Ashoka University Campus. , Photo credit: Parth Pratim Sharma
wWhile some have dismissed the government’s initiative to set up foreign universities in India as a predatory practice, others have hailed it as a quality-enhancing move. Economic aspects are missing from the conversation. It appears that the Indian education market is attractive and the assumptions that lead to relatively affordable, high-quality education are accepted. The ground reality forces a re-evaluation.
The OECD Global Study on the Internationalization of Higher Education reported that “no matter how altruistic and enlightened the motivation, the financial aspects of setting up an offshore campus are likely to prevail.” Although this observation was made 10 years ago, nothing has changed since then to reconsider this deal-breaker.
Two promising numbers drive the government’s assumptions. First, as the education ministry recently clarified in Parliament, the number of Indian students going abroad is set to increase from 4.4 lakh in 2021 to 7.5 lakh in 2022. Reserve Bank of India Bulletin. The reckoning is that India is an attractive market, even if foreign universities can tap a fraction of this outflow.
The other strong figure is the enrollment figures. The All India Survey on Higher Education estimates that 4.13 crore students are enrolled in higher education. If the policy target is to achieve 50% enrollment ratio by 2035 from the current 27.3%, student enrollment will almost double in 15 years. Much of this is expected to happen in private institutions, which currently only accommodate a quarter of enrolments.
Fees and Costs
The figures look good on paper, but how will they play on the ground? One way to find out is to ask how foreign universities position themselves in terms of fees and costs. If foreign universities want to compete with premier Indian institutes like IITs, they need to take into account the real costs involved. For example, IIT Madras, based on data filed with the National Institutional Ranking Framework, has about 7,000 students with an annual operating expenditure of ₹1,032 core (2020-21). Fees only partially cover this expense. Government support enables the institute to charge fees as low as ₹2 lakh annually for its core programmes. Had the IIT adopted a fully fee-based model, it would have charged at least ₹14 lakh per year to recover its operational costs. This is the basic figure that foreign universities have to keep in mind.
In addition, they have to offer services at par with those offered at home – one of the key conditions of the University Grants Commission and a requirement for branding. In that case, they must bring in foreign faculty and make significant capital investments. With this, if the rate of return is taken into account, the fee would be around ₹20 lakh on a conservative estimate. While this is less than what they charge at home, how does it compare locally?
The local market is scattered. Universities like Shiv Nadar and Azim Premji, which are supported by philanthropic foundations, have managed to keep annual tuition fees for four-year undergraduate courses low (around ₹1.6 lakh for humanities and sciences and ₹4 lakh for professional courses) . Institutes like Vellore Institute of Technology (VIT) take the volume route and charge a mid-level fee. Others such as Ashoka University or Kriya University follow the niche route and charge relatively higher fees. With around 38,000 students, VIT charges around ₹4.95 lakh (merit-based concessions are provided) and Ashoka University with around 2,800 students charges ₹9.2 lakh for liberal arts education. In this scenario, foreign universities can establish themselves as premier institutions and compete with elite private institutions.
make premium
If the institutes can make a premium for the students then the high fee should not be a major deterrent. Recruiters should be prepared to pay increased entry-level wages that can offset higher education costs. IIT and IIM offer two different models. The success mantra of IITs is low fees and high premium. For example, IIT Madras had 90% placement for its four-year undergraduate program (2020-21). It offers students an average entry-level salary of ₹13 lakh per annum. The IIM model is high fee, high premium. For example, IIM Calcutta charges ₹31 lakh per annum, manages almost full placements and receives an average salary of ₹30 lakh per annum (2021-22). Making graduates who are in demand is not easy. Even decades old elite private institutes are yet to reach the level of IITs or IIMs. Their placement record is 60%-85%, and the average salary ranges between ₹ 5 Lakh and ₹ 8 Lakh. The 2019 Global Education Monitoring report on the internationalization of higher education in the Gulf Cooperation Council countries also states that despite GCC countries investing heavily in branch campuses of foreign universities and providing financial incentives to them, “nationalization of the employment workforce has remained elusive.” “
Students traveling abroad pay higher fees for better opportunities and richer cultural experiences. Realizing this, countries like the UAE, where Indian students are the largest among international students, offer 10-year visas for exceptional students and five-year visas for others seeking work. This makes the UAE an attractive destination.
The establishment of foreign universities would not radically reduce outbound flows, but would lead to a modest increase in local options and redistribution of students to elite institutions.