Private education: Reforms that we need to create next generation of school entrepreneurs

The need for reform, of course, runs much deeper, and we need to reflect on the impact of our current school regulatory system.

By Ashish Dhawan & Bikkrama Daulet Singh

Prime minister Modi’s Covid package promised important and long-awaited reforms across various beleaguered sectors—including agriculture, banking, and power. These reforms come in the wake of a sustained effort to streamline business regulation, culminating in a three-year streak among the top-10 “improvers” in the World Bank’s ease of doing business ranking. At this critical point in our development, there is another area where regulatory reform is sorely needed—private education.

One immediate symptom of this is that as schools face the fifth month of shutdown, and precarious financial health, no credit relief through the package for MSMEs will come their way due to regulatory barriers. The sector is likely to see a short-term period of immense flux, and unfortunately, some good schools will likely be forced to exit altogether.

The need for reform, of course, runs much deeper, and we need to reflect on the impact of our current school regulatory system and adapt it to enable the next generation of school entrepreneurs. As of 2017-18, private unaided schools educate 35% (approximately nine crore) of India’s 25 crore school-going children. Enrolments in these schools have witnessed 6x increase in the last 25 years. The immense growth of the sector has come about despite a regulatory environment that makes it challenging for existing schools to operate and inhibit formal sector providers from entering the sector. For example, a study in Delhi finds that opening a school requires 125 documents, and applications move through at least 155 steps within the directorate of education.

Our current regulatory system has its roots in India’s early education policy goals around creating education inputs—school buildings, classrooms, designated teachers—and bringing students into schools. We have achieved reasonable success with this objective, with near-universal primary education and increasing transition to upper primary and secondary schooling. However, in this rush to provide schooling, we have created a system that does not provide learning. This is what parents want, and students need. Yet, our current regulatory regime has stuck to its focus on inputs in schools rather than outcomes.

Many of these input regulations are neither practical nor critical to learning. The Right to Education Act places inordinate attention on playground/classroom sizes and teacher recruitment constraints; while state and municipal laws create entry barriers by placing constraints on who can set up a school, how schools are established, the size of the school and how much a school can charge. As one school owner in a Mumbai slum commented: “If we were to follow all these laws, we would need crores of rupees to set up a school here.

How can this be viable when students here struggle to pay `400 per month as fees?” Schools are also legally non-profits, and yet, in most cases, they function as micro-enterprises—run not by charity-minded philanthropists, but by more educated community members, who rely on collective community resources in the form of dues to run their schools. They must fudge their books to exist. The array of regulatory hoops compels school owners to invest in infrastructure and compliance rather than on processes that could improve quality. A school with good infrastructure, but worse learning outcomes, is much less likely to come under the purview of regulatory agencies than a school with good learning outcomes, but deficient infrastructure.

It is another matter that these regulations often do not even produce the inputs they target, given tacit acknowledgement of their impossibility in many low-resource contexts. The implementation of different regulatory licenses and inspections, as is typical in such regulatory setups in India, has created a culture of bribes and kickbacks. Regulators are also the same people who manage government schools, making impartial regulation a further challenge.

Fixing our regulations may require an overhaul of the governance philosophy, rather than just policy tweaks. First, we need to move towards holding schools accountable by measuring and disclosing actual school-level performance on standardised assessments rather than setting up input requirements. Private accreditors should be empanelled to grade schools on their safety, infrastructure and governance, and these grades should be made public so that the stakeholder who cares most about children—parents—can judge schools based on their context and priorities.

Another key change would be to move towards an accepted hallmark of good governance—separation of powers. In the education sector, the department that frames regulations is also responsible for providing public educational services as well as monitoring of private schools. This leads to stretching of manpower over multiple responsibilities affecting efficiency, and even introduces potential conflicts of interest. Instead, as suggested by the National Education Policy 2019, an independent regulator would encourage fairness and transparency in the regulation of all schools, private and public, in India. Evidence from other countries suggests independent regulators are a common, powerful feature in improving school quality and facilitating school choice.

This sector has long been ignored. Still, it is a signal of the aspiration and sacrifice of millions of Indians for education. Post-Covid, these families deserve a vibrant, competitive, and transparent sector to educate their children—and the state should act now to enable this.