$13 billion annually for education outsourcing?

A study recently released by the Hindustan Times estimated that $13 billion a year are spent by Indian students abroad for higher education. Atanu Dey tried to frame this number into more tangible terms.

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.

The issues here are complex, but the article highlights that over 90% of people rejected at an IIT is due to capacity considerations. Moreover, higher education in India is subsidized while students are forced to pay full market prices when they study abroad. The article suggested deregulation as a potential solution.

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.

Dey echoes these sentiments on dregulation in a followup post where he argues that by opening up the market it will theoretically lower the costs to education and increase competitive efficiencies in its provision of it.

Large domestic markets allow an economy to achieve scale economies, and efficiencies through learning-by-doing, and therefore gain comparative advantage. India has a potentially very large domestic market in education. It is only potential and not actual because the supply is deliberately not allowed to expand to meet the demand.

However, Dey recognizes that this competition must be made possible from the bottom up in the education space in order to ensure that the barriers to entry in the newly ‘deregulated’ market do not handcuff the market from the outset. Using the analogy of licensing and monopolies, Dey describes the current situation where the government enjoys a monopoly over the provision of higher education and its perverse influence to actually reduce competition to retain power.


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