Why I have turned pessimistic about the education sector

These days I spend a lot of time looking at policy issues in the education sector, across all aspects - K-12, college and vocational. And the situation is deplorable. There is a lot of talk by the government, especially by the previous HRD Minister, but no serious significant attempts are being made to improve the quality of outcomes.

Luis Miranda
Updated: Feb 26, 2013 08:28:39 AM UTC

A few months back I attended a discussion on education in India. The panelists were Ninad Karpe of Aptech and Jetu Lalvani of Kaizen Private Equity. I was happily sitting in the back of the room minding my own business when Rontu Basu of Quest Partners, who was monitoring the discussion, asked me for my comments. And I sounded very negative on the education sector when I spoke. Later that night as I was heading home by train I asked myself why I had become so negative on the education sector. The answer was actually very simple.

In the past I looked at the education sector from an investor's perspective. The gaps and opportunities in the sector in India are so large that one has to be an idiot to lose money as an investor in the sector. There are only 3 reasons to lose money in Indian education - pay too high an entry price, execute poorly or get stuck in regulatory crossfire. The fact that engineering colleges are closing down in UP and business schools in Gujarat and Maharashtra are doing the same highlight the fact that there are many idiots playing in this sector (and I have had my fair share of idiotic non-education deals). Hence my friends on the investment side are correct to believe in the great education opportunity in India.

But these days I spend a lot of time looking at policy issues in the education sector, across all aspects - K-12, college and vocational. And the situation is deplorable. There is a lot of talk by the government, especially by the previous HRD Minister, but no serious significant attempts are being made to improve the quality of outcomes. It is frustrating to see how the powers-that-be are only taking small steps to fix the problem. All we see is some tinkering on the sidelines. The RTE has been a disaster when it comes to implementation. I was in Manipur recently and visited a remote village where the only private school in the village was shut down last month because it wasn't recognised. The government school is like something from the future ... a 'virtual' school - it allegedly has paid staff but no school building and students. Hence 40 kids have no school to go to from February 2013. Yes, the private school in this village was pathetic, but isn't the RTE supposed to offer education to all and not cut down access to education? And I am sure that this will be repeated across the country.

This is why I am pessimistic about the education sector today. Hopefully the new ministers will do something different.

On a separate note, I just spent a week in Australia looking at the hotel industry there. One of the very pleasant surprises on this trip was the ease of checking into Qantas domestic flights - the entire process has been automated, including dropping off checked-in bags, and it is extremely efficient. It is also interesting that no one asks for any form of ID and one can carry bottles of alcohol on board in your hand baggage. It will be a sad day when terrorists destroy this Aussie travel experience.

But that's not the reason for talking about my Australia trip. In Brisbane I drove through a super tunnel that went under a part of the city, cutting down travel time considerably. When driving in from the airport I asked a colleague about the performance of the developer, BrisCon, which is a part of Macquarie Group. A few hours later he told me that BrisCon had called in administrators because they owed AUD 3.5 billion to banks. This was big news in Australia.  This Airport Link toll road in Brisbane had been operating for just 6 months. It is a truly world-class piece of infrastructure, but traffic is only 50,000 cars a day compared to the projected 135,000 cars a day. This once again highlights the risks of developing large infrastructure projects across the world.

In India the risk is even higher because of regulatory uncertainty.  History is full of examples of great infrastructure projects that were financial disasters for the initial developers. In 2009 Fitch published an interesting report that talked about the financial problems developers of projects like the Panama Canal, the Eurotunnel and Boston’s Big Dig.  As governments across the world run out of cash and rely on the private sector to build marquee infrastructure projects through a PPP model, it will be a disaster if the private sector stops developing large projects. It is imperative that frameworks get established to ensure that these PPPs continue to get funded and developed.

The thoughts and opinions shared here are of the author.

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