Wednesday, September 12, 2007

Proposed Exit Tax on IIT/IIM Grads.

Newspapers are full of stories suggesting that the Government is mulling an exit tax on IIT/IIM graduates if they leave India. There can be valid reasons driven by the economics of the matter, but I have a slightly different viewpoint on the way this is being proposed and would be administered.

The Indian Government subsidizes education in IITs and IIMs. When someone goes abroad and works there, in effect the Indian Government is subsidizing the research and development in foreign countries. There is an inherent motivation in the policy to recover the costs associatied with the subsidy as well.

One thing which I fail to understand is why is the Government still subsidizing the IITs and IIMs? They have been around for a while now, have a global brand image, have influential and connected alumni and have a proven track record. Surely they do not need the financial doles that are being meted out to them and if needed, they can raise as much resources as they require. When Harvard has a corpus of a few billion dollars, I see no reason why an IIT cannot be even independent if not run a surplus. If there is a corpus available, the students (whoever needy) can be financed by the institutes themselves ridding the government of the burden of the subsidy.

Here is the real reason: IITs/IIMs are still under the control of the Government and the Babus. No one wants them to stand up on their own. Instead of setting up more institutes and expanding the knowledge base, the policy is an attempt to keep the stranglehold on IITs and IIMs by controlling their grants. Instead of doing better things, this silly step is designed to protect the turf rather than to serve the nation. Even if we keep the nightmares faced in the implementation of this proposal aside, it should be condemned and debated for its flawed intent and ulterior motives.

Disclaimer: I am a graduate of IIT.

1 comment:

Svaha said...

Education in India (and elsewhere)
There has been a lot of discussion lately about the quality of some higher education institutions in India such as the IITs and the IIMs, some of it from the US media. While it is true that some of these graduates have done well in the information technology sector and, to a lesser extent, in other parts of the corporate world, as well as in entrepreneurial activities, the key questions are whether they truly represent value in India's growth equation, and whether they are truly the product of meritocracy. I would make the following observations:
1. The biggest public gains from a public welfare standpoint to any society is in primary and secondary, rather than in higher education. Since there are more private gains for every additional year of higher education, this is best left to private capital to manage at market prices. Affordability and access to such higher education institutions should not be an issue as long as tax policy and access to private funding is encouraged (bank loans, etc.) since the key underwriting question will be the net present value of future earnings from such education; the "sheepskin effect". I would venture to suggest that institutions such as the IITs should be sold to private entreprenuers (and even such institutions such as JNU whose current contribution to public welfare relative to tax spending is questionable) in order to release substantial efficiencies. The AICTE and other regulatory bodies, on the other hand, should be considerably strengthened in order to provide quality-control and oversight over privately funded institutions. Government expenditures in higher education should focus on niche areas relevant to economic growth such as biotechnology or alternative fuels research that may not attract short-term focused private funding, but even here, TATA (as in BP solar) or Suzlon and Biocon should be encouraged to fund their own future requirements in manpower and R&D (tax breaks). Also, fees in IITs should be increased substantially to reflect the true cost of education, mitigated appropriately by scholarships and loans to provide access to less-privileged students.
2. Although there is a strong myth about the competitive nature of IIT and IIM entrance examinations, and the focus on meritocracy, there is a considerable skew towards prospects from urban, english-language schools. Go to any IIT campus, and you will see that the proportion of students from such schools is much higher than the underlying proportion of such schools in the overall geography of India. My point is not to argue that those schools have an unfair advantage since they offer better educational facilities and preparation for IIT entrance examinations, but to suggest that kids from rural schools or government schools in general have a disadvantage when it comes to understanding the real relevance of IITs and other elite institutions in their future lifetime earnings. When one looks at other publicly funded "institutions of national importance" such as the ISIs (Indian Statistical Institutes) the skew is even more pathological; why is there an overwhelming overrepresentation of Bengalis in the ISIs, is it because they are genetically predisposed to be statistical in their thinking, or is it because the ISI entrance examination notices appear next to tender notices in many national newspapers, and is more heavily advertised in Bengal newspapers? The answer is that fees (and scholarships) need to be raised in these insitutions and specific funds need to be applied to advertising and coaching for students in rural and vernacular schools. Then you will see a real meritocracy, not just meritocracy among the children of the Indian professional elite. Think of the quality of IIT graduates then!
3. Despite the appearance of academic quality, there is a dearth of good faculty at these institutions and this is primarily due to the lack of pay but also due to the lack of quality control in faculty hiring and promotions. A lot of these issues are due to lack of autonomy and interference from government agencies, and the fact that the existing faculty and administrative bureaucracies at these institutions haave taken shelter under the pretense of lack of autonomy to subsidise large-scale inefficiencies. The lack of merit in teaching and research related income streams clearly will have downstream effects on the quality of graduates coming out of these institutions. These facts are often hidden from the taxpayers who fund these institutions, creating a classic "moral hazard" from a public welfare standpoint. The central universities, in particular, where an increasing share of taxpayer funding is diverted, are places where this kind of pathology is rampant -- JNU, Jamia, AMU, Pondicherry are all excellent (!) examples.
4. When it comes to primary and secondary education, there needs to be a sea-change in taxpayer funding, focussing large funds on rural schools, in teaching as well as in infrastructure, but also in the local control of these fund expenditures. Give local taxpayers control over schools and their governing bodies and you will see better visibility in their functioning.
One little known fact is the skew in public tax-based funding of Kendriya Vidyalayas, which subsidise inefficiencies and restrict access to these "better" schools through the tariff barriers of admission criteria. Let me expalin this tax scandal which has been going on in India for the past half-century, which neither our media, nor tax-paying citizens have chose to make visible. Kendriya Vidyalayas are, like many other publicly funded institutions, primarily paid for by corporations and private-sector employees. However, the children of private-sector employees in effect have almost no access to these schools, who have a stated policy of discriminating in favor of government and public-sector employees as well as defence personnel. Why hasn't someone moved the courts against such an obvious flouting of equal treatment constitutional principles? Again, taxpayers in private-sector jobs probably have written this off as yet another cess and in any case have access to other private-sector primary/secondary education options, but what about access and scholarships for children of day laborers in the unorganized sector???
Perhaps the left leaning ideologues at JNU would wish to comment on this dictatorship of the proletariat! Why are there so many of these Vidyalayas in urban areas or in public industrial towns or in district headquarters towns rather than in far-flung rural areas?
Enough said.
By the way, educational access and skewness against the underprivileged is not just an Indian problem. Just see how asymmetries and inequalities are reinforced in other educational models; in the UK, how many Oxford and Cambridge graduates come from working Cockney families in relation to their proportion in the population? In the US, how are Harvard and Stanford admissions criteria different for children of alumni and donors, as opposed to the general population?
India has a tremendous focus on education (I have benefitted) but I would argue much of it is familial and societal culture; the specific question to honestly answer is how much the government has done to unleash procutive human potential through illiteracy eradication. How much of India's education policies are simply a function of the need to provide quality education enclaves for the children of bureaucrats, the successors of the British collectors? Are we democratic in our education policies? Think about this the next time you vote.