Private Engineering Education in India: Market Failures and Regulatory Solutions

Lav R. Varshney

Science, Technology, and Public Policy

Massachusetts Institute of Technology
November 29, 2006
 Engineering education in India has seen tremendous growth over the past decade, both in
number of students and number of colleges (see Table I), however the average quality of the
colleges and graduated students has become suspect (Sengupta, 2006). A survey of human
resource professionals at multinational corporations in India revealed that only one quarter of
engineering graduates with a suitable degree could be employed irrespective of demand (Farrell
et al., 2005). Another survey of employers shows that only a handful of the 1400 engineering
schools in India are recognized as providing world-class education with graduates worthy of
consideration for employment (Globalization of Engineering Services, 2006). These results
suggest that engineering degrees from most Indian colleges do not provide signaling value in the
engineering labor market. Hence, low quality (in the labor market sense) engineering schooling
has come to predominate in the education market. The current situation, with an abundance of
low quality engineering schooling, is considered objectionable by many in the Indian polity and
is also projected to stifle growth of the Indian economy (Globalization of Engineering Services,
2006). It is our purpose to investigate the factors that lead to the current state of technical
education in India and to suggest public policies that would rectify the situation. Since the recent
growth in Indian engineering education has been overwhelmingly due to privately funded
educational institutions rather than publicly funded ones, our focus lies thereto.
Often arguments are made that environmental policy cannot and should not be reduced to
cost-benefit analysis, since life, health, and nature cannot be reduced to monetary values and that
attempts at such reductions are depraved (Heinzerling and Ackerman, 2002). Similarly, many
protest that “placing a ‘price’ on education is to debase it” (p. 7, Schultz, 1963) and that analysis
of the education system cannot be reduced to the economic calculus of costs and benefits
(Schultz, 1963). In fact the Indian Supreme Court has said, “Education has never been
commerce in this country. Making it one is opposed to the ethos, tradition and sense of this
nation.” (Kapu and Mehta, 2004). We note that although these other considerations may cast the
normative model for education policy as different from the cost-benefit model, we assert that
individual actions by students and private colleges in the Indian engineering education market as
well as by graduates and employers in the Indian engineering labor market are driven largely by
economic considerations. The assertion of economic motivation of students and colleges follows
from the behavior reported in (Kapu and Mehta, 2004) and personal communication with several

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 School Year Number of Degree Colleges Number of Incoming Students
1997–1998 562 134298
1998–1999 644 153151
1999–2000 755 179647
2000–2001 821 209115
2001–2002 1057 293814
2002–2003 1195 356258
2003–2004 1263 380803
2004–2005 1358 450954
2005–2006 1478 508595
Table I. Growth in number of engineering degree colleges and number of incoming engineering students.
Data from p. 214 of Annual Report 2005–06, Dept. Secondary and Higher Education, Ministry of Human
Resource Development, India.

Indian engineering students and graduates. Hence, economic analysis is a justified approach to
the analysis of the Indian engineering education system.
First we specify the benefits and costs of education to the individual student. One can
broadly divide goods and services into two classes: consumption are those from which
consumers derive present benefit; investment are those which are used in production over a long-
term (Vaizey, 1962). Schooling has the attributes of consumption, as it can immediately provide
the enjoyment of one’s classmates company, the joy of learning, and the satisfaction of
accomplishment. The consumption “consists of values associated with education that are not as
a rule vocational, occupational, or professional” (p. 8, Schultz, 1963). Schooling also has the
characteristics of investment, as it can affect the capacity to enjoy books in the future, affect
future consumption rates, and increase future earnings. The human capital investment benefits
accrued through schooling are not like other non-human benefits and cannot be sold in the same
manner. Although the investment benefits of schooling should not be lessened merely because
there are also consumption benefits, often there is a tradeoff between consumption and
investment attributes of schools. Students must often forgo the present enjoyment associated
with less rigorous schooling for the long term benefits of rigorous schooling. As some might
say, steel forged in hotter fires is more valuable for future production. Vocational, occupational,
or professional benefits from schooling are the ones that we will focus on here, in particular with
regards to the valuation of these benefits in the labor market. Note that when we discuss
educational benefits, we restrict our attention to formal, degree-granting schooling, even though
similar benefits may be derived through informal education systems such as the Massachusetts

