India's Financial Progress Hinges on Rectifying Flaws in Higher Education
In an unprecedented achievement, India has outshone China to become the leading market for Initial Public Offerings (IPOs) in Asia. Though celebratory headlines fill newspapers like the Financial Times, a more profound issue emerges: Can India's higher education system sustain this growth momentum?
Considering the growth from an strategic perspective, this isn't just about numbers but the system's ability to match educational outcomes with national economic needs.
Obstacles Facing India's Higher Education and Economic Development
As vast sums of money flowed into Indian equities, driven by investor optimism, a substantial question arose: Who will drive this growth in the next 2 decades? Will India's universities and institutes of higher learning be prepared to cater to the demand for skilled talent, innovation, and intellectual leadership?
Assessing this readiness necessitates a detailed examination of India's higher education system – its scope, structural challenges, and potential for reform.
At first glance, India's higher education system appears powerful with over 56,000 institutions educating nearly 40 million students, supported by 1.5 million faculty members. Over the last decade, the sector has seen a significant increase in institutions – from 600 universities in 2012 to nearly 1,150 today. Privately managed institutions, now making up 40% of the total, dominate the landscape. Concurrently, student enrollment grew by nearly 16% in just 5 years.
However, growth alone does not paint the whole picture. Underneath the surface lurks a paradox. While the sector has expanded in size, quality remains inconsistent, and research output falls short of international standards – an issue recognized in studies by EY and The MIT Press.
Overcoming Skill Gaps in India's Higher Education and Economic Development
Even India's prestigious institutes, such as the IITs and IIMs, grapple with faculty shortages, infrastructure shortcomings, and bureaucratic inertia. Vacancies among faculty stand at 40% in IITs and 31% in IIMs, indicating a chronic issue in attracting and retaining top academic talent. These figures are far from insignificant – they represent the very threads holding together an education system that could unravel under pressure.
The stakes are high. India's young, burgeoning workforce could transform into a liability if the education system fails to deliver. With projections suggesting that India must add 26 million higher education enrollments by 2035 to meet the National Education Policy's (NEP 2020) target of a 50% Gross Enrollment Ratio (GER), time is of the essence.
As Vijay Pereira, the newly appointed senior professor and director of KEDGE India at KEDGE Business School in Paris, explained in our interview, India's higher education sector stands at a 'tipping point.' While there's undeniable growth, there are significant structural gaps in quality, equity, and research focus that require immediate attention. To bridge this gap, India's education landscape must align closely with global trends, particularly in fostering collaborations between academic theory and industry practice.
These talent gaps and institutional capacities become increasingly evident when viewed alongside India's recent economic performance.
Research and Innovation in India's Higher Education and Economic Development
India's success in IPO fundraising in 2024 was not a mere stroke of luck. It stemmed from years of economic realignment, tech sector maturation, and a thriving entrepreneurial ecosystem. Companies like Swiggy, Zomato, and Ola Cabs have become household names in India and beyond. Hyundai Motor's substantial listing in India further emphasized India's growing importance in global equity markets.
But behind these financial triumphs lies a less-talked-about issue: talent. As industries expand, they need leaders, engineers, researchers, and strategists. India's booming economy – now the world's fifth-largest – cannot depend solely on the IITs and IIMs to produce the workforce of the future. Systemic reform – renovating teaching methods, research funding, and industry alignment within thousands of smaller institutions – is urgently needed.
Consider the digital transformation wave. While major urban universities have integrated hybrid learning models and AI tools into their curricula, smaller and rural institutions struggle under the weight of outdated teaching methods, poor infrastructure, and limited digital access. Less than 1% of Indian colleges are registered with the Academic Bank of Credits (ABC) system, designed to allow students to transfer credits between institutions. This lack of adoption constrains mobility and flexibility for students, perpetuating systemic disparities and limiting access to contemporary academic opportunities.
Digital Transformation in India's Higher Education and Economic Development
India dedicates only 0.69% of its GDP to research and innovation – a marked disparity compared to countries like South Korea (4.2%) and Israel (4.3%). This minimal investment translates into a noticeable disparity in research capacity. According to 2023 statistics, South Korea leads with 7,498 researchers per million people, followed by Japan (5,304), the United Kingdom (4,341), and the United States (4,245). In contrast, India has only 255 researchers per million – a figure that underscores the scale of the challenge.
Pereira, the president-elect of the Indian Academy of Management, discussed with me that without substantial investment in research infrastructure, faculty development, and policies supporting long-term research goals, India risks lagging behind globally in both competitiveness and innovation leadership.
Global collaborations are frequently suggested as a way to overcome this issue, providing Indian educational institutions with the chance to boost their research capabilities and comply with worldwide standards. However, these collaborations are not widespread. Less than 10% of India's 1,043 universities and only 1% of its 42,343 colleges actively engage in internationalization activities. Out of these, around 230 universities meet the requirements to offer joint, dual, or twinning degree programs. Despite government initiatives, inconsistent policies, structural barriers, and limited institutional capacity continue to hinder widespread adoption.
However, there are some optimistic instances. Partnerships such as Cranfield University with Manipal Academy of Higher Education (MAHE), the University of Liverpool with IIT Palakkad, and Vijaybhoomi University with KEDGE Business School demonstrate the potential of international collaborations to increase academic excellence, stimulate research innovation, and foster cross-cultural knowledge. Yet, these instances are few and far between, primarily occurring in elite institutions.
For internationalization to transform into a sector-wide catalyst rather than an exclusive privilege, India needs to tackle systemic obstacles. Clear regulations, financial incentives, and capacity-building initiatives will be crucial in empowering smaller institutions to participate effectively in global networks.
The Future of India's Higher Education Sector and Economic Growth
India's higher education sector currently finds itself at a critical juncture. Its growth in size and ambition is evident, but significant weaknesses in research, talent development, and institutional alignment continue to pose challenges.
Addressing these challenges necessitates a strategy based on established theories. Porter's Competitive Advantage emphasizes the need for institutions to capitalize on their unique strengths. The Resource-Based View (RBV) underscores the importance of creating unique assets—expert faculty, advanced research infrastructure, and strong governance. Dynamic Capabilities Theory emphasizes agility and adaptability, enabling institutions to swiftly adapt to trends like digital education, AI adoption, and sustainability requirements.
In essence, India's educational strategy must align with its economic aspirations to secure sustainable growth and global competitiveness. Success is not just about policy intent but also about execution that matches vision, resources, and institutional culture with innovation, agility, and strategic long-term perspective.
- To maintain India's economic growth momentum, there's a pressing need to assess the readiness of its higher education system to cater to the demand for skilled talent and innovation.
- Recognizing the inconsistency in quality and shortfall in research output, India's education policy must focus on reforming higher education to align with global standards and trends.
- Global collaborations could be instrumental in boosting India's research capabilities and helping its educational institutions comply with worldwide standards, hence bridging the talent gap.
- The Future of India's higher education sector lies in capitalizing on its unique strengths, creating unique assets, and fostering agility and adaptability, as per established theories like Porter's Competitive Advantage and the Resource-Based View (RBV).
- As India strives for global competitiveness, it must invest in research infrastructure, faculty development, and policies supporting long-term research goals to attract and retain top talent and drive innovation.
