just as those leaving are doing so. The liberalization of the economy from the clutches of the government has offered some degree of opportunities in India and thus the limited reverse migration of the managerial and executive class. That should give us a clue: to halt the migration of educators and indeed reverse it, what is needed is liberalization of the educational system. This may be equally, if not more, critical to India’s development as was the liberalization of the economy.

Liberalizing the educational system must begin with the dismantling of the bureaucratic control of the system. There are examples of countries freeing up their educational systems. New Zealand abolished their Department of Education and transformed their dysfunctional school system within a few years to one which is world-class. It is hard to fathom what good bureaucratic control of the educational system does in the first place. What do bureaucrats have to do with education anyway other than not allowing the moribund system from changing?

Bureaucracy rules in the Indian school system. Who is allowed to run a school, what is to be taught, who is allowed to teach, how much a teacher is to be paid, who is allowed to attend and for how long, who must be allowed to attend, how much can be charged—all these things are bureaucratically determined and no freedom of choice is permitted. The system lacks freedom and the not so surprising effect is the system is dead.

I am confident that Indians are no less smart than any other group. Indians are poor because they lack freedom to act, to perform to the best of their abilities. Given the opportunity, in free societies Indians do just as well as the others. It is time for Indians to build world-class schools and universities. It is time for Indians to have real freedom from the government of India, not just the political freedom won from a colonial power over half a century ago.

Right now, in the education sector there is severe competition for the market—a limited number of entrants are allowed. So there is limited competition in the market leading to high prices (and economic rents, part of which has to be paid to the operators of the state control machinery to gain their patronage). Limited competition in the market implies not just high prices but assures low quality also. The people, given the supply constraints, in desperation put up with high prices and low quality.

My prescription is simple. Allow free entry into the education business. Give absolute freedom to schools and universities to charge what they wish, to hire who they wish, to pay what they wish, and to admit who they wish. By allowing free entry in the education business, there will be no competition for the market. There will be competition in the market. Prices will reflect true costs and quality will improve.

One hears the argument that if you allow free entry, would not all sorts of shady fly-by-night operators open up schools and bilk the general public? Let’s paraphrase that argument a bit. If you allow anyone to open a bakery, would not people who have no expertise in baking open up shop and sell garbage to the general public and make tons of money? Now that is a stupid argument, is it not? After all, unless the general public is totally brain-dead, the bakeries with crappy bread will go out of business because given free entry, there will be other bakeries. It is only when the government hands out limited number of licenses for bakeries that the people don’t have any choice but to take what they can get from government licensed bakeries.

Of course, one must distinguish between different levels of education. First, there is primary and secondary education: all, irrespective of their ability to pay, must have access to that. The government must help those who cannot pay by financing their education. School vouchers is the mechanism. The government must not be in the business of running schools—whether primary or secondary.

Next there is college education. Again, the role of the government is limited here. For those who cannot pay and are credit constrained, the government should guarantee educational loans which are given by financial institutions.

That’s it. Get the government out of the education business. And within a generation you would have India really shining in education.

19 thoughts on “Liberalize the Indian Education Sector

  1. Corporate Serf Monday December 11, 2006 / 8:50 am

    We need the government out of everything barring defense. And, given that the government mismanages even that…

    Now who will bell the cat? The reason the govt does not go out of anything is that there are massive incentives for everyone in the government: babus, MPs, judges to stay there. Right now it is not even possible to democratically change the character of the government, as that will be a change in the “essential structure” and is illegal, both according to 44th amendment (?) as well as a supreme court decision (I don’t remember which one).


  2. Sudipta Chatterjee Monday December 11, 2006 / 11:45 am

    Wow! So that dude really wanted a PhD from an IIT? Hmm… I guess plain old Hex to Decimal conversion would’ve gotten him a thesis.

    Agreed with all the points that you’ve raised. To unshackle the other areas in education, however, I believe that more than anything, the government should pamper the young people who want to join back in. Without attracting fresh talent as teachers and researchers in IITs and places like the IISc, it is not possible to merely turn the thing around on its head.


  3. Rajalakshmi Monday December 11, 2006 / 4:45 pm

    Excellent Atanu!
    “By allowing free entry in the education business, there will be no competition for the market. There will be competition in the market.” This ought to be in capital letters.
    This is what “appeasements and reservations” have wrought. I recall a comedy where one such “doctor” uses the word ‘biopsy’ for ‘autopsy’:)


  4. Ike Monday December 11, 2006 / 9:42 pm

    Don’t be surprised to find American education unions doing their best to stamp out such an idea. After all, if it starts to work in India, they’ll have to find excuses to keep protecting incompetent teachers in the U.S.