2
Institute of Technology’s OpenCourseWare (Lerman and Potts, 2006). The main benefit not
provided by such informal educational systems is signaling of quality in the labor market. In
general, an educational degree comes to signal quality in the labor market for several reasons.
First, filtration is provided by the admissions process of the educational institution: gaining
admission by itself may indicate that some standard has been achieved. Second, the student
presumably gains knowledge and skills through coursework, completion of which is indicated by
the degree; education without a degree cannot be certified. If the degree program is accredited to
meet certain standards by a putatively neutral body, this indicator is strengthened. In the
engineering education context, the engineering degree may signal that the degree holder
possesses knowledge and skills that are applicable to the profession of engineering. Finally,
successful completion of the educational endeavor may indicate certain positive personal
qualities. The costs of schooling borne directly by the student are mainly the earnings foregone
by going to school rather than working and the school tuition. Public expenditure may also
cover some costs of schooling.
Given that we have established the costs and benefits of schooling for the student, we
must also establish incentives for the provision of schooling. Although we are treating the
educational enterprise in economic terms, we must point out that there are differences between
education and more conventional industries. As noted by Schultz (p. 4, 1963), “With a few
unimportant exceptions, schools are not organized and administered for profit.” In fact, the 1992
Indian Supreme Court decision in St. Stephens v. University of Delhi ruled that “educational
institutions are not business houses; they do not generate wealth.” Moreover, in the 1993 Unni
Krishnan v. Andhra Pradesh decision, the court ruled that education could not be the object of
profit-seeking activity. The Court does allow institutions to deduct “reasonable operating and
other capital expenses” (Kapu and Mehta, 2004). Most engineering colleges are now privately
supported rather than through public expenditure: private colleges account for 86.4 percent of
students and 84 percent of engineering colleges (Kapu and Mehta, 2004), see also Table II.1
Despite legal prohibitions on profit, Kapu and Mehta (2004) argue that the growth of private

1
This is in stark contrast to other countries where most higher education resources are provided from public funds.
In Denmark and Holland, 2% is private funding; in Canada, 10% is private funding; in the United States, 22% is
private funding (Kapu and Mehta, 2004). The engineering college boom in the United States, when the number of
engineering schools increased from 6 to 70 between 1862 and 1872, was largely due to direct federal funding
through the Morrill Act (p. 24, Noble, 1977), a Stiglerian direct subsidy of money (Stigler, 1971). The engineering
college boom in India, detailed in Table I, is largely due to private funding.

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 State Government Colleges Private Colleges
Andhra Pradesh 10 213
Assam 3 0
Bihar 4 3
Chattisgarh 2 9
Delhi 7 7
Gujarat 9 16
Haryana 7 29
Himachal Pradesh 2 3
Jharkhand 4 2
Karnataka 13 99
Kerala 31 51
Madhya Pradesh 6 47
Maharashtra 16 133
Orissa 6 38
Punjab 11 27
Tamil Nadu 16 234
Uttar Pradesh 25 58
Uttaranchal 5 4
West Bengal 15 37
Table II. Numbers of government engineering colleges and private engineering colleges in major Indian
states, 2003. Data taken from (Kapu and Mehta, 2004); original data from All India Council for Technical
Education.

engineering colleges is simply an artifact of politicians creating opportunities to collect rents.

That is to say, private engineering colleges are organized and administered for profit in spite of
legal prohibitions.
Now that we have established the incentives of students and of colleges, we may apply
economic analysis. First we assume that the private engineering education market functions
without failure. In the labor market, firms and graduates both know the quality of a graduate
from a particular college. Based on this knowledge and through market interaction, prices for
graduates of particular quality are set. These prices, inasmuch as they are determined by the
signaling function of degree-holding,2 will be the quality indicator in the education market.
Prospective students and colleges will know the signaling quality of a degree from a college, and

2
Note that here we are assuming that the average quality of a graduate from a particular college is known, not that
the actual quality of a particular graduate is known. Under the alternative enhanced information pattern, the degree
would grant no signaling function whatsoever, as each candidate could be judged directly. Moreover note that under
the reduced information pattern, the degree is not the sole factor in determining price in the labor market. Factors
such as nepotism or communal ties may also come into play, however we assume that these can be separated.

