Atanu Dey On India's Development

India Spends $13,000,000,000 on Education Abroad

That’s what a report in the Hindustan Times claims: US $13 billion each year. Figures such as these are unbelievable but I suppose someone must have done the numbers. In any case, I had estimated that number to be around $10 billion a few years ago.

Let’s pause for a moment and figure. $13 billion every year. Or in the last 10 years, about $100 billion. Imagine what you could buy for that money. How about 100 colleges with first class infrastructure with housing, classrooms, labs? Each year India could have an additional capacity for 10,000 college students and in 10 years you could have 100,000 additional capacity. Imagine the multiplier effect of that spending — in construction, in salaries to teaching and non-teaching staff. Imagine the boost to the industry from creating human capital. The imagination boggles at the sheer waste.

Imagine how much infrastructure you could build for $100 billion.

One of the principal lessons one learns as one studies economic development is that success or failure depends largely on the set of economic policies that govern the economy. India, for instance, is poor and economically a failure because its economic policies are extremely brain-dead. Of course one can explain why these brain-dead economic policies exist. We will not visit that now. Here I would only mention that the policy on education is the most brain-dead and that educational policy is largely to blame for why India is poor today, and if the policy is not changed, then it will certainly doom India in the future.

In other words, India is poor because Indian policymakers are either (1) morons who are too bloody stupid to realize that they are continuing to keep India poor and are killing any future that India may have, or (2) they are evil immoral bastards that know what they are doing to the country but do it anyway because by controlling the system they line their own pockets. Or perhaps a combination: some policymakers are of the first kind (morons), and some of the second (bastards.) In end result is the same, however.

Here’s the text of that article — for the record.

Industry body Assocham said on Monday that over $13 billion is spent every year by about 450,000 Indian students on higher education abroad.

Over 90 per cent of students appearing for the Indian Institutes of Technology (IIT) and the Indian Institute of Management (IIM) entrance examinations are rejected due to capacity constraints, of which the top 40 per cent pay to get admission abroad.

“Over 150,000 students every year go overseas for university education, which costs India a foreign exchange outflow of 10 billion dollars. This amount is sufficient to build more IIMs and IITs,” it said.

The primary reason for a large number of Indian students seeking professional education abroad is lack of capacity in Indian institutions. The trend can be reversed by opening series of quality institutes with public-private partnership by completely deregulating higher education, Assocham President Venugopal Dhoot said in a statement.

Higher education in India is subsidised as an IIT student pays an average 120 dollar monthly fee, while students opting for education in institutions in Australia, Canada, Singapore, the US and UK shell out 1,500-5,000 dollars as fees every month.

Deregulation of higher education in the country will result in creating annual revenues of 50-100 billion dollars, besides providing 10-20 million additional jobs in the field of education alone, the chamber said. India has only 27,000 foreign students, as compared to four lakh in Australia.

Assocham further said vocational education in India is a meagre five per cent of its total employed workforce of 459.10 million as against 95 per cent in South Korea, 80 per cent in Japan and 70 per cent in Germany.

[See follow up article on Educational Spending.]

  • http://www.bhopale.blogspot.com bhopale

    I am trying to understand your brilliant ideas about opening up/transforming education in India.

    In Madhya Pradesh, a galore of private college has come up lately – degrees are being offered in law, engineering, medical and education. Output quality is low, the engineers mostly end up into call centers doing supervisory jobs or marketing insurance policies. The Government has found another stream of making money by giving permission to setup such colleges, but that is beside the point. One cannot compare the quality of these colleges to IIT/IIMs, but is an IIT-Kanpur pass out comparable to IIT-Silchar, or IIM-Ahmedabad comparable to IIM-Indore? These so called “private colleges” have pretty good campus and other infrastructure. The staff turnover is high as lecturers are always on the lookout for better recognized colleges, if not some government college. If neither of these two happens, they open up their tuition institutes for Joint entrance and start minting money. It seems the Indian child will go to US if they do not make it to the top IITs – more so if the loan comes by easily.

