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How Indian universities can benefit from federal cuts and policy changes in foreign universities

Dynamic policymaking can ensure that India grabs this golden opportunity presented by the shifting global scenario to foster a boom in its education sector.

India’s education system is severely capacity constrained. Young people comprise almost a third of the country’s population, but only a quarter of them enrol in higher education. We need to increase the number of higher educational institutions or seats in existing institutions by almost five times to achieve the NEP 2020 target of 50 per cent youth with a college degree.

For the 420 million youth in the age group of 15–29 years, there are only 40,000 higher educational institutions of varying quality, with current enrolment of about 45 million students. The growth in the number of public higher educational institutions has been insufficient. Private institutions dominate the landscape of higher education, with almost 50 per cent of the universities in this sector. Although their growth has been faster relative to the public sector, that, too, has been inadequate to meet the rising demand, as per the Youth Report of MoSPI in 2021. Needless to say, with the rise in income levels and the size of the youth population, the competition for admission into high-quality educational institutions has increased in recent years. Not surprisingly, the excess demand for quality education leads to an exodus of about half-a-million youth to foreign shores every year.

Limited and poor-quality education is a potential cause of unemployment, underemployment and unemployability of India’s youth. How can India increase its capacity to offer quality college-level education at home?

Recent events indicate that the world’s dominant education sector is about to experience transformative shifts, with ripple effects across the globe. The US remains the largest recipient of Indian students, but the Trump administration’s anti-immigrant stance is likely to have an adverse effect on Indian parents’ preference for a US education for their children. In addition, the doors to foreign students are closing elsewhere with cuts on the number of student visas and other immigration policy changes, especially in Canada and Australia —two other countries high on the list of preferred destinations for Indian students.

India’s large and aspirational youth population puts the country in a unique position to take advantage of the coming global shifts in the higher education industry to aggressively attract private investment as well as raise public investments in its educational institutions.

With massive cuts in federal grants to US universities, along with reductions in the number of student visas or optional practical training after completion of degrees, American higher educational institutions are likely to (and are starting to) experience significant decline in foreign student enrolments. Foreign students are one of the largest sources of revenue for educational institutions in the US, Canada and Australia. These institutions will increasingly need to raise revenue resources outside the US. There are several ways in which India could attract investments by these institutions.

The government recently enacted legislation to facilitate the establishment of campuses in India by foreign universities as envisaged by the NEP 2020. However, uptake of this policy has been lukewarm so far. India needs to actively pursue high ranked foreign universities at both the central and state levels and facilitate the process of setting up standalone campuses by facilitating land acquisition and availability of other complementary inputs.

Domestic private investments in the education sector will continue to show robust growth, but while the number of private universities has doubled between 2011 and 2020, there is a deficit of trust in the quality of most private educational institutions. This can be circumvented by setting up joint programmes with foreign universities of global repute. Foreign universities entering into partnerships with Indian universities to offer joint degrees and set up campuses in collaboration with domestic institutions should be proactively encouraged and facilitated by the University Grants Commission.

The second strategy I would advocate for is investment in the existing public institutions that have been at the forefront of offering quality education for decades and carry high brand value in the country. Unfortunately, public higher education institutions are in dire straits today, with high vacancies in faculty positions that have not been filled for years, along with crumbling infrastructure. A case in point is the stagnant faculty strength of Economics departments in undergraduate colleges in Delhi University, while Ashoka University’s Economics faculty strength has grown multiple times to become the largest Economics department in the country within 15 years. This divergence indicates that there is no paucity of high-calibre candidates for faculty positions. Instead, hiring processes at public institutions have not been sufficiently adaptive. Further, public education must remain viable and effective in a relatively poor country such as ours, where the majority of students cannot afford to pay the high tuition costs charged by private educational institutions.

