"Indian universities must have an international flavour, international students, international staff. This would not happen unless the government removes the restriction on employment of international faculty.
"Unless this is changed it will be difficult to make it to the top grade," he said. Under the existing rules, Indian universities are not allowed to recruit foreign faculty.
The challenge before planners, policy makers and educationists, both in the public and the private sector, is of producing the world class Indian universities that could be counted among the top 200 rating list, he said.
"In the next 20 years we must see a significant number of educational institutions in that category," he said.
He said the 12th Plan Approach Paper has laid special emphasis in making primary education more widespread and higher education more research-based.
Ahluwalia added that expansion of higher education has to be balanced with equality of access, especially for those living in areas where educational institutes do not exist.
"For higher education, the 12th Plan objective is expansion, equality of access and excellence," Ahluwalia said.
"The objective is to raise the enrollment ratio in higher education from the current level of 15 per cent to 30 per cent over the next 15 years," Planning Commission Deputy Chairman Montek Singh Ahluwalia said while addressing the FICCI Higher Education Summit 2011.
Ahluwalia also came out in support of awarding government scholarships to meritorious students from private institutes.
"We also need to do a lot more on research funding. We could do with more philanthropy but that will take time to come. So government funding has to increase," he said.
According to estimates, the total public spending in education in India stood at $30 billion or 3.7 per cent of the Gross Domestic Product in the last financial year.
Meanwhile, private spending in education was estimated at $50 billion, which is expected to grow to $115 billion by 2018.
Speaking on the occasion, Secretary for Education in Scotland, Michael Russel said, "We are looking at education in life sciences, biofuel and liberal arts as major areas where lot of exchange can take place. There are 4,000 Indian students in Scotland, the second biggest group of overseas students, and we are keen to increase the numbers and also send students from our country to India."
The Scottish minister is here with a 35 member delegation for the FICCI conference. Lin Tsong-ming, Deputy Education Minister of Taiwan, said his country will be offering incentives, including scholarship to the tune of $1.5 million, for Indian students to come and study in universities in the East Asian country.
"Besides, we are willing to extend help in teaching of Chinese here, including providing study material and teachers," Lin said.
There are around 450 Indian students in Taiwan at present and the aim is to take the number to 2,000, he added.