The Indian Institutes of Technology (IITs) occupy an important and special position in the country, playing a crucial part in the career aspirations of lakhs of students. At the same time, policymakers are grappling with two questions on their real contribution to the nation in order to justify providing funds for maintaining the premium nature of these institutes and source these funds. Since it is market dynamics that have created this rather ironic situation, I propose using the same market forces to address this issue.
Let’s first understand the market forces. The return on the investment for the parents, if not to the students, is the first market force that has created the enormous demand for the IITs. The brand value that almost guarantees admission with financial aid to a U.S. university for higher studies leading to a job, permanent residency and eventual citizenship or the near certainty of being placed with a higher than average salary on graduation is the primary market force that makes parents push their children into aspiring for entry into the IIT, often at as early an age as 15. The fact that most of these high paying jobs have nothing to do with engineering is neither discussed nor considered.
While assuring a higher return, the cost — fees at the IIT — is much lower than what is charged by the ubiquitous self-financing engineering colleges that do not assure students a career after graduation. Granted, parents do invest in one or more of the various coaching institutes without which none can get into the IITs nowadays, but even with that cost, the IITs make the best financial sense in terms of risk vs. reward.
This intense preparation to pass the entrance examination burns out quite a few of the successful students who have no interest in the education they are pursuing and have no incentive to excel in the studies since they are aware that the IIT brand will assure them a well-paying job if they just clear the examinations.
The second market force that leads to questions on the contribution or lack of it on the part of these bright students to national development is the skewed salary structure prevalent in today’s world where the marketers of cosmetics and financial analysts earn twice or thrice as much as an engineer gets even at the entry level. While these professions’ contribution to nation building may be debated, there is no question that education at a premium engineering institution deserves a better return in the form of its graduates exercising their intellect and education to address the numerous challenges facing the nation.
This, in turn, leads to the question of return on the money the nation spends on the IITs. Whether it is due to a lack of universal acceptance that investment in the IITs has yielded sufficient dividends or otherwise, the fact remains that the original five IITs have not seen increases in their funding in the last two decades commensurate with their requirement to replace their increasingly obsolete infrastructure. Whatever infrastructure development that has been funded in the recent past is mainly to cater for the increased student size that has been thrust upon the IITs to implement the social justice agenda. Both sets of the original five IITs and the newer nine ones require a large infusion of capital funds in order to renew or build infrastructure that will help them retain the premium nature of education in these institutions.
We can address all the three issues through a substantial increase in the fees paid by the undergraduate students. The IITs can be given the freedom to determine their fees as do the IIMs and the additional funds generated from higher fees can be used to build the research infrastructure. To ensure that these higher fees do not pose an undue burden on any student, a loan to cover the fees may automatically be sanctioned to each student. This loan will have no additional requirements such as collateral security, or the financial status of the parents, etc. This should not pose a problem since it’s recognised that an IIT graduate will not have any issues finding a job. Increasing the fees addresses two of the three issues raised — namely the extremely attractive return on investment that encourages parents to exert undue pressure on their children to enter the IIT and the issue of funds for the IITs. By devising a scheme to convert the loan into a grant based on the nature of employment taken up by the graduates, we can address the issue of their contribution to nation building as well.
We can categorise DRDO, CSIR laboratories and other national institutions, the IITs and the NITs as the priority sector, employment in which for a specified minimum period will convert the entire loan into a grant.
Organisations that are public-funded and commercial in nature but play a vital role in building national self-sustenance may be classified as core sector, employment in which for a specified period will convert 50% of the loan into a grant. The grant can be provided by the employer itself and its financial impact can be mitigated through suitable tax concessions. This will also be an avenue for the employers to discharge their corporate social responsibility.
Private sector organisations but involved in core engineering activities may be classified as the allied sector, employment in which for a specified period will convert 25% of the loan into a grant. Teaching in AICTE-approved engineering institutions may also be classified as the allied sector.
If the student opts to join organisations not belonging to these sectors, such as those in management consulting, banking and finance, and insurance, then he/she will need to repay the full loan at market rates within a reasonable period. Since salaries in these sectors are high, loan repayment should not be a major burden.
In case the graduate opts for higher education in India or abroad, a moratorium on repayment of the loan can be given and recovery may be initiated on completion of studies, depending on the nature of employment taken up.
The students can further be incentivised by linking the interest rate payable on the loan to their performance in the IIT. The rate of interest could be something like PLR-CGPA (Cumulative Grade Point Average) on a 10-point scale. Thus, the top performers will be required to pay only an interest rate of 0-3%, while even average performance will attract a rate of 5-7%. For students coming from socially disadvantaged sections, further concessions or a total waiver could be given to account for the differences in their performance due to social conditions.
Thus creating this market force of higher fees with the necessary infrastructure around it to manage its adverse effects can ensure adequate and timely funding for the IITs without burdening the government. The higher cost may discourage those who are not interested in nation building from enjoying the benefits of government subsidy and hindering imparting quality education. The performance-linked interest rate may motivate students to perform and finally the repayment options may encourage them to work in sectors that badly need them.
At this critical juncture where India needs to create substantially more capacity and quality in the engineering education sector, the way China is doing, this model may prove worthwhile to follow for the IITs and extend to the NITs as well.
The model can lead to financial and operational freedom for these institutes so that they can compete with foreign universities that are to be allowed to set up colleges in India on an equal footing.
(The writer is Professor, Department of Mechanical Engineering, IIT Madras. The writer’s email is: mayuram@iitm.ac.in)
