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India is a country starved of quality education. That may sound excessive. After all, the country boasts of some very good engineering and management institutions. It also has some excellent centres of scientific learning (the Indian Institute of Science and the Tata Institute of Fundamental Research being two well-known examples). However, there is something missing here.

There is a huge demand and supply gap in higher education. Every year, the school system churns out hundreds of thousands of students. Within this group, there is great variation in quality: A large number of students are very bright and promising while an even larger group is just about average. Yet such is the state of college and university education that even the bright lot turns out to be just about average when they enter the job market with a degree. That is if they are lucky to get a place in the university system first.

Illustration: Jayachandran / Mint

This combination of low quality and poor quantity is marring India’s economic future.

That situation may now improve in the years to come. On Monday, the Union cabinet cleared the Foreign Educational Institutions (Regulation of Entry and Operation) Bill, 2010. When the Bill becomes law, it will permit foreign universities to set up shop in India.

Until now, students had to go abroad to acquire quality education in fields as diverse as science, humanities and management. That was always an expensive proposition: A one-year stay in the US costs anywhere from $18,000 to $25,000 in living expenses alone. When tuition fee is added to this sum, education becomes virtually impossible for a majority of the students. It’s expensive for the country too: Every year an estimated 16,000 students end up spending $4 billion in funding their education abroad. That will change now.

This will work well both at the individual and societal levels. Firms can have better trained manpower at much lower costs and students, in turn, much better life chances. It, of course, works very well for the economy.

The Bill, however, is only the first step in a long journey. Reviving the higher education sector will require a revamping of the university system. A reordering of incentives (salaries, retention premiums, promotions and other rewards) for faculty members in line with performance is a must if these universities are to compete with their foreign counterparts.

Will foreign universities make a difference to India’s economic future? Tell us at views@livemint.com

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