Reforming Higher Education, With a Helping Hand From Philanthropy

The insufficient public spending on higher education needs to be supplemented, not with for-profit private investment, which does not consider educational standards and quality, but rather with genuine philanthropy.

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If India wants to become a superpower, higher education must be reformed on priority. Expectations were high from Budget 2022 for the allocation of substantial funds for higher education as well as strategic changes in policy. While the budget has taken some steps in this direction, it is far from what is needed. 

India lags behind in global university rankings; in mentions of Indian scholars as endowed chair professors or fellows of prestigious societies and universities; and in the output of prestigious research written by scholars, especially in the liberal arts and humanities. Articles by foreign scholars on India are cited more often than those by Indian academics. 

There is an enormous unmet demand in the higher education sector. According to the All India Survey of Higher Education (AISHE) for 2019-20, the gross enrolment ratio (GER) in higher education in India (the percentage enrolled in the age group of 18-23) is merely 27.1 %, as compared to 54.4% in China or 88% in the USA. 

Despite the demand, India is poorly served both in terms of the number of institutions and in terms of quality. This is principally because of the meagre allocation of public funds. India spends less than other fast-growing economies on higher education and research and development. Though public expenditure on all education has increased tremendously since independence, from Rs 64.46 crores (0.64 % of GDP) in 1951-52 to 3-3.5% in recent years, this clearly is insufficient to ensure both the expansion of seats and improvement in quality.

The latest budget allocation is much less than the 6% of GDP committed in the National Education Policy, and as spent by China.

Much of the existing supply is met through private institutions. AISHE 2019-20 reports that 78.6% of colleges are privately managed and, as discussed below, most are for-profit teaching shops.

Stringent government regulations – both for public and private institutions – allow little freedom to institutions, even prestigious ones, to innovate and adapt to the needs. As a result, the system churns out ill-prepared and unemployable graduates due to a chronic shortage of faculty, poor quality of teaching, outdated and rigid curricula and pedagogy, lack of accountability and quality assurance, and the separation of research and teaching. In consequence, the state of academic research today is lamentable. 

Also read: Children’s Share in Budget Has Nearly Halved Since Modi Took Charge

2022 budget allocations 

Of the Rs 1,04,177.7 crore allocated in the 2022 budget for education as a whole, Rs 40,828.35 crore was set aside for higher education; an increase of Rs 2,478.35 crore (a mere 6.46%) over last year’s budget estimate. In fact, amounts for some specific projects, such as the Higher Education Funding Agency (HEFA), have actually been reduced.

Formed five years ago, HEFA was meant to grant infrastructure loans to institutions, including central universities and Indian Institutes of Technology (IITs). The budget for HEFA has been reduced to the negligible sum of Rs 1 lakh.

The budget for the Rashtriya Uchchatar Shiksha Abhiyan (RUSA) was also reduced, from Rs 3,000 crore to 2,042.95 crore. A centrally sponsored scheme, RUSA supports state higher educational institutions, especially those who give priority to education in backward and aspirational districts.

Luckily, Budget 2022 had some positives: a digital university to provide personalised learning in regional languages; allowing world-class universities to establish campuses in India and offer programs in financial management, financial technology (fintech), science technology, engineering and maths without following local regulations; and allowing states to revise the syllabus of agricultural universities to meet the needs of natural, organic and modern-day agriculture.

Most notable is the increase in the budgetary allocation for research. Among this is the Scheme for Promotion of Academic and Research Collaboration (SPARC), which has been given a substantial raise from Rs 10 crore last year to Rs 74 crore this year. Moreover, a greater budget of Rs 1,700 crore has been allocated for Institutions of Eminence, though only Rs 1,369.30 crore had actually been spent on these as of February, 2021. What is more, five institutions are to be recognised as ‘centres of excellence on urban planning’. 

Also read: Stagnant Budgetary Allocations to Education Indicate Government’s Plans to Privatise

The need for philanthropy 

Greater investment is needed in education, especially in basic research. As executive chairperson of Wipro, Rishad Premji, pointed out in an article for the Economic Times, whatever gains India have made in technology have come from institutions like the Defence Research and Development Organisation (DRDO), the Indian Space Research Organisation (ISRO) and public and private universities. India needs more long-term in-depth research in new and emerging technologies.

Unfortunately, the government spends only 0.7% of its GDP on R&D, compared to the 2% spent by China or the 5% spent by Israel.

Clearly, public expenditure needs to be supplemented with private investment, and especially philanthropy. Though the share of the unaided private sector in education has increased significantly since 2001 in terms of the number of institutions and enrolment, the situation is unsatisfactory for a number of reasons.

Private investment in education is made up of two parts: the first, greater part represents a privatisation of education in the name of philanthropy, and the second, smaller part represents genuine philanthropy. Much of the increase in private investment is interested only in the profits to be harvested from providing education and not in improving standards. And even in the so-called philanthropy, there is a cynical use of charitable trusts for the sake of profit and personal gain.  

