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India’s New Rules for Foreign Universities Are a “Missed Opportunity”

India appears to have finally agreed to a set of rules for establishing international branch campuses within its borders. This has been a long process, with many false starts and few conclusive decisions. And, as we have written previously, the nation desperately needs to expand access to higher education. Assuming that news reports are accurate, this time it looks like India is finally ready to open up its borders to foreign universities.

But will they be willing to come?

The recent move could be significant if universities with global ambitions decide to take India up on the offer. Many have been lying in wait for years – some even have bought property in India – hoping that the opportunity will come. But few universities, we believe, will see any advantage to entering India under the new rules. For a country with problems involving higher-education capacity and quality, this is a missed opportunity.

The rules lay out a specific set of criteria that a foreign university must meet before opening in India. First of all, only one that is ranked within the top 400 institutions in the world need apply, and its application must be endorsed by its home country’s embassy in India. Financially it must incorporate in India as a nonprofit, with an endowment of about $4.2-million for each proposed campus . No more than four campuses per institution are allowed. Up to 75 percent of the income from the endowment can be spent on developing the campus, with the remainder reinvested into the endowment. All surplus revenue must be dedicated to the growth of the branch.

If the goal is to provide a pathway for the expansion of India’s higher-education system through branch campuses, those rules are too restrictive. We see two main reasons.

First, limiting eligibility to only top-400 universities reduces the potential pool of applicants. Currently, out of the roughly 160 institutions in the world that we have identified as having branch campuses outside their home countries, only about 30 are that highly ranked. It is doubtful that all 30 would be interested in adding another campus, so India must be relying on attracting the interest of the remaining elite, which have so far ignored the siren song of an overseas campus. We don’t think that many of them have been holding back, just waiting for India to make a move.

Second, the financial requirements for institutions will be a barrier. So far Qatar is the only country that has been able to build branch campuses by focusing almost exclusively on top-ranked universities. It has done so by essentially paying for all expenses incurred by the home campus. And not all branches in Qatar are operated by the top 400. Many other countries that want to attract foreign universities are supporting the efforts with infrastructure, loans, or other government support. Those that don’t provide such support offer regulatory flexibility that reduce the financial burdens on foreign investors. India, however, seems to be doing none of that.

India is instituting additional regulations and requiring institutions to put up their own money to start. If the home campus could recoup that investment over time, this could be a reasonable requirement. But India has structured the fund as a permanent endowment and prohibits any revenue from being repatriated. Few institutions have been willing to commit their own resources to building an overseas branch without a business plan in place that projects reasonable revenue stream to recoup expenses. We think it unlikely many will now decide that a permanent commitment of resources in India is warranted.

In general, we think the rules mean that India is more concerned with increasing prestige than it is with expanding capacity in its higher-education system. Perhaps the country will get a few institutions to sign up. But it seems hardly worth the trouble.