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MARCH 11, 2007
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The centre is looking at removing the distinction between FDI and FII investments. This will impact sectors like asset reconstruction, real estate and aviation, where separate ceilings apply to FDI and FII investment. However, allowing FDI through the FII route in the realty sector could result in prices shooting through the roof. The Asian financial crisis of the '90s is still fresh in mind, and a method should be devised to moderate possible volatility in key sectors.

S&P And After
For the first time in 14 years, international credit rating agency, Standard and Poor's (S&P), has raised India's credit rating to investment grade. S&P is the last of the three major international rating agencies to do so. Moody's Investors Service did it in January 2004 and Fitch Ratings in August 2006. The upgrade is likely to spur the flow of foreign investment into power, steel and other industries, which receive less than a tenth of the funds going China's way.
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Business Today,  February 25, 2007

The Education Jigsaw
It's a no-brainer that a knowledge economy needs an educated workforce. But archaic laws and a short-sighted government are conspiring to deprive the sector of the autonomy and the private funding it so badly needs.
MIT's Banerjee: The future is bleak
It is one of the most mystifying paradox of our times-the Indian economy, powered in large measure by its knowledge industries, is expanding at over 9 per cent per annum; the country has moe than a billion people, half of them under 25 years of age. Yet, there's a major shortage of skilled workers in this country. Mind you, we're not talking here just of rocket scientists and the like; good plumbers, carpenters and brick layers are proving as hard to find in large numbers as people higher up the knowledge ladder. Another paradox: world class educational institutions like the IIMs, the IITs and a few others exist as microscopic islands of excellence amidst the general decay and rot that characterises the country's education landscape. In this chasm between the possibility and reality resides a sorry tale of missed opportunities.

"India compares very unfavourably with its peers in indicators of educational attainment at all levels. Both spending and the efficiency of spending on education remain weak," says a recent Goldman Sachs report on Indi

ra. The country is still struggling to scale up its investment on education to 6 per cent of GDP from 3.8 per cent at present. And this may prove to be a very costly oversight in the years and decades to follow. The Goldman Sachs report adds that in 2000, the working-age population in India, had, on average, attended 5.1 years of school, compared to 6.4 years in China and 6.8 years in Malaysia. "The demographic dividend may not materialise if India fails to educate its people," Goldman Sachs report warns.


The Prime Minister's Knowledge Commission has made the following recommendations to energise the education sector:


Target: 1,500 universities by 2015.

Set up Independent Regulatory Authority for Higher Education (IRAHE) in tandem with the overhaul of the University Grants Commission.

Scale up government support for higher education to at least 1.5 per cent, if not 2 per cent of GDP, by 2012.

Fees should meet at least 20 per cent of an university's expenditure; these should be adjusted every two years through price indexation.

Change tax and trust laws to incentivise corpus building by universities.

Create at least 10 National universities over the next 3 years, and 50 over the long term.

Reform existing public universities and undergraduate colleges.

Universities should revise or restructure curricula at least once in three years.


Increase total spend on VEC to 10-15 per cent of the total education spend.

Levy a cess on employers (as in Singapore) or make it mandatory for companies to invest in training (as in South Korea).

Set up a National Institute of Vocational Education Planning and Development to formulate strategy, advise government and undertake R&D.

Appoint an independent regulatory agency for VEC.

Maintain an electronic database of certified training providers and certified workers.

It's a no-brainer that the education sector could do with massive spurts in funding; but there's an even more urgent need to ensure that existing and future investments are used efficiently and reach the intended beneficiaries. The government recognises its limitations and is now looking at alternate sources of investment. "We can't wait any longer. We must experiment with several things," says Kris Gopalakrishnan, Director, Infosys Technologies, one of India's leading knowledge companies.

The urgency seems to have carried to the corridors of power. Finance Minister P. Chidambaram is expected to increase gross budgetary support for education by about 30 per cent to over Rs 31,000 crore in his forthcoming Union Budget. There is also a move to liberalise investments in higher education level. Ironically, the more the economy grows, the more the real extent of the problem becomes apparent.

Laws Discourage Private Initiative

Unless the government recognises the profit motive as a legitimate one, education in India will continue to languish.

The law stipulates that a private sponsoring body can set up a society, charitable trust or Section 25 company which can provide education to those requiring it.

The key requirement is that profits from the venture have to be reinvested in the venture; i.e., they cannot be distributed as dividends.

The government's "no commercialisation of education" policy is a major roadblock to greater private sector participation in this field.

Policy-makers are considering allowing foreign investments in higher education but they cautiously temper that proposal with the requirement for a level playing field for Indian players.

Expert groups have recommended a public-private partnership model as the way forward.

The Birlas run 45 schools, 10 vocational training centres and BITS, Pilani. Many other corporate houses, notably the Tatas, the Bajajs, the Ambanis and the Singhanias, among others, run schools, colleges and other educational institutions across the country, but all of them are part of their corporate social responsibility initiatives.

Primary Colours

The real problem begins at the elementary school level. The statistics, though, look rosy at first sight. Over 95 per cent of children between ages 5 and 10 are enrolled in schools and there is a school within 1 km of every habitation, barring a few in Bihar and Rajasthan.

However, that is where the good news ends. "Children learn little and what they do comes too late. Whereas they are expected to learn to read fluently by the end of Standard 2, only about 50 per cent can read fluently even in Standard 5," says Madhav Chavan, Trustee of Pratham Mumbai Education Initiative, an NGO working for the education of underprivileged children. "Neither the syllabus nor the teaching methods are adjusted for that. Hence, most children in class are utterly lost," says Abhijit Banerjee, Professor of Economics & Director, Abdul Latif Jameel Poverty Action Lab, MIT. No surprise then that about 70 per cent students drift away by the time they reach Standard 8 (See The Mess in Education).

The government is pursuing its aim of universalising elementary education through its flagship programme, called Sarva Shiskha Abhiyan, and the Mid-day Meal Scheme wherein cooked meals are provided to children who attend school. Says Bhalchandra Mungekar, Member, Planning Commission: "These schemes have dramatically reduced the drop-out rate at schools over the last two years." The number of out-of-school children in the 6-14 years age group has dropped from 13.4 million in 2005 to 7.06 million in end-March 2006.

Rajendra Pawar, Chairman, NIIT, one of India's leading purveyors of knowledge, is ready to believe this magical rise in gross numbers. "Do not forget the parallel system that is flourishing," he says. Over the last decade, there has been a virtual mass movement towards private schools, say education experts.

But there are problems galore. If government schools are afflicted by creaky infrastructure, absent or apathetic teachers and general lack of verve, then their private counterparts are afflicted by a wide variance in standards and the fees charged. However, "private schools at least impart education and that is because there is a functioning chain of accountability," says Anurag Behar, Corporate Vice President, Mission Quality, Corporate Brand & Innovation, Wipro Technologies. So, it does seem as if the numbers issue at least is being addressed, even if imperfectly.

Vocational Intent

The inability of the system to deliver relevant and quality education disillusions and disappoints a large section of the addressable population by the time they reach Standard 8. The formal system does not address these issues. And there is no way of switching to vocational streams. "There has to be convergence between mainstream education and vocational training. Currently, if someone fails Standard 10, his entire education is lost," says Mungekar.

Cultural issues aggravate the shortage. "There is a social barrier to vocational education. Technical staff hesitate to roll up their sleeves and work with their hands," says Murlidhar Rao, President and COO, NIS Sparta, one of India's largest corporate training companies.

The country has 6,500-odd Industrial Training Institutes that impart vocational training. Yet, they teach only 100-120 trades, compared to about 4,500 in China. Moreover, there is a mismatch of skills imparted in these institutions with market demand. The course curriculum and equipment are also outdated. "These boys are far, far away from the current technology that is being used in their respective fields. One has to put them through at least 6 months of on-the-job training to get them work-ready," says S.Y. Siddiqui, Head (HR), Maruti, which has hired about 800 automobile technicians from ITIs over the last 18 months. It is now taking over the management of four such institutes in Haryana. At the vocational training level, move towards certification bodies and adoption of standards hold the key to success. The government has decided to set up a National Skills Mission to address these issues.

Tertiary Education

The Knowledge Commission's report late last year found that only 8 per cent of our population, in the 18-24 years age group, reaches the higher education level-half the average for the Asian region. India has around 350 universities and about 17,700 undergraduate colleges. Though quantity is an issue (See We Have a Long Way to Go), the quality of graduates coming out of these institutions is equally worrying. According to nasscom, only a quarter of the technical graduates and 10-15 per cent of general college graduates are suitable for employment in the offshore it and BPO industries.

Yet the situation is not entirely without hope. Vivek Wadhwa, Executive-in-Residence and Adjunct Professor at Duke University (US), points out that multinationals are able to hire from a majority of Indian universities; they simply put graduates through special training programmes to compensate for the quality problems. "Graduates from comparable Chinese universities are simply unemployable," he says.

Granting universities autonomy can improve the situation. "The government has created excellent tertiary institutions; it is time now to give them academic and financial freedom so that they can be independent," says Ajit Rangnekar, Deputy Dean, Indian School of Business, Hyderabad.

Yet, functional autonomy is a difficult issue for most governments to cope with as was evident from the very public spat between the HRD Ministry and the IIMs. The disproportionate public emphasis on the IITs and the IIMs also underlines our national obsession with these premier institutions at the expense of other centres of higher learning. "President A.P.J. Abdul Kalam, Infosys Chairman N.R. Narayana Murthy, and Knowledge Commission Chairman Sam Pitroda have all studied at private colleges. We really need to shake off this obsession with the IITs and IIMs and realise that private institutes are as good," says Y.S. Rajan, Executive Director, TIFAC.


Infosys' Gopalakrishnan (left) and NIIT's Pawar: Need for nifty reforms
If there were magic bullets then just two would suffice to fix the education story-improving the delivery channels for public education and opening the floodgates for foreign and private investments in the sector.

While there is scope for private sector participation across the education value chain, the government will have to shoulder a major share of the burden. "The biggest issue in the education sector is scarcity of good teachers. We need to increase salaries to attract good people to join," says Infosys' Gopalakrishnan. Then, technology can be used to enforce attendance. Says MIT's Banerjee: "Teachers should sign in using fingerprint readers three times a day; those who fail to do so on a given day should be declared absent." Finding a way to help poor children receive after-school tuitions is also necessary. "The government can give tuition vouchers to all poor families; these should be used only in recognised tuition centres," says Banerjee.

And if education and jobs are linked up, then the financial issue also automatically gets solved. NIIT's Pawar points to a financial services course launched by the education and training company where the student gets an appointment letter from a financial services company on enrolment for the NIIT course. At stake is the ability of the student to complete the course.

But such solutions will become universal only if the government must muster up the political will to shed old shibboleths. The situation is reaching crisis proportions, but it is not beyond redemption.

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