Expanding the capacity for quality education not only increases the human capital of the youth, it also raises youth employability while creating new job opportunities in the education sector and beyond. The education sector is one of the relatively more labour-intensive industries in India. Agglomeration economies created through education hubs have the potential to expand employment opportunities at all skill levels — from high-skilled teaching positions to mid- and low-skill providers for on campus student services. The employment elasticity in the sector has been increasing over the years — for every 10 per cent increase in investment in the education sector, there is almost a 4 per cent increase in the number of people employed in the sector. The sector also has strong inter-sectoral linkages — both backward and forward —potentially stimulating expansion and job creation in other sectors such as publishing. A burgeoning education sector would, in turn, stimulate output in industries that hire high-skill graduates and thereby raise aggregate consumption in the economy. This can create a virtuous cycle of higher domestic demand, leading to higher private investments, and thereby, faster economic growth of the country.

Dynamic policymaking can ensure that India grabs this golden opportunity presented by the shifting global scenario to foster a boom in its education sector — investing in the human capital of our youth and, at the same time, creating new employment opportunities at scale.

The writer is professor of Economics, Indian Statistical Institute, Delhi, and visiting professor, NCAER. Views are personal.

The arc of ascent of China’s financial system

Reform, global reach and financial stability statecraft. 

Amid developing tensions, the International Monetary Fund’s 2025 Financial Sector Stability Assessment for China arrives at a pivotal juncture. More than a domestic stocktake, it reflects the structural transformation of China’s financial system, marked by increased complexity, persistent contradictions and a steadily expanding global footprint – much of which is mediated by Chinese financial institutions.

This year’s assessment invites further scrutiny of the system’s evolving resilience and policy trade-offs. Having contributed to China’s inaugural Financial Sector Assessment Program in 2010, which played a key role in helping China embark on financial reforms in the following years, I recall one main thing. That is a large but underdeveloped financial system – bank-dominated, policy-directed and functionally insulated from global market signals.

Also among the vulnerabilities were undercapitalised banks, misallocated credit, structural dependence on real estate, opaque risk pricing and the absence of formal resolution protocols. Not only was regulation fragmented, but supervisory authorities also lacked independence and governance frameworks were nascent.

Domestic gains, lingering risks

Fifteen years on, institutional progress is evident as brought out by the 2025 assessment. Risk-based regulation is more embedded. The macroprudential toolkit has matured, with the People’s Bank of China deploying instruments under the Macroprudential Assessment regime. Regulatory oversight now extends to systemically important fintech and nonbank financial conglomerates. Capital markets have deepened, the investor base has broadened and digital finance increasingly intermediates through regulated channels.

The shift from financial repression in 2010 towards selective marketisation has helped to broaden credit allocation and improve price discovery, particularly in corporate and local government financing.

China’s macroprudential regime, however, continues to operate under institutional constraints. Due to administrative overrides and conflicting policy mandates, countercyclical capital buffers, systemic risk surcharges and borrower-based tools work less effectively. Unlike other G20 jurisdictions, China lacks legal independence and transparent, rule-based triggers in macroprudential governance, undermining credibility and market expectations.

Moreover, the financial sector’s growth has created new vulnerabilities. Smaller banks face continuing exposure to deteriorating assets, weak controls and concentration risks from local government vehicles and property developers. Many also struggle with thin margins and mismatched balance sheets.

While the 2025 assessment identifies these problems, it does not quantify the potential chain reactions and stress breaking points that demand attention from China and global finance.

Crisis management and political limits

Resolution frameworks have improved modestly. Deposit insurance – introduced in 2015 – has gained operational traction. Resolution planning and recovery mechanisms are now in place.

Yet critical institutional and legal gaps remain unresolved. The absence of binding bail-in protocols, creditor hierarchy legislation and explicit fiscal backstops continues to undermine the credibility of resolution in the event of a large-scale or cross-sectoral failure. The capacity to resolve distressed but non-systemic entities in a predictable, market-neutral way – without cascading contagion – remains untested.

The 2010 and 2025 assessments call for improved financial transparency, governance and data quality. These are no longer technocratic refinements for China but preconditions for confidence in the financial system and effective macroprudential calibration.

