Why India’s education capacity crisis needs equity capital

When I started my career in 1996, calling home often meant waiting until midnight, when the STD pulse rate could drop to a quarter of the daytime tariff. In the next few years, the country allowed private capital to solve the crippling telephone density problem and made the linesman redundant as a middleman. Within a few years, we built world-beating telecom connectivity, and guess what? Our telephone bills dropped to a fraction of what we paid during the MTNL/BSNL era.

Today, when one sees the country crying out for more capacity in education, a fundamental question arises in my mind: Why aren’t we bringing equity into education?

Like the linesman in the 1990s, we have turned entrance exams and coaching centres into a constricted portal through which millions try to squeeze, causing immense pain to those who don’t make it. In an aspirational India, out of millions of aspirants, barely 18,000 secure seats in Tier-1 engineering colleges, while over 500,000 fly abroad for STEM programmes.

The number of medical seats in Indian colleges is a fraction of the demand, driving young students to pursue their degrees in far-flung nations. Whenever geopolitical strife breaks out—whether in Ukraine, Georgia, Iran or the Middle East—the External Affairs Minister’s job becomes rescuing our children—some 18,000 from Ukraine alone—from the consequences of a shortage we chose to create at home.

Capacity creation in public education relies on government spending, which cannot match market urgency because the dividend matures 20 years down the line. Meanwhile, private capacity is increasingly being left to religious denominations or charitable institutions. But charity is inherently constrained, since most individuals deploy no more than 2-5% of their capital philanthropically. Should we rely on trickle-down charity for the crying need of our youth?

This artificial scarcity has built a massive, multi-billion-dollar coaching industry where test-prep instructors are revered more than educators. We have reduced the inquisitive, impressionable teenage years of our youth to cracking multiple-choice question (MCQ) formats. Is this really the intellectual foundation we want for the next generation?

By recent estimates, Indians now spend close to $70 billion a year on foreign education. Over the last decade, families have sent out an estimated ₹1.76 lakh crore chasing degrees abroad—more than three times what our own government spends on higher education in a year and, by one calculation, enough to have built 62 IITs. Much of it is invisible: it leaves quietly as “family maintenance” rather than fees, so the official education-remittance line badly understates the true drain. The Indian middle class is paying through its nose for foreign degrees on a depreciating rupee. We are, in short, exporting our brightest young people and our foreign exchange at the same time—because we will not build capacity at home.

So why don’t we simply build more? Because we have forbidden the one thing that builds capacity at scale: capital that is allowed to earn a reasonable return. The ‘not-for-profit’ rule, designed to keep education affordable, is the very thing making it unaffordable. Regulating fees treats the symptom. Building capacity treats the cause. India’s greatest infrastructure success stories have all followed the same playbook: allow capital to create abundance, then regulate for quality and fairness. Education deserves the same opportunity.

It will take bold political will to amend the framework—to move past the Supreme Court’s ‘no-profiteering’ doctrine as well as the fee-control regime and the ‘public good’ orthodoxy the NEP still upholds. But once education is opened to corporate governance and institutional equity, Indian entrepreneurs will solve the capacity crisis with the speed and scale our young population deserves.

Yes, there will be implementation and judicial challenges. But until we create quality capacity at scale, we aren’t solving the fundamental tragedy: millions of ambitious young Indians losing out because opportunity itself was scarce. True Right to Education must mean the right for every student to access the course they want, in the country they call home.

(The author is Chairman & Managing Director, Equirus Group. Views are personal.)