If you compare India with other countries, qualitatively or quantitativel the answer would be a resounding “NO”.
If you compare the Education sector with other sectors in India which have been liberalised and privatised (telecom, airlines, insurance, IT, banking) again the answer would be a resounding “NO”.

So lets not try to draw any conclusion from the current half-baked private initiatives about the benefits of liberalisaion.

Other anti-liberalisation arguments are also common in one respect. We’ve heard them before
- if telecom was opened up, only the very rich would be able to afford phones
- if private airlines were allowed, only the very rich would be able to afford flying.

etc. etc.

Is the government hindering private initiative in education?

I would like to point out to only one of many news articles on the subject
http://www.rediff.com/money/2006/sep/14spec.htm

Finally, regarding some comments on the government being precluded from education - who on heaven mentioned that government should not invest in education?

Its only about private investment, both domestic and foreign being REALLY allowed into education

Panchayats together with community involvement can provide checks and balances on government spending on education. Management of schools should be with the community, including hiring of teachers ( and firing). Private sector must be given free access to the higher and vocational education sectors under market conditions as skills are more attuned to market requirements. Government should provide free access to quality primary and secondary education in a common school system for all.

The markets are efficient as Atanu describes and will phase out any company/product that does not satisfy the customers - Absolutely true.
While the above efficient markets theory works for products, in case of education, private education BUSINESSES which do not satisfy customer getting phased out as well is a leap of faith and may not always happen.
The flaw with Atanu’s theory is that as companies adapt to stay in business and they will try to achieve profitability through efficiency. In the education value chain one of the inputs is the students - Now if an average or slightly below average student enrolling in a private institution causes their end product to be less than stellar from a markets perspective, they will adjust their supply chain to deny admission to anyone deemed below average. Take this point in the perspective of primary, middle and high school education. The education companies/businesses will have no vested interest in working with the below average candidate (or perceived below average student) and the best way for them to avoid having to work with sub-par input is to not enroll one (costs are also lower when not have to work on improving a sub par input and the final product becomes inherently competitive when eliminating sub-par inputs). Education increases the productivity of an economy overall and letting ONLY MARKETS dictate the education system can very well result in vast swathes of population left behind altogether or denied education outright. So education, especially higher education being privatised helps to some extent, basic primary education cannot and should not be completely privatised.

The other argument that I put forward is through my personal experience dealing with Privately educated individuals (mostly higher education)during my working career. The individuals are usually bright but private education systems especially in India tend to focus on the flavor of the day - Again its a supply and demand mechanism that forces them to do that albeit for a profit. These products of the private system are usually very deficient in the overall package and are one hit wonders - there is no incentive for the private education company to try to build a complete package.
I am sure a counter argument can be made to my second argument that markets will phase such one hit wonder creating machines but markets take time to reach efficiency and this can create opportunities for product distortions whose effects can be felt for a very long time economically.

Education can not be a pure product like a mortgage or bond - markets cannot be extremely efficient as a lot of economists and Miller Modgiliani school of thought experts may testify. If you need examples of inefficiency of markets, we do not need to look farther than most banks which have for a long time sold products which while being profitable to them have destroyed share holder value for a lot of companies (their clients) and yet they continue to exist and become larger on the strength of their balance sheets and continue to increase in size on the back of mega-mergers.

Atanu, I think there is a place for Private Institutions in the education field but they should fulfill needs that the public education systems cannot address. The public education systems are built to serve a very diverse set of stakeholders and have to be nimble and vast in their service. What public education systems cannot provide, the private institutions can do very well. This would help those among the populace that think they need specialized education get that but through their own recourse. Yes this might raise questions of accessibility and affordability for some but no one said Life was fair!. I know it is not a great expression to use here but that is all I have.

A better solution is to expect and demand the Government to provide a better education product, much like we ask of other private companies. We have to stand up and do that and not just say that it is better to entrust everything to the private hands and that the markets are better at everything.

Thanks,
Piyush Goyal

A similar phenomenon occurred with the Public Distribution System where families above the poverty line got hold of ration cards leaving BPL families with no access to good food…

The role of the government in provision of education is necessary not just because of the argument above but because of the very laws of economics…

How so? Every economic policy ultimately has one goal…the creation of a society where resources are utilized in such a way that every individual in the society will have adequate access to these resources in order to satisfy his or her demand…whether it is free market policy or otherwise, the goal is always the same

What is demand? Economically, demand is desire backed with adequate financial capability. Thus, even if the poor people in a society have a greater desire than the rich to get educated properly, their demand will be lower because of financial constraints. On the other hand, even if the rich have a comparatively (comparatively!) lower desire to get educated, their demand will be higher because of greater financial capability.

Thus when the suppliers (private educators) look at these two sub-economies (rich and poor), they will prefer to supply to the rich because economically, there is a greater demand for education among the rich.

If you let only private educators do the supplying, you would be going against the goal of every economic policy…to ensure enough access to resources for everyone…

On the other hand, if the government runs schools of their own for the poor people in a country, the demand for education for the poor will be met, because the poor will be able to afford government education.

Again, since comparatively, govt education will be of lesser quality, the rich will stay away from these schools and go to the private sector…the rich get a higher quality of education by paying for it and the poor will be free to occupy govt schools where they are given atleast some sort of access to education and empowerment…

From what I can make out, the quality of govt schools can NEVER reach the quality of private sector education…but you know what? This is economically desirable because it’ll keep the rich away from govt schools allowing the poor to access education…the gap of quality between govt and private schools should be as small as possible and govt schools should try all the time to close that gap in order to ensure good quality of education…but there should be a slight gap nonetheless, to ensure that you get your money’s worth of quality.

So the solution is to allow both private and govt agencies to run schools…this will ensure everybody gets access to education while at the same time, people get their money’s worth of education…

Have to disagree with your prescription - exactly for the reasons that Santhosh points out.

There have been significant success stories even in Indian primary education where local involvement has been high. The previous generations of Engineers, Doctors, Administrators, and all others were generally the product of state-sponsored education. They seemed to have turned out alright. And the system is generally acknowledged to have worked fine. There has been much water under the bridge since then - corruption taking a huge toll and being not among the least of the present problems.

Why would privatization of primary/secondary education work here when you have no equivalent system anywhere else in the world?

When you talk about post-secondary, higher education, I’m inclined to agree that a greater degree of freedom will provide benefits - precisely because the student is able to make a better informed decision.

I see a lot of hand-waving about the benefits of Capitalism and Competition in general, which very few of us might argue against. I don’t see any justification of why a free-market system would benefit the customers in a scenario where there is significant customer lock-in (you can’t just leave school when you want), significant long-term benefit and lack of short-term returns at the expense of high short-term cost.

Complete privatization of primary/secondary education will lead to worsening inequality, with even starker differences between haves and have-nots.