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prices will thus be set. Since we are treating schooling as an investment, under perfect
information, the greatest amount that a college will be able to charge is the amount that will be
recovered by the student in net increase of benefits through employment. If there is an
overabundance of engineers produced by the colleges, one would expect prices for engineers to
decrease, thereby driving the weakest of engineers out of the labor market. Since these weak
engineers are produced by the weakest of colleges, the weak colleges would be driven out of the
education market. This process would continue until the supply and demand in the labor market
and thereby in the education market achieved equilibrium. Thus under perfect market
conditions, one would not expect a surplus of weak engineers in the labor market, but this is
exactly what is observed in the Indian engineering market.
We are now in a position to determine the causes of the surplus of low quality engineers
and the proliferation of low quality engineering education in India, as it is not the result of
perfect market forces. Recall that we are determining quality of education by the interaction of
college graduates and employers through the labor market. That is, we are determining quality
by the investment attributes of schooling rather than the consumption aspects of schooling.
Engineering colleges are typically able to ascertain the quality of schooling that they provide,
e.g. by tracking alumni or communications with industrial bodies. Students, however, are not
able to make such determinations. Students will only enter the labor market upon completion of
their studies, and so must make a determination of quality without a direct test. Moreover, they
are “seldom well informed even when it comes to job opportunities in the near future, namely,
about jobs and earnings likely to await them when they complete their schooling.” (p. 22,
Schultz, 1963). This is a general property of educational markets, since almost by definition,
students are unsure of their talent, and only discover them by going to school (Schultz, 1963). In
the Indian context, one medium where the apprehension of prospective students in choosing
colleges is revealed is in questions left on a blog about private higher education (Satyanarayan,
2003; Satyanarayan, 2004). The blogger is presumed to be able to provide information to
mollify the prospective students’ information shortage. The information asymmetry in general
education markets is further born out by the differences in college choice among children of
university faculty, who presumably have access to side information, and their cohorts (Siegfried
and Getz, 2003). As a side note, the information asymmetry problems associated with the
investment attributes of education may not be present for the consumption attributes of

5
education. The quality of dormitories, the gender ratio of the student population, and the beauty
of the university campus, among other things, are all assessable by students. Since our focus is
on the investment attributes of schooling, the information asymmetry stands.
As argued by Akerlof (1970), due to the informational asymmetry between colleges and
students, the price that students are willing to pay is determined by the average quality of the
ensemble of engineering colleges rather than by the quality of the particular engineering college
itself. This pricing structure, however, will drive high quality schooling (with presumptively
higher costs) out of the market, and low quality schooling will predominate. This “lemons”
adverse selection failure of the education market is the reason for the proliferation of low quality
engineering education in India. This adverse selection problem will also drive students looking
for high quality schooling out of the market altogether. It is worth pointing out a key difference
between the education market and a market such as for used cars. Unlike the used car market,
where the quality of particular car is fixed, the quality of a particular school can be modified. By
reducing the quality of faculty and facilities, with a presumably commensurate reduction in
costs, an engineering college may reduce the cost and quality of education provided. This
difference explains why there is only degradation in the quality of education on the market,
rather than a reduction in the number of vendors in the market; in fact, there has been an increase
in the number of vendors in the engineering market, Table I.
Before promulgating public policies to rectify market failures, let us review the
manifestations of the market failure in more specific terms. The first problem is the spiraling
decrease in quality of engineering education, as measured by suitability of graduates for the labor
market. As noted by Akerlof (1970), “An untrained worker may have valuable natural talents,
but these talents must be certified by the ‘educational establishment’ before a company can
afford to use them. The certifying establishment, however, must be credible.” Graduates from
the top Indian schools rank excellently in employment suitability, but there is a steep decline in
quality beyond these top-tier schools. “‘Many so-called 'degrees' just do not have the right
fundamental education behind them,’” according to one human resources professional (Farrell et
al., 2005). “Most observers agree that Indian universities, with a few exceptions, do not perform
this signaling effect. A degree from any of these universities could mean anything in terms of
quality” (Kapu and Mehta, 2004). One further piece of evidence of college degrees not
providing signaling functions is the significant expansion of certification programs from

