India’s development trajectory is critically linked to the investments in social infrastructure, thus, liberalisation of private education will allow higher investments in human capital and inclusive growth.
30 years ago, in 1991, a major financial crisis allowed for reform that liberalised the Indian economy, and led to India’s resurgence in the world. Today, the Indian education system is facing a crisis of unprecedented magnitude due to the pandemic, but this crisis too presents an opportunity to reform and liberalise the sector, resulting in a higher quality of education for all Indian children.
Nearly 12 crore of the 25 crore Indian children study in private schools. Of these 12 crore children, 70 percent of the students study in private schools that charge less than INR 1,000 per month. Yet, the narrative on India’s private schools is centered around a few elite schools instead of the low budget schools where most private school students actually study.
For all Indian children to be well educated in a way that they are prepared for 21st century jobs and challenges, not only do children need to have great foundational learning but they also need to learn skills that will help them succeed. However, learning outcomes in budget private schools are only slightly better than those in government schools, at best.
The National Education Policy 2020 does a stellar job with academic reforms such as recognising the importance of Early Childhood Education (ECE) and Foundational Learning, emphasising the need to develop higher-order cognitive skills as well as social and emotional skills, recommending flexibility of streams in high school along with integration of vocational courses. While the policy also makes some regulatory recommendations, it doesn’t address the weak state capacity to deliver quality education in public schools, and it doesn’t liberate private schools from the philanthropic mandate. The policy recognises the “severe learning crisis” in public schools but fails to address the accountability issue that’s at the centre of the severe learning crisis in public schools.
For private schools, the policy does recommend that the norms to regulate private schools should change from input-based ones to outcome-based ones. However, the policy fails to recognise that this alone will not be enough to allow low-cost schools to deliver high-quality 21st-century education to 8.4 cr children
For private schools, the policy does recommend that the norms to regulate private schools should change from input-based ones to outcome-based ones. However, the policy fails to recognise that this alone will not be enough to allow low-cost schools to deliver high-quality 21st-century education to 8.4 cr children. Low-cost schools exist because they more accountable to the parents as government schools have failed to deliver by large. However, given the plethora of unreasonable regulations in place, their poor infrastructure, small budgets, and very little room for innovation, they are not in a position to deliver higher-quality education. The COVID-led pandemic has led to such schools losing anywhere between 20 to 50 percent of their revenues, and several anecdotal records report the losses to be much higher. Many states have reported that enrolments in government schools have gone up at the cost of these budget private schools. This trend is likely to be driven by a fall in income of their target audience.
However, irrespective of where these students study, learning outcomes that were poor to begin with, have fallen rapidly due to the pandemic. And there’s very little evidence that either public schools or lowbudget private schools, under the current regulatory setup, have the capability to deliver high-quality education at the scale that India needs. Experience from other sectors of the Indian economy including telecom, aviation, retail shows that liberalisation can improve quality while keeping the costs low. For something similar to happen in education, private schools need a huge influx of high-quality people and large and patient capital. The philanthropic mandate for private schools prevents this from happening.
Schools are supposed to be non-profit in India. However, running a school is a full-time occupation, and only a very few school owners can afford to forgo a return on their investment or a wage for their efforts. This deters both quality capital and people from entering the schooling sector. The ideological imperative that being a noble cause, education must remain not-for-profit is especially bewildering when compared to the evergreen coaching industry and the more recent EdTech sector. The huge influx of capital and people that’s seen in these two sectors is a clear indication of the huge latent demand for quality education in schools as well.
Liberalisation of India’s private schools has to include both a rationalisation of the regulations as well as the removal of the philanthropic mandate. The plethora of regulations currently imposed by state and the centre need to be rationalised into a regulatory framework that focuses mainly on learning outcomes and essential safety norms rather than inputs such as infrastructure requirements, teacher qualifications, and fee caps. Additionally, schools can be required to publish information regarding other important matters including admission process, fees structure, teacher quality without being required to meet norms which impose prohibitory costs on school owners. To ensure that parents are well aware of a school’s performance, standardised census assessments of learning outcomes should be published for all schools, both private and public. As the NEP proposes, an independent regulator separate from state bodies that manage public schools should be set up at each state level to ensure compliance to the limited regulation to act as an ombudsman.
As the NEP proposes, an independent regulator separate from state bodies that manage public schools should be set up at each state level to ensure compliance to the limited regulation to act as an ombudsman
Removing the philanthropic mandate means allowing schools to operate for profit with autonomy on all matters. Currently state and central boards of education require schools to be non-profit entities such as a Trust, Society, or Section 25 Company to affiliate with them. Similarly, most states—though not all—have the same requirement. This requirement should be removed, allowing schools to make a choice. Schools run by philanthropic organisations can continue to operate with their current legal status. However, schools wanting to move to a profit status may do so by declaring their intent.
One major objection against this will be that this will allow schools to raise their fees indiscriminately. While in the long run, competition is the only force that can keep prices genuinely low while keeping the quality high), in the short term, schools may not charge more than say 10-12 percent increment—which most fee regulation acts anyway allow for—to any existing parent. Schools can, however, charge any fees to new parents by declaring the fees for as long as the student can be in school (for the next 12-15 years).
Despite all the regulations and the philanthropic mandate, private schooling is nearly at a US $100 billion size, having grown at about 15 percent compound annual growth rate (CAGR) over the last decade. Given the size of this market, rationalising regulations and removing the philanthropic mandate could push the growth up to 25 percent CAGR, pushing the sector to nearly US $200 billion by 2025. Given the possible scale and the experience of the coaching and EdTech sectors, huge capital inflows into private schools will surely happen once it’s liberalised.
Low budget schools present a huge opportunity at the bottom of the pyramid with their scale and current lack of large players. Various models show that low budget schools could make a 20-30 percent return on investment while delivering better quality education than what’s currently available by leveraging economies of scale, technology, and most importantly better intent. However, to be able to deliver high-quality 21st-centurylearning, even at scale schools need to charge more than the average INR 700/month that low-budget schools currently charge on average.
India already spends an average of INR 30,000 per annum per student in public schools where accountability is poor in general. If this sum, or a significant part of it, were to be made available to parents directly through education vouchers or direct benefit transfers, it would spur a huge supplyside response by spurring huge investment into schools of all kinds. With the parents getting access to school report cards, private schools and public ones will focus on improving their learning outcomes.
Arguments that only public schooling can deliver quality education to all Indian children are not based on reality. At this point of time, the vast majority of our children are not learning anything socially or economically meaningful to them in the schools. The COVID-19 pandemic has further exacerbated the learning gap. And the 21st century requires not just literacy but much higher-quality education and higher-order skills than being able to read, write, or add alone. Yet our failure to deliver the basics points to serious and complex problems in our system. India can’t afford to make incremental safe changes and expect radically different outcomes. Radical changes are necessary. The only realistic way that all Indian students can get education that actually prepares them for the 21st century is to liberalise India’s private schools and fund students directly.
(This article is based on the report, “Liberalization of India’s Private Schools, by Vardan Kabra and Anupam Gupta, released in October 2021 by FICCI_ARISE. The full report is available here:
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Vardan Kabra is an engineer from IIT Bombay and after graduating from IIM Ahmedabad he co-founded and heads Fountainhead School in Surat. He's also supporting ...
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