  5. Biswajit Tuesday December 12, 2006 / 1:05 am

    I don’t quite agree with your evaluation of the student. Many students freeze up when asked to think on their feet – and this happens to the best (especially when they are not very comfortable with the English language). Whether a student will or will not be able to think independently (which is all that is needed on a PhD student) cannot really be judged from their performance in a stressful situation. I’ve known quite a few students who can easily answer similar questions under stress but freeze up when they are asked to do something (under much less stressful conditions) that they have never learnt before.

    A better test is to give them a pen and paper (or a chalk and a blackboard) and let them think out the steps systematically and get comfortable.

    However, I do agree that many Indian students have not learnt how to think. In the absence of a large pool of potential PhD students, it is up to the advisor to teach them how to think. At age 21, the student is still young enough to learn the basic process.


  6. Mohit Mehra Tuesday December 12, 2006 / 4:39 am

    Free market to the rescue! Make the education market close to being perfectly elastic and the competition will automatically reduce the cost, and also raise quality. That’s simple. How did Dr. Manmohan Singh with all his Econ background miss this!

    If your intention is to describe the problem then you have done a beautiful job. I agree that the path to growth begins with education. But if you are proposing a solution then I would like to give my 2 cents:

    In order to attract quality educators from abroad (reverse brain-drain), India needs to create a stable research environment. Where is the money for research going to come from? You may say that private investors can provide it. But there should be a reason for those private investors to invest their money. After all a capitalist system is built upon the principle of maximizing utility or profit in this case. That again adds the burden on the economic system. Kids with deep pockets would then be able to squeeze their way into these institutions but majority would still watch the show from the “outsides”. I don’t mind that as long as we cherish equal opportunity not equal outcomes. Of course that would mean more “Aptech” and “NIIT” type of institutes instead of something like a UC Berkley. Secondly, professors like any educated human being look at other factors besides research, for example political and social environment which in itself is built upon a stable education system. Also, if new institutions are to germinate they should be geographically available to the common man. That means less developed states as well. Are the professors willing to travel to any city other than the metros or Pune, Hydrabad or Bangalore for that matter? Unlike New Zealand, India does not enjoy the same freedom. Lastly, I feel that it is imperative to realize the importance of elementary education in developing a child. India has a great elementary education system but again unfortunately the emphasis has always been on Math and Science. Unlike the west where students are encouraged to participate, most Indian schools just shove the course work in a rather subjective manner. I would like to see more emphasis on critical thinking as a part of social science. Unless students are taught to question and debate they will remain slaves to the system when they grow up. And that’s been the irony of our system.


  7. Apun Ka Desh Tuesday December 12, 2006 / 1:59 pm

    What you are seeing is just a symptom ofcourse. The cause is the jokers who are governing.

    Some notes:
    – Highly experienced Mr Arjun Singh from HRD thinks Reservations is the way forward to bring education to the masses.
    – The Social Welfare ministry decides Private Sector must recruit based on caste.
    – The education departments in Karnataka decided to close down several hundred schools because they flouted a local language policy.
    – The MPs do not want foreign univs. to come to india – the real reason is they think they will lose control. See how they are able to push IIMs every which way they want.

    The economy is poised to grow. The people want to progress. The governance HAS NOT kept pace, REFUSES to do so.

    Infact the MPs are busy making amendments to foreigners act to allow Bangladeshi migrants to settle in North East, so that they can be converted to Vote Banks. And thank god supreme court struck it down for now.


  8. Jyoti S Wednesday December 13, 2006 / 1:11 am


    That was amazing. The education sector needs to be released from the clutches of bueracrats. I was studying the results of deregulation in the US and UK during Reagan and Thatcher and wondering why India didnt have the smarts to do something like that. Competition will ensure that the best survive and I’m sure there are a lot of corporate biggies who will invest heavily into it. The sunrise industry in India is education and not infotech as many believe. It is ironical and a travesty that the land of Saraswati should have so many illiterate people who cannot comprehend the profundity of education while they worship her idol.



