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Home > Business > Special

How India's education system can change

Mohit Satyanand, Outlook Money | December 01, 2006

Only two per cent of Indian colleges have the potential for excellence, according to the University Grants Commission. It's no wonder that every admission season, cut-off marks at our few reputed colleges creep higher into the 90s. And, immigration queues at embassies grow longer.

Our Indian Institutes of Technology are known world-wide for their alumni who have made it to the top, not just in tech firms, but across the Fortune 500. Yet, in terms of teaching quality, no IIT is among the world's top 50 technical colleges. The quality of IIT graduates is already determined by the time they enter the institution. To get chosen, they write a test; to prepare for this test, they spend two years in coaching classes. To get into these they clear another test. An entrance exam for coaching to prepare you for another entrance exam! Only in India.

Primary education? Drop-out rates in government schools are horrific - 8 per cent per annum in Delhi, and probably worse in rural areas. Only 50 per cent of Delhi government school students clear their Class 10 Boards. In my Uttaranchal village, it is barely 20 per cent. Parents who send their kids to government schools see education as being of little value.

A recent survey conducted in Delhi slums asked parents how much they would pay to send their kids to a government school. The average answer - Rs 66 per month. How much did they think it cost the government? Rs 100 per month. How much do these schools cost you and me, the tax payer? A conservative estimate is Rs 800 per month.

Clearly, our education system is not delivering in terms of quality, quantity, or value for money. Economics tells us such a situation cannot last. Entrepreneurs will rush in to fill all the gaps - in quantity, quality and price-points - unless they are blocked by legislation.

Which is precisely the situation in India. The abysmal situation of education in India is a direct result of low levels of investment and the consequent absence of choice and competition.

Our talented politicians sell it as a socialist virtue in the name of equality, while sending their own kids to well-run schools and overseas universities. The laws they continue to back guarantee slow progress.

For example, only non-profit organisations are allowed to run schools. Such organisations have little access to bank funds and none to stockmarkets, the two primary institutions for raising capital.

The situation is even more complex in higher education. When Stanford University looked at higher education in India, it was told that it would have to follow UGC norms in both teachers' salaries and fees - clearly not a formula for quality.

As a result, there are only a few listed companies, which are functioning in the education space. All of them offer services either outside, or alongside, the formal education sector.

The most recent entrant is Educomp, which had a sensational listing, and sells at about Rs 640, 60 times its earnings per share.

NIIT, once the only IT company in the top 100 by market cap, sells at Rs 340, roughly 15 times its EPS. Jetking, which teaches computer hardware, sells at Rs 262, a modest 12 times earnings.

For India to take its rightful place in the sun, we need scores of companies involved in formal, mainstream education. A huge mobilisation of entrepreneurial talent and management will be required if India has to become a real knowledge economy, and the only way to do this is through transparent capital market offerings.

The prime minister has begun to acknowledge the need for greater private sector participation in education. But he will require enormous political will to legislate this.

Then (if?) it happens, education will occupy pride of place on our exchanges. If not, start saving to send your kids to the US, Singapore - or China, the rising star in our north.

The author is an investment advisor to a select group of clients. He can be reached at

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Number of User Comments: 8

Sub: Ban Reservations and Quota system

only if India ban's Reservations and Quota system the higher education in India will expand and boom...

Posted by Ajai

Sub: Education in India

It is our false sense of socialism that lets the substandard educational instituitions survive. Private educational insititutions run on a commercial scale are a must ...

Posted by George Mankottil

Sub: How education system can change

The federal govt must set the standards, provide the funds and punish the state govts which don't follow the guidelines. But knowing this nation of ...

Posted by labrea

Sub: education in India

This is the reason, we are far far far far far behind developed countries. We do not have attitude to succeed. Pakistan has better attitude ...

Posted by mahendra kothari

Sub: Who want to be a teacher??

One of the reason for current situation of educational institute is the way people think about teachers. In several surveys doctors and teachers came out ...

Posted by sanjeev sharma



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