Category: India

A disclosure based approach to monitoring educational institutions

Business standard has an editorial pointing out that instead of having approvals / accreditations for educational institutions, a better system would be to have a disclosure based approach. Institutes do not need approval, but they are policed to ensure that they disclose all the “important” information to prospective students. Excerpts:

A major question animating law-makers is the fear of “fly by night” firms who will “run away” with the money of students or short-change them. This is reminiscent of the problems seen in the securities markets, where there are concerns about similar “fly by night” firms who sell securities to “hapless investors” and run away. In the securities markets, the country has seen a shift away from the Controller of Capital Issues—who gave out discretionary permissions to any firm seeking to sell securities—to the modern disclosure-based framework. In this disclosure-based framework, the government only emphasises the importance of accurate information being available to the investor when a decision is made to invest in a security.

A similar approach would work very well in education. In a disclosure-based framework, the focus of the government would be on disclosure. For the rest, the decision about what university a person chooses to go to is best made by that person—and not by the government. The key insight here is that—as with investors—students are not eager to waste money on earning low-quality diplomas. Students are self-interested and work hard on trying to identify good programmes. Their efforts at making a choice can be supported by the government, if it runs a disclosure programme whereby accurate and salient information is made available to prospective students. The great advantage of such a disclosure-based approach lies in the fact that it would eliminate entry barriers in higher education, and make possible a surge of supply through which shortages would ease. Reputed global brands would come into the country to offer educational services. The market for education would shift from the present framework of scarcity and low quality to one with competition and choice.

See full article which I found here.

Can India afford its villages?

An editorial in livemint puts forth the thesis that the answer to rural India’s problems does not lie in the development of the villages, but rather in the development of the villagers. And they claim, paradoxically, that the best way to do that is to convert them into city dwellers.

There has been a general tendency to romanticize village life as a return to our roots. What is noticeable, though, is that most people who romanticize village life in India tend to live in cities—in India, or elsewhere. They also seem incapable of noticing the irony implicit in this romanticization, since their forefathers, too, were once villagers —who migrated to cities for good reason.

The main problem they see with development of villages is that a typical village is too small to allow efficient delivery of (at least some important) goods and services. Like electricity.

The economics of power generation and distribution do not allow decentralization to the level of villages that are home to a few hundred people. The average cost of per unit of power makes it prohibitive. The only way for a small 1-2MW decentralized plant to provide power for a village of 1,000 people is for the villagers to pay substantial premiums—which is highly improbable.

However, an earlier post on the Indian Economy blog suggests an alternative way to fix this without giving up on the villages:

Given that rural populations are very poor, it is reasonable to expect that the aggregate demand of a single village for any single service will be very low. However, the aggregate demand for, say, a 100 villages for a single service could be significant. Aggregating the demand for many different kinds of services of the same 100 villages would translate into lot of services. These services would require infrastructural inputs which can be commercially and sustainably supplied. Thus, a RISC would supply to the needs of about 100 surrounding villages.

Considering that Atanu Dey is a co-author of both the above posts, I am not sure why the livemint editorial does not have any reference to the RISC idea.

In any case, it is very common for people to subscribe to the “village life is great” philosophy without really putting too much thought into it. And these two articles should go some way in ensuring that you understand the issues a little bit more.

The overheads of outsourcing

Munjal Shah, CEO of riya.com/like.com blogs about having to close their Bangalore office. The overheads of having multiple sites geographically separated (especially for a small start-up) are just not worth the (fast reducing) cost savings. for:

Bangalore wages have just been growing like crazy. To give you an example, there is an employee of ours who took the first 5 years of his career to get from 1% to 10% of his equivalent US counterpart. He then jumped from 10% to 20% of his US counterpart in the next 1 year. During his time with us (less than 2 years) he jumped to 55% of the US wage. In the next few months we would have had to move him to 75% just to “keep him at market.”

Keep in mind that Riya are at the leading edge of this trend. We tend to only hire folks from IIT or other top schools. We tend to only hire the smartest folks from these schools. We only hire in Bangalore (just too hard to have three offices). We tend to only hire folks with a lot of experience. These are all characteristics that are critical for technology startups, but not necessarily for a big company like IBM or a services company like Infosys who can afford to train new graduates. I do believe that other startups in Bangalore will see the same issue in 12-24 months.

See full article.
I found it here.