Most universities and colleges are set up as not-for-profit, tax-exempt ventures under Section 25 of the Companies Act, but a large number operate as for-profit entities, charging high capitation and tuition fees without giving corresponding value-added services. Their income comes from fees rather than endowments and investments and they make large profits, especially professional colleges, without having to pay taxes on them.

Tax exemptions have attracted huge amounts of black money into the higher education sector. Registering as a non-profit charitable trust also allows for easier land acquisition without inviting public interest litigation. 

The result is that though there are some private institutions of a high standard, on the whole, there is a mushrooming of private, often for-profit, “unaided”, academically mediocre colleges with questionable standards. There is little pedagogical innovation or research, and they have thrived only due to the connivance and active involvement of politicians and officials. 

Also read: The Systematic Dismantling of Public Higher Education in Western UP

Fortunately, genuine philanthropy does also exist. Though smaller in size than private investment in education for profit, it is growing. Education has long been a favoured field for philanthropists, and the potential to attract more philanthropy to education is encouraging. Bain and Company’s ‘Annual Philanthropy Report, 2021‘, points out that private philanthropy totalled about Rs 64,000 crore in 2020; almost 23% more than in fiscal year 2019 (Rs 52,000 crore).

Family philanthropy, in particular, has considerable growth potential, whereas other philanthropic sources are constrained.

According to the ‘Billionaires Insights, 2020′ report, published by UBS and PwC, the wealth of Indian billionaires grew by 35% between April and July, 2020, and according to Edelweiss’ ‘The Family Wealth Report, 2018‘, India has nearly 1,50,000 ultra-high-net-worth families, holding a cumulative net worth of about Rs 140 lakh crore. This cohort is expected to grow to 4,00,000 families with a net worth of almost Rs 360 lakh crore by 2025.

Indian billionaires give proportionately less than their global peers. If these families start giving in line with their global counterparts (2% to 3% of their wealth), family philanthropy could generate an additional annual investible corpus of Rs 60,000 – 1,00,000 crore for the non-profit sector.

Education and health-focused funding dwarf other causes – receiving 47% and 27% of total family philanthropy respectively. In addition, there is a small but growing trend of alumni donations to alma maters, though the downside is that there is also some outflow of Indian philanthropy to foreign universities like Harvard and others, where the donors once studied.

The mandatory contribution of 2% of profit before tax for corporate social responsibility (CSR) programmes under the Companies Act, 2013 should also give companies a push in the direction of setting up new universities. For many companies, the amounts to be spent under the CSR requirement are so large that only a big project can absorb such amounts, and a university is an ideal project.  

All this points to the need for educationists to make greater efforts to draw more philanthropy towards research and improving higher education. Liberal arts and humanities, in particular, are deprived of the funds they badly need to improve standards. There are too few endowments for Chairs of Eminence or for Distinguished Fellows that would raise the status of an institution to that of an internationally recognised Centre of Excellence.

The number of merit-based scholarships and fellowships also need to be increased. Such measures would also require less amounts of money than setting up new institutions and creating infrastructure.  

Also read: Why Exclude SC Students Wanting to Study ‘Indian’ Topics Abroad from National Scholarship?

Realising the potential of philanthropy, the New Education Policy (NEP) is encouraging universities to look for external sources for funding. But apart from a few exceptions, like the IITs and the Indian Institute of Science, Bangalore, higher education institutions have not attempted to tap into the huge alumni resources through aggressive fund-raising.

The Association for Indian Universities (AIU), which works as a link between the government and universities, has, therefore, been tasked with training institutions on how to approach foundations for philanthropic funding and whom to approach. 

But before philanthropy can prove to be the ‘magic bullet’, several constraints, especially on the policy front must be removed. One of these is the government’s refusal to give autonomy to public or publicly-aided educational institutions. Donors of scale, whether non-resident Indians (NRI) or those living within India, hesitate to commit large resources unless they also have a say in their use as well as an institutionalised mechanism to have their voices heard. However, the governance structures of most higher education institutions are so poor that such mechanisms are non-existent and government interference with institutional autonomy rampant.

Further, the regulatory regime on philanthropy also needs to change. It is difficult – if not downright impossible – for public colleges and universities to tap private resources or seek to leverage old school ties with alumni to raise funds because of the University Grants Commission’s practice of deducting such philanthropic contributions from a university’s grant-in-aid. It leaves little incentive for these institutes to conduct aggressive fundraising campaigns. 

An inheritance tax, as exists in the USA, has also been suggested as a step to increase philanthropy, and needs to be debated and explored. 

Finally, since it is difficult to distinguish real philanthropic activity from disguised profit-making because all Indian universities and private colleges are “non-profit” organisations, the government must tighten licensing standards, improve quality assurance and put in place a rating framework which emphasises student learning outcomes and research and not only facilities and infrastructure. A regulatory mechanism should be developed in consultation with private players to oversee all educational institutions – public and private. 

Pushpa Sundar writes extensively on philanthropy. Her latest book is Giving with a Thousand Hands: The Changing Face of Indian Philanthropy (OUP 2016).