  9. jayant Wednesday December 13, 2006 / 1:16 am

    Hi All,
    Not related but nonetheless interesting for all of those who are always checking facts:


  10. Sandeep Wednesday December 13, 2006 / 5:23 am

    Excellent post Atanu. A lot remains to be said about the way alumni funds are being repatriated into the IITs as well. Every time someone wants to create a private research center, it seems like one has to move mountains in the Ministry of HRD to make sure the dollars go to the right place. Oh, and you can forget about endowments for professorships and “merit based” grants for individuals.


  11. Abhijat Wednesday December 13, 2006 / 3:30 pm

    Why should I give up my ability to borrow from Peter and pay Paul ? Especially, if I am the one to decide the amount I extract from Peter, and separately decide the amount I pay to Paul! I will definitely permit you to even change the structure as long as I hold the power and the changes do not upset my interests. Else I simply prevent you by introducing the negatives to the hoi polloi who have been actively revelling in their ignorance and poverty. Since I speak for the masses, their verdict is final. The verdict is implemented as ‘regulation’. And please don’t point me to the other nations who have done the same. Their issues, problems and motivations are different than ours. Unlike them, I also have to shoulder the responsibility of steering the generally illiterate and poor populace to the bright new future. Worse, because we are overpopulated! There isn’t any brain drain either. No brain – no drain! I was late to catch up on the mobile phenomenon, but here I am keeping a sharp eye. Education is too crucial to be deregularised! On the contrary, the need of the hour is more regularisation to ensure a more uniform distribution of access to quality education over our complex demographics. I already am facing far too many problems on this front, and you suggest I give up my responsibility ? Our culture shows that Education is divine, and not for the free market. We must respect our teachers even if they are grossly underpaid. Research is anyway done by the west, we simply have to take it from them and have our intelligentsia present it to our people. Since the numbers are too high, they wont have, and need, any time to do any other activity. That spread of known “knowledge” is the need of the present hour, and there are statistics that show that we have been quite successful this way.

    Out of sarcasm now. The system isn’t dead, my friend. It’s a vampire. It lures, lulls and sucks least worried about the cross behind the locked doors in a few ivory towers as long as there are many more to feed on. Unfortunately, there is no recognized crisis like the one in the early 90s that forced liberalisation. I agree with the diagnosis, but cannot see the cure. The question is: who will bell the bureaucrat? 🙂


  12. Krishi Wednesday December 13, 2006 / 8:18 pm

    Yeah, yeah… all this is repeatedly restating the problem and the end-solution. In my opinion, easy enough – low hanging fruit, and all that.

    Do you have anything on how to get this done ? Considering that the people who need to make the change (lawmakers) are the ones with the vested interests to not have it changed. It is all well and good to rave and rant, but let us look at solutions (which is obvious), and how to get there.

    I have never seen even one suggestion so far, from anyone, on what kind of incentives the MPs have to make the change. As economists and libertarians (and assorted labels), you should know that everyone is motivated by incentives. What incentives do the MPs have to make this happen ? None, nada, zilch, zero.

    The MPs have seen the sectors which got liberalised, and they saw that they lost all control, all the money was going into someone else’s pockets, while they, the lawmakers with all the power, get a piddling salary that cannot even pay for their mobile bills, let alone their election campaigns.

    If we are talking of liberalising sectors, let us think about how to liberalise the electoral system, and find a way to provide the right incentives to the MPs to make the right decisions. And, for crying out loud, let us think and speak of ways to get to a solution, rather than just continue to rant about the problem and the end goal, which things, by today, are known to even 5-year olds.


  13. RJ Tuesday December 19, 2006 / 2:37 pm

    Here is something happening in Andhra Pradesh.

    “This officially makes AP, the state with the most number of engineering seats, a staggering 97,000. The state surpassed the previous leader in this department -Tamil Nadu which has 248 engineering colleges.

    The philosophy of All India Council for Technical Education (AICTE) for sanctioning so many colleges is simple. If you give more colleges, the competition will ensure that only the fittest will survive and that in turn will ensure of quality education. And so, the AICTE will continue to sanction more colleges- and at any point of time in the year. If this causes mushrooming of colleges that does not matter because only the best will remain open in the end, a senior official from AP State Council of Higher Education said.”

    So it is beginning to happen in some isolated pockets …


  14. amol Monday July 9, 2007 / 6:31 pm

    it is true life story i came to abt this site from


Comments are closed.