  • Siva

    Atanu,
    I agree with your basic idea. But two questions.
    1. The figure US $13 billion (or even the $10 billion) looks farfetched. That is $29K per year per student (assuming 450,000 is correct and 150,000 is a typo) which is higher than even Stanford’s tuition (10 unit at least). If you consider public schools, student who do Phds, students who have funding, student who earn to pay part of their tuition then the amount will be far less. And if you consider that the reported number for Indian students is 84,000* then the amount is totally different. (*http://www.insidehighered.com/news/2007/11/12/opendoors )
    How did you arrive at US $10 billion.
    2. Do you think improving higher education in India will lead to students spending that few billion dollars in India even if the salary gap stays the same.

  • http://idlinginc.blogspot.com idlinginc

    Siva,

    84,000 students is just for US. Let me bring to you kind attention countries such as Australia, UK, Germany, Canada, New Zealand, Mauritius, China, Russia …

    Perhaps you consider tuition to be the only cost. That would be true, if students lived under trees, roamed around naked, ate leaves and used the woods for nature calls. Unfortunately, the countries our students go to are conservative (and students would be arrested for lewdness or littering), can’t eat leaves (not tropical countries), and being cold places, need some housing. These costs, commonly known as “cost of living” are at least as much as tuition.

    Hope that helps.

    Best,
    Idler.

  • lurker

    $13 billion is a colossal sum of money, about what all the foreign students contribute to the US economy every year. There is no detail to this data, but were it analysed we would find a large mass of students we ship out are the full fee paying undergrads. Were schools of comparable quality available in India would our students still ship out? We can at best make an educated guess and confidently say no. Take the IITs and its peers, BITS and a handful of other schools. Hardly anyone turns down an IIT undergrad admission for a US school, unless it is of the caliber of Caltech – possibly the only undergrad engg program in the US that can be compared with the IIT program in terms of student quality – MIT is a bit behind. Today we have a lot of private schools but by and lare the newer crop is run by carpetbagging fundamentalist theocratic ignoramuses out to make money, only money and nothing else, like this joke of a university – http://preview.tinyurl.com/yoj54q – in the style of the numerous diploma mills in the US run by televangelical louts. Even otherwise good colleges like St.Stephens have fallen prey to the Indian government’s propensity to indulge minority thuggery and thievery, as we saw with the recently concluded tamasha orchestrated by “Rev” Valson Thampu. Today we do not have a free market in education, the government controls it in innumerable ways – thru the UGC, AICTE, and of course by breathing down the necks of genuine educational entrepreneurs like the Manipal Pai group or the BITS trustees while looking the other way at “minority” institutions like the one I have linked to here. What we need is for the government to completely quit the educational sector and leave the private sector a free reign. With the sort of controls we have only pseudosecular crooks and shady operators are attracted as they can get by by greasing the palms of assorted politicos and babus. Allow the private sector in, let India’s traditional business houses, Tatas, Birlas, Bajaj, Mahindras, Godrej, and many others every one of whom has run outstanding primary and/or university level isntitutions set up schools we can be proud of. IISc, TIFR, and BHU (India’s only true multiversity) are all the result of enlightened philanthropists and leaders (Jamset Tata, JRD/Bhabha, Pt.Madan Mohan Malviya).

  • http://adityaathalye.wordpress.com/ Aditya Athalye

    My argument is based on a gut feel for the education business/market in India.

    1) The education business in India is currently a play based primarily on control of physical infrastructure… particularly land.

    S/He who controls land, controls education.

    The business sustains (so far) on the ability to rapidly extract rent for physical infrastructure by offering some educational services. The higher the degree offered, the higher is the rent, the better it is for the educator.

    From what I’ve observed, the rapid growth in the number of higher education institutes indicates how lucrative the business is for landowners.

    2) “The Market” (companies/organizations) by and large supports this basic model (so far) because it is not yet demanding enough on the quality of people it hires.

    Someone with a substandard education, underdeveloped skill set, but with the right sounding degree still gets employed.

    Hence there is no incentive for the educator to up the quality of educational services offered. There is no incentive for the student to demand any better.