A persistent gap remains in the quality and timeliness of financial disclosures. While credit registry coverage and regulatory consolidation have improved, the 2025 assessment implies systemic opacity is impeding risk pricing, especially for external actors.

Global leverage and surveillance

One aspect where the 2025 assessment could have provided clearer insights into systemic risk arising from China’s expanding global financial footprint.

Since 2010, China has transformed from a net capital importer to a strategic creditor. Through its policy banks, state-owned commercial lenders and bilateral swap arrangements, China finances infrastructure, helps trade settlement and provides development lending across Asia, Africa and Latin America. Renminbi-denominated trade in Asia has grown sharply, while its share in global payments has tripled since 2010. China is also a creditor in the global bond markets, actively funding cross-border public debt.

Yet, the 2025 assessment only cursorily addresses this selective and state-mediated financial globalisation, which operates under capital account controls and geopolitical uncertainty.

As the IMF has already attempted for other internationally active economies, such as Singapore and Switzerland, the 2025 FSSA would have benefitted by going a step ahead and having a dedicated module on cross-border stress transmission, renminbi clearing hubs, the PBOC’s role and sanctions-related financial connectivity risks. That China’s established role as a global liquidity provider and payment system actor is not treated with the same analytical depth represents a missed opportunity.

China’s financial system operates with a distinct duality: functioning as a macroeconomic stabiliser and a policy-driven geoeconomic lever. This creates tensions between market signals and administrative control, liberalisation goals and geopolitical buffers.

While the 2025 FSSA acknowledges this contradiction, it leaves unexplored implications for regulatory coherence and crisis preparedness. The analysis should have moved beyond international standards to recommend approaches better suited to China’s structural uniqueness and its significance in global finance.

Looking forward

What next? China faces three strategic questions. First, can China enforce market discipline in resolving smaller institutions without resorting to implicit guarantees or policy forbearance? Second, is the renminbi’s internationalisation and the financial system’s role driven by genuine competitiveness or administrative design? Third, can monetary, fiscal and financial policy coordination stabilise an aging, debt-heavy and geopolitically vulnerable environment?

China must build on its institutional progress and the policy suggestions noted in the 2025 FSSA while adapting to a more fragmented global financial landscape. The shift from insulation, as pointed out by the IMF in 2010, as well as the shift to sensible integration, as outlined by the IMF in 2025, stays unfinished.

Whether China moves towards transparency and rules-based finance, mindful of its implications for global financial stability, or greater opacity and intervention will profoundly shape its path and role in the international monetary system.

Udaibir Das is a Visiting Professor at the National Council of Applied Economic Research, Senior Non-Resident Adviser at the Bank of England, Senior Adviser of the International Forum for Sovereign Wealth Funds, and Distinguished Fellow at the Observer Research Foundation America. He was previously at the Bank for International Settlements, the International Monetary Fund and the Reserve Bank of India. Views are personal.

School to Work: A Tale of Missing Females in the Indian Labour Market

India has made remarkable strides in expanding access to education for girls over the past few decades. Enrolment rates for girls in primary and secondary schools have risen significantly, and gender gaps in literacy have narrowed. Girls have surpassed boys even in gross enrolment in higher education. However, this educational success has not translated into a proportional increase in female labour force participation.

Despite robust economic growth and declining fertility, women’s participation in wage work in India has not increased over the last  two decades. The latest Economic Survey (2024-25) report even marked a significant dip in wage employment among women since 2017, both in rural and urban areas. According to the World Bank, working women in India dropped from 24 percent to 18 percent between 2010 and 2020. This anomaly points to systemic barriers that prevent educated women from translating their qualifications into employment opportunities.

Conservative social norms are the most commonly blamed reason for this disconnect. However, recent evidence refutes this claim. Using the latest wave of the India Human Development Survey (IHDS) data, Sonalde Desai claimed that parental aspiration and investment in girl children have gone up over the last decade, leading to parity on enrolment in higher education and delayed marriage among girls (The Indian Express, 13 November, 2024). Young Indian women have shown considerable improvement in the first three among the four key domains of women’s empowerment, i.e., personal efficacy, power in intra-household negotiations, and societal engagements, and access to income-generating activities over the last decade. They have shown their readiness to engage in income­generating activities, but a lack of suitable employment opportunities is acting as a hindrance to their success.

