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TECH TALK: Education and Reservation: Atanu Deys Primer

May 29th, 2006 · No Comments

A part of India is seething. The reason? A decision, driven entirely by politics, to reserve 27% seats in Indias higher education institutions for other backward classes. The government has tried to assuage some of the anger by announcing a simultaneous increase in the overall seats by 54% so that mathematically the number of existing seats do not change. Over this week and next, we will discuss some of these issues here, starting with a five-column series by my colleague, Atanu Dey.

There are numerous characteristics which distinguish developed from underdeveloped economies but the one invariant difference is that the former have robust, efficient, and effective educational systems which the latter do not have. Indeed it can be argued that it is the educational system which forms the foundation upon which the development of an economy rests. Even economies with little natural resources can overcome this handicap and flourish based entirely on their stock of human capital created by an excellent educational system. Conversely, even though endowed with a wealth of natural resources, some economies dont prosper because of poor educational institutions.

If you wish to predict the trajectory of an economy, the leading indicator you pay attention to is its education system. If the system is in decline, the economy has little to look forward to in this age post-industrial age; if the system is in ascendancy, the economy will emerge to join the ranks of rich nations. Note not just the level but note especially the trend of the educational system, and you will have a fairly good estimate of where the economy is headed.

The Indian education system is moribund. It is not, and in fact has never been, very good. By the 12th standard, the school drop out rate reaches an astounding 94 percent. Of those who finally graduate out of college, only around 15 percent (or, one percent of the those who enter grade one) are employable, leading to a serious shortage of qualified college graduates. It is severely capacity constrained. Getting admission into a good school or college has become a Herculean task. Horror stories of three-year olds being given kindergarten admissions tests and the parents being interviewed abound. Quality higher education is scarce. The IITs, those much celebrated technology institutions, can only admit fewer than 2 percent of applicants: annually around 300,000 compete to get a shot at 5,000 seats.

But the disturbing fact is the negative trend in the system. The primary worry is that the system is increasing falling behind in its capacity to meet demand. India is demographically very young. About half the population is below 25 years old. Young people need schools to become productive members of society. The capacity constraintthe mismatch between demand and supplyhas the predictable effects of low quality and high prices. Prices are a rationing mechanism and high prices implies high barriers to entry for the huge number of poor people in India. The economic waste that results from tens of millions of people not being able to afford education is staggering. Poor quality education also has effects that propagate across the entire economy. Globalization has increased the premium associated with a well-educated workforce, and India stands to lose a great deal if the quality of its labor force does not make the cut.

The fundamental problem with the Indian economy is that the education system is one of the most flawed systems in the country. If there is one sector which is in dire need of reform, it is that education system. The most urgently required reform is to get the government out of itlock, stock, and barrel. The recent move by the government to further increase quotas in the so-called elite institutions with a view to social justice is akin to rearranging the deck chairs on the Titanic. No, I take that back: it is akin to scuttling the lifeboats even as the ship is sinking.

Tomorrow: Atanu Deys Primer (continued)

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