One thing that is certain about any interaction on the internet today is that somebody will try to sell you something, and most likely will offer you a discount as well. The interesting question to ask is: Just because a discount is offered, does everyone purchase the item? Access and uptake are different things. The recent University Grants Commission (UGC) announcement to let foreign universities set up campuses in India is a great idea. What is less clear is the results it would deliver.
We had already opened up our education sector to private entrepreneurs. While private institutions have mushroomed, the majority haven’t really kept up in quality. Opening up to another set of private entrepreneurs can potentially introduce more competition — just as discounts are a good idea, because they enable some the option to buy items that were unaffordable earlier. In that sense, the UGC has done well to allow more providers and possibly expand the market for higher education within the country.
Having said that, let’s get something clear: Higher education is a costly business. Setting up science, technology, engineering and medicine (STEM) departments requires costly labs with stringent quality control and safety protocols in place. Add to this policy uncertainties in India and the non-trivial impediments the UGC can offer, it’s unclear that the best global universities will come marching in. It’s not like they are short of students in their primary campuses.
For instance, a perfect entry deterrence strategy would be the UGC’s insistence that a foreign institution’s faculty in the India campus have the same qualifications as the faculty in the primary campus. This will not be a cost-effective idea for a Harvard or Stanford, besides making it impossible to recruit the necessary numbers of faculty for the India campus. The majority of universities coming in, then, will most likely be “teaching shops” providing a lower-cost India-based option to parents. These teaching shops would only be able to recruit matching faculty. Consequently, we will not benefit from R&D spillovers and provide a boost to innovation that top-notch foreign universities are known for. At best, we can expect the entrants to be in areas such as liberal arts or business and law schools, which do not require investments of the same magnitude as STEM disciplines.
Besides, there is the issue of labelling. Mercedes-Benz today produces small cars jointly with China’s ZGH Group, which it sells under a different “Smart” brand. There’s a reason it does so. Similarly, an Ivy League university wouldn’t want its India campus to affect the brand equity derived from the primary campus. A few big-name universities have tried opening campuses elsewhere. But these have tended to be small and, by and large, subsidised by the local governments. Subsidies are out of question because we don’t offer the same to our own private educational institutions. New York University-Abu Dhabi, for instance, has around 2,000 students. Most of them attend for free since more than 90 per cent of the campus’ revenues come from the UAE government.
Let’s now consider the stakeholder at whom the latest reforms are directed — the Indian student and her parents. The UGC guidelines potentially open up a cheaper studying option, but not necessarily one that is of higher quality. One reason parents are willing to send their children abroad is that it provides them access to foreign labour markets; the higher earnings from there can eventually more than recoup the high cost of the foreign degree. Like in our discount coupon story, Indian campuses may appeal to the price-sensitive consumer, but others will still prefer their children to go to the primary campus.
Unfortunately, foreign universities will also internalise this argument, providing yet another reason for the best ones not to set up Indian campuses. The labour market, too, would always rank the degree from the primary campus higher, preserving market segmentation. It raises the question of what kind of jobs students graduating from Indian campuses will get and is it worth the price tag.
However, I also envision exciting opportunities. Imagine that instead of trying to establish full-fledged campuses, a foreign university ties up with an Indian institution for joint degree programmes in some specific disciplines. Each entity can, then, focus on its comparative advantage. The Indian institution may provide the infrastructure, logistics and access to the Indian market, and the foreign institution the advanced manpower. This could even be used to boost research and new knowledge generation in those areas. Another example can be in the medical field, where India would provide access to many more patients than any Western university for training purposes.
My department at Virginia Tech is, from July 2023, beginning a Master’s programme in Economics with NMIMS University in Mumbai. Students will complete their first year in India covering the core micro and macroeconomics courses. They will do their second year at Virginia Tech in the US, focusing on courses such Big Data Economics and Behavioural Economics — the university is not planning to set up a campus in India. The programme will provide them two degrees (one from NMIMS and Virginia Tech each) in two years at a lower cost than a two-year US degree.
The NMIMS-Virginia Tech partnership also mandates faculty exchange with the goal of conducting collaborative research. UGC’s guidelines, appropriately curated, can facilitate many more such meaningful collaborations with foreign institutions of excellence in higher education.
Sarangi is the Department Head of Economics at Virginia Tech and author of The Economics of Small Things