Ajob-relevant skill gap has stood out as one of the major roadblocks on the way to women’s employment. Today, more women enrolled in higher education are studying arts, humanities, and social sciences, which have limited scope in providing employment. According to the All India Survey on Higher Education (AISHE) 2021-22, in both the undergraduate and postgraduate levels, a smaller number of females were enrolled in engineering and STEM courses compared to males. Despite a high enrolment rate, the choice of stream acts as a deterrent to women’s employment.

In addition to this, vocational training plays a role in enhancing the employability of women. The current policy offers women limited vocational training opportunities like apparel, tailoring, beauty and wellness, healthcare, and retail, which align with their traditional roles. However, well-paying jobs in a modern world require skills like English proficiency, digital literacy, IT and computer skills that schools often fail to provide.

Even with all these shortcomings, we need to acknowledge that we are unable to produce adequate jobs that attract young women to work and grow. Workplace discrimination based on gender makes the workplace toxic for women to work and thrive. Safety and security often pose a threat to their mobility for work. Offering on-the-job training, flexible work hours, or work-from-home options, and childcare facilities in the workplace have the potential to raise the labour force participation among Indian women.

The economic costs of low female labour force participation are profound. India is missing out on the demographic dividend that an educated female workforce could offer. In a period of low fertility, providing opportunities to Indian mothers with smaller family sizes to join the workforce would boost the economy. Moreover, the underutilization of half the population limits innovation, productivity, and inclusive growth.

Attempts to make America great again seem to centre around destroying the institutions that made American science great. It is a bad idea

As India seeks to enhance its innovation ecosystem, it is worthwhile to pay attention to opportunities and lessons from the self-inflicted wounds on American science

What do lasers, the internet, Google’s search algorithm, the gene-editing tool CRISPR-9, Wireless MIMO (multiple-input multiple-output) technology, and Covid vaccines have in common? Key innovations underlying each originated in an American university, where government grants funded initial research and were later adapted for industrial research and development. Many great American multinational companies have emerged from these foundational research breakthroughs. However, if President Donald Trump has his way, America’s golden age of creativity would soon be a distant memory. While the world is focused on the economic disruption caused by Trump’s tariffs, his short-sightedness in killing the golden goose that made the American economy soar will have longer-lasting effects. Nevertheless, there are lessons for other countries, particularly India, as the American innovation system begins to unravel.

Assaults on universities and the feeding of anti-migrant hysteria undermine the fundamental framework on which America’s technology-driven economy rests. The American innovation-industrial complex relies on three pillars: Stable support for research infrastructure within universities and non-profit institutions funded by the government, while allowing them to operate independently; an open and competitive ideas marketplace; and tapping into global talent. All three are currently under threat.

The Trump administration views universities as free riders exploiting government largesse by collecting 30 cents in overhead for each dollar going directly to support research.

This is contrary to the post-war grand bargain created under the leadership of Vannevar Bush, the first presidential scientific adviser, whereby universities were supposed to nurture scientific talent through stable provision of jobs, laboratory space, research infrastructure, including libraries, and provide seed funding for new projects. The government would support this through overhead payments on grants. Curtailing overheads to 15 per cent jeopardises this equation.

The second pillar of this troika balanced creative freedom with accountability through professional oversight. An elaborate infrastructure was put in place in institutions like the National Institutes of Health to ensure that lack of fame or connections did not hold back young researchers, and peer review by other scientists was the only criterion that grant proposals needed to satisfy. The Center for Scientific Research at NIH was always conscious of the tendency of scientific orthodoxy to dominate and suffocate innovation. It looked for ways to ensure an even playing field. The latest balloon from the administration to downplay the role of scientific review and withholding funds from research powerhouses Harvard and Johns Hopkins to ensure political compliance risks destabilising this hard-won independence. If America forgets that, when ideology or cronyism trumps fair competition, it stifles a vibrant scientific culture. It only has to look at Russia. Russian scientists did not receive a single Nobel Prize for science between 2011 and 2022, during which 61 Americans became Nobel Laureates in scientific disciplines.

Beginning with a flight of Jewish scientists from Germany, American science has benefited tremendously from the influx of international scholars. Of the 314 laureates who won their Nobel Prize while working in the USA, 102 (or 30 per cent) were foreign-born. Compare that to Japan, which counts no foreign-born individuals among its nine Nobel laureates. We would be hard-pressed to find any scientific discipline whose leadership does not include people born outside of the United States. The anti-immigrant sentiment fuelled by the current administration will make America a less attractive place for international students and researchers. The administration claims not to be against international students, but they are welcome only if they hold no political views. This is reminiscent of Great Britain, which until 1829 was more than willing to extend democratic privileges to Irishmen as long as they did not profess Catholic beliefs.

Ironically, attempts to make America great again seem to think that destroying the institutions that made American science great is the best place to begin. These draconian measures have their roots in a belief that American universities are home to a woke culture that must be rooted out by any means. Ostensibly, this is to prevent activism around Gaza to prevent antisemitism. However, using the cudgel of financial and administrative power to humble universities that have taken pride in self-governance and openness to diverse viewpoints does not simply curb political dissent; it risks damming the fountain of their creativity. The only two-time unshared Nobel Prize winner, Linus Pauling’s life, offers an interesting example. Pauling received a prize in Chemistry as well as the Peace Prize for his crusade against nuclear weapons, a crusade that came under scrutiny from Senator McCarthy and led to tensions with his home institution, the California Institute of Technology. These tensions led to his leaving CalTech, and as historian of science Jeffrey Kovac notes, stunted the productivity of his later years. Unfortunately, the costs of the road not taken are rarely visible, except through the eyes of history.

There is a lesson and an opportunity for nations that seek to compete with America by enhancing their scientific infrastructure. The lesson lies in heightened appreciation of what made the American innovation economy function — institutional structures that provide support without stifling creativity and innovation, not using political ideologies to guide funding or regulations. Opportunity lies in a vacuum that is likely to be created and spaces that can be filled by less dogmatic nations in fields like climate science and vaccine technologies. As India seeks to enhance its innovation ecosystem, it is worthwhile to pay attention to opportunities and lessons from the selfinflicted wounds on American science. 

Kanakia is the founding president of Maker Bhavan Foundation, and Desai is professor and centre director at NCAER National Data Innovation Centre. Views are personal

India’s national river linking project will cost us dearly

India’s water crisis is not only about scarcity. It is mismanagement, over extraction of groundwater and pollution that are the real culprits

In a country where nearly 600 million people face high to extreme water stress and where per capita water availability has dropped sharply from 5,177 m³ in 1951 to about 1,400 m³ today, water security has rightly taken centre stage in policy discussions.

The government’s flagship plan, the National River Linking Project (NRLP), proposes nothing short of a hydrological transformation on a grand scale: linking over 60 rivers, building a canal network of 15,000 km, connecting 3,000 reservoirs, and transferring 174 billion m³ of water every year from the so-called surplus basins to deficit regions.

The price tag? A staggering Rs 8.5 lakh crore, a figure that could rise to Rs 21.9 lakh crore as inflation, execution delays, and project complexities pile up.

At the heart of this ambitious programme is the Ken-Betwa Link Project (KBLP), the first river-linking project to take off on the ground. With an estimated cost of Rs 44,605 crore, the KBLP plans to divert water from the Ken River in Madhya Pradesh to the Betwa River in Uttar Pradesh. The promise is irrigation for 10.6 lakh hectares of farmland, drinking water supply for 62 lakh people, and 130 MW of hydropower generation along with solar energy. The key infrastructure includes a 77-metre-high Daudhan Dam and a 221-km canal cutting across the drought-hit Bundelkhand region.

However, as work begins, serious cracks are emerging in the grand narrative.

– The Human Cost: The project is set to displace at least 21 villages, home to over 7,000 families, many of whom belong to the Gond and Kol tribal communities. It is not just about losing farmland—ancestral homes, cultural heritage, and forest-based livelihoods all are at stake. The compensation being offered ranges from a meagre Rs 7.5 lakh to Rs 12.5 lakh per household, barely enough to buy equivalent land elsewhere, let alone rebuild lives from scratch.

– Ignoring Ecology: One of the biggest ecological casualties of the Ken-Betwa project is the Panna Tiger Reserve, a sanctuary where tigers were carefully reintroduced after local extinction in 2009. The project will submerge nearly 98 sq km of this delicate ecosystem, amounting to 18% of the reserve’s core area, putting at risk not only tigers but also gharials, vultures, and many other species unique to this habitat.

While the Standing Committee of the National Board for Wildlife (NBWL) has cleared the project, the Central Empowered Committee (CEC) has flagged this clearance as a violation of the Wildlife (Protection) Act, 1972. The law clearly prohibits such diversion of river flows unless it directly benefits the wildlife, a condition that has not been convincingly demonstrated here. Independent experts, including those appointed by the Supreme Court, have also raised serious doubts about the project’s hydrological assumptions and its ecological justification. To make matters worse, the project’s assessment of “surplus” water in the Ken basin is based on yield estimates from as far back as 2003, failing to consider updated hydrological data and the increasing uncertainties posed by climate change.

– The Climate Challenge: The core idea of moving “surplus” water from one basin to another overlooks the profound changes in rainfall patterns brought about by climate change. India’s monsoon, which provides 80% of its annual rainfall, has become highly erratic. Recent estimates warn that inter-basin water transfers could actually reduce rainfall in dry regions like Rajasthan by up to 12% while increasing rainfall in wetter basins by around 10%—thus worsening both droughts and floods.

Research from IIT Bombay suggests that large-scale irrigation from river-linking could disrupt local land-atmosphere feedback loops, potentially affecting the monsoon cycle across the subcontinent. History offers sobering lessons from the ecological disasters of the Kissimmee River restoration in the US, the shrinking Aral Sea, and other large-scale hydrological interventions.

It is important to recognise that India’s water crisis is not just about scarcity. Mismanagement, pollution, and over-extraction of groundwater, which currently provides 85% of rural and 50% of urban drinking water, are the real culprits.

– The Economic Reality Check: With Rs 45,000 crore earmarked for the Ken-Betwa project alone, the economic feasibility of such ventures deserves close examination. Once maintenance, ecological restoration, and rehabilitation costs are included, the expenses could easily double over the project’s lifetime.

– A key question arises: what if these massive investments were directed instead towards micro-irrigation, rainwater harvesting, wastewater recycling, or smart technologies like IoT-based precision agriculture? Studies show that micro-irrigation alone can improve water-use efficiency by 30-70% and increase crop yields by 20-90% without displacing people or harming wildlife. Global examples should also serve as cautionary tales. China’s South-North Water Transfer Project displaced over three lakh people and caused widespread ecological damage. Yet, India seems determined to follow the same path, positioning river-linking as the ultimate solution for water scarcity.

– The Smarter Path Ahead: Rather than relying solely on heavy engineering, India should focus on integrated water resource management at the basin level. This includes improving demand-side efficiency, encouraging water-saving technologies, and promoting decentralised, community-led solutions.

Local innovations like the Mangal Turbine, developed by a farmer in Bundelkhand in 1987 as a low-cost irrigation alternative, are examples of homegrown ideas that deserve more attention and support. Further, strengthening River Basin Authorities under Article 262 of the Constitution, alongside effective interstate cooperation and transparent public participation, could resolve disputes and lead to more sustainable outcomes.

Mohapatra is with IIT Jodhpur, and Mitra is with NCAER. Views are personal.

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