    Therefore “Knowledge Infrastructure” in the form of a highly academically-driven environment, rich contemporary curriculum, good faculty, relevant contemporary research, industry-academia partnerships etc… has taken a back seat.

    3) BUT “The Market” wants to be globally competitive. It is surely and rapidly getting more demanding about the quality of its hires. It will quickly find workarounds if the traditional route of talent development through education fails to meet its upgraded requirements.

    So, control of land will rapidly become secondary to running a successful education business.

    It is up to Educators to go beyond the infrastructure they have created and really up their academic game if they wish to survive for the next decade and beyond.

    Also, I’m optimistic that the interests of The Market will prevail over the interests of a few individuals in the next 5 years or so.

  • Siva

    Idler, Thanks for explaining what cost of living is. I am going to rely on anecdotal evidence here. I haven’t seen a single student (US grad school) who relied on money from his parents or his savings for more than a month of living expenses. Most of the students start searching for a part time job even before leaving India. I hope you can throw some light on cost of living in China and Russia.

    PS : The cost of living is never as much as tuition for a typical grad student in US.

  • Amit

    Atanu,

    I’m a bit unsure about the title of this post. You write “India spends…” but it’s not the Indian State – rather individual citizens who are choosing to spend that money the way they see fit, no?

    Further you say:
    “Imagine what you could buy for that money. How about 100 colleges with first class infrastructure with housing, classrooms, labs?”

    Doesn’t it assume that all this money is sitting around with the government or a single entity which has a choice to either spend this money in the US for tuition etc., or for building 100 colleges in India with first class infrastructure?

    A rough analogy would be that Indians have spent x amount of money over the past 10 years in buying cars. Wouldn’t it be great if that x amount was used to build a first-class public transport system instead?

    How can cumulative money for tuition be spent on building colleges? I’m scratching my head here.

    I agree with your broader point though about having more colleges in India, and if India has more first-class colleges, students will have more options available to them and some/many of them will spend the money in India, instead of going to a US college and spending money there.

    Thanks.

  • Amit

    One more thought.

    How much does an aircraft carrier cost? Or a missile? Would it really compromise India’s security to have 5-10% fewer number of missiles or submarines? If the answer is an emphatic no, then re-allocate that money to building colleges. Problem solved. Anyway, all that money is going to foreign countries too.

    Didn’t someone you come close to worshiping say:

    This topic brings me to that worst outcrop of herd life, the military system, which I abhor… This plague-spot of civilization ought to be abolished with all possible speed.??

    ;)

  • http://www.deeshaa.org Atanu Dey

    Amit (#7):

    “India spends …” in this context is a compact way of saying “Indians collectively spend …”

    So no, it is not as if that collective amount is sitting around in the government coffers and they can just build the colleges using that money.

    As you may have correctly suspected, markets don’t work like that. People spend their money where they have an opportunity to do so.

    A lot was left unsaid by me in the post — including the exact details of how I believe the system can be fixed. Partly because I have written extensively on this blog about the matter; and partly because it is commonsense.

    But let me be explicit now.

    Suppose private sector entities, noting the demand for quality higher education (as can be judged by the spending), decide to provide quality higher education in India. Then people see that you can actually get a decent education in India and some choose to spend their money here.

    That expands the market for education in India. The supply increase attracts foreign students, a source of earnings for India. (More about this in a subsequent post.)

    The bottom line: I am disgusted at the short-sighted idiocy of the policymakers who do not allow the private sector the freedom to invest in education business. The education business in India can be much much larger than the IT business.

  • http://www.deeshaa.org Atanu Dey

    Amit (#8):

    Yes, Einstein said that he abhors the military — as do I. Herd behavior is what repels me. That is part of the reason that I find Islam and Christianity abhorrent. They are regimented ways of approaching the mystery of life.

    Yes, money is fungible. You can shift from buying guns to buying butter. Yes, you can build colleges instead of missiles. But your point is?

  • Amit

    But your point is?

    That there are many ways to skin the cat.

  • tarang_72

    How many of these students are going abroad just for the purpose of education? I did my masters at Carnegie Mellon and can assure you that most of us wanted to migrate to US and wanted a better stamp to work in the US market.

    So, even if we have better facilities in India, how many of the students will still prefer overseas education for settling abroad.

    To one of the posts by lurker: if learning in good school is the only purpose; why not IITians do not do Mtech? Why do i see floods of them with degrees in Mech/Chem/Env engg doing Phd in Comp Sci? Isn’t it for better job prospects?

  • lurker

    Amit, If the answer is an emphatic no, then re-allocate that money to building colleges. You said it. NO. Without getting into why it is a NO, let’s just say that this is a discussion on how to invest in education, not how to invest in our defence.

  • BytePro

    Interesting discussion!

    One of the central issues about Education in our country is the “multiplier effect”, or “scaling it up”. Unfortunately, as of today, our political set up has failed to deliver education to the population. Analysis of the reasons behind are useful to determine the mistakes. The next step is to correct them. And that is where the liberalizing of education sector comes in in order to shift the competition to the supply (of education) side. While the sum total of the money is one of the necessary things, it’s correct application (distribution, division and use) to the purpose (scaling) is equally necessary.

    The 13 billion is the sum total of the spending by the collective. The question is why is the collective choosing to spend so? A related issue: would it be good for the state to use it’s powers to curb this expenditure? Given the current state (pun!), I believe the State is likely to consider it “good” to curb, while a more positive way would be to spend the resources to achieve the scale. It is a license raj after all. The private colleges as permitted by the Govt. will be making money with no issue/pressure about quality since the competition is on the demand (of education) side :) (something that the “permission” system takes care of maintaining).

    And while we are at it, the 13 billion is about higher education (or tertiary as Atanu calls it).

    Also while we discuss the “arithmetic”, then perhaps we should also be looking at the 13 billion (or whatever) in terms of the fraction of the total spent on higher education by the collective. Of course, if we had a strong enough academia, and education that could provide the “service” locally, then the 13 billion could turn inwards!

    Atanu: I suppose the main question this post may be asking is: what do we need to do today to redirect the flow of that money inwards tomorrow given that the flow is outward today?

  • http://www.deeshaa.org Atanu Dey
  • vasudevan

    Indian students wanting to study in India in good colleges are limited by all the factors the honorouble members above me pointed out in their views but i think a major one missed was:

    reservations for castes & minorities

    this simply kills the chance for the unreserved lot. In case they wish to study in India they have no option but to pay hefty black money through backdoors in most of the private professional colleges.

    there are many universities abroad who conduct regular roadshows in India and such universities also inform the students about some limited scholarships they have but most of them do announce the scope of working and earning while studying abroad. students earn much more abroad for delivering paper than their fathers might earn in India as engineers.

    Besides, most students who go abroad have long term plans. Like someone mentioned correctly, they go not to return but to stay on. Even otherwise, these foriegn shores are good launchpads for jobs further on in other continents. India cannot offer such good launch pads for average students from average colleges in India (of course, every T-D-H professional from any duck university in India is nowadays going abroad to do some clerical job there under the garb of software engineer etc. but that is besides the point).

    If one totals up the whole thing, it would emerge that studying abroad becomes cheaper for an unreserved category of Indian than paying backdoor money to join a good professional institute in India.

  • pankaj

    The students who go abroad for so called ‘Higher Studies’ do so in the intent of settling there,how many have come here atleast not after education they may do so after some years as a posting for some company which has operations in india and that also for temporary basis.Education abroad is a door through which people settle abroad.and its much easier than applying for work visa.

  • lurker

    “Herd behavior is what repels me. That is part of the reason that I find Islam and Christianity abhorrent. They are regimented ways of approaching the mystery of life. ”

    Whats so herd-less about Hinduism or for that matter any religion you are devoted to ? Celebrating Holi in the name of God.. is it herd-like or not? Celebrating Diwali in name of Goddess is it herd-like darling? Rushing to pilgrimage in long serpentine queues is it herd-like?

    What a SHAME that you leave no opportunity to denigrate “other” religions.

  • vasudevan

    i guess herd like is with reference to unthoughtful group behaviour which leaves no scope for thinking ‘out-of-the-box’.