6
companies such as Microsoft in India (Karlin, 2006). The wide heterogeneity in quality of
universities explains why only 25% of Indian engineering graduates are considered suitable for
employment (Farrell et al., 2005). The main reasons that graduates are unsuitable for the job
market are the “lack of necessary language skills; the low quality of significant portions of the
educational system and its limited ability to impart practical skills; and a lack of cultural fit,
which can be seen in interpersonal skills and attitudes towards teamwork and flexible working
hours” (Farrell et al., 2005). The top-tier engineering colleges are the Indian Institutes of
Technology (IIT) at Bombay, Delhi, Kanpur, Kharagpur, Madras, Guwahati, and Roorkee, which
were established as “Institutions of National Importance” by the Institutes of Technology Act of
1961. They are controlled by the national government and are “globally competitive and
contribute significantly to development of technical manpower and technology development in
the country” (Annual Report 2005–06). Since these universities are not subject to the same
market forces as privately funded colleges and are also not profit-seeking, it is not surprising that
the decrease in quality does not apply. One might even argue that these institutions are external
to the Indian engineering education market that we have been discussing. A degree from an IIT
(or perhaps just gaining admission into an IIT) does signal quality in the labor market; the
institution is credible.
Foreign engineering colleges are also considered credible and external to the Indian
educational market. In fact, a foreign degree has been a traditional signal of quality in India.
During the nineteenth century, “Many among the most conspicuously successful in India’s rising
middle class had studied abroad, which almost always meant England,3 and were members of a
category broadly called ‘foreign returned.’ Even at the lower levels in the social system, this
identification ensured a competitive advantage in employment opportunities” (Lambert and
Bressler, 1955). Returning to the modern educational market, estimates indicate that there were
about 110,000 Indian students studying abroad in 2004, nearly 75,000 in the United States, about
14,000 each in the United Kingdom and Australia, and another 5,000 in Canada and New
Zealand (Kapu and Mehta, 2004). A conspicuous example is Rohan Murthy, son of Infosys’s
3
The United States was also a destination for foreign study. To take an example, Ishwar Das Varshnei obtained the
S.B. in chemical engineering from the Massachusetts Institute of Technology in 1906 and would go on to found
several leading glass manufacturing companies in India. With the growth of Indian nationalism and the restoration
of the prestige of Indian culture, there was some stigmatization for those too closely associated with the British, in
some sense an Olsonian selective incentive for political interests (Olson, 1982), hence the U.S. might have become a
better option. Separate from the signaling function, arguably the knowledge and skills gained in the U.S. were also
superior to those available to be gained in Britain.

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leader Narayana Murthy, who wanted to study at an IIT, but couldn’t get in; he went to Cornell
University instead, rather than an Indian college (Stahl, 2003). Entering foreign engineering
colleges exemplifies the exit from the Indian engineering market by students willing to pay for
high quality schooling, the second part of the adverse selection problem. This problem has
significant leakage externality problems for India, as it results in a so-called brain drain. As
noted by Ravindran (2005), with the demand and value Indian students place on American
higher education, and with the greater availability of student loans in India, there is bound to be a
steady increase in students going to the United States, as the investment will be well worth it in
terms of career opportunities. A very recent piece of draft legislation that is expected to be
discussed during the current session of parliament is being proposed in an apparent attempt to
quell leakage while maintaining the positive signaling functions of foreign degrees. Namely,
foreign educational institutions will be allowed to open campuses in India (Economy Bureau,
2006). This proposed policy shift provides further evidence of the quality assumed for foreign
degree-holders. According to M. Anandakrishnan, the chairman of IIT-Kanpur, it is expected
that second- and third-tier foreign universities, rather than “top-tier institutions such as MIT
[Massachusetts Institute of Technology], Harvard University, Stanford, Yale and Princeton” will
take advantage of this policy change (Viswanthan, 2006), and yet there are indications that these
degrees will still carry signaling function in the Indian engineering labor market and will be
considered as a separate ensemble from the private Indian engineering colleges. Thus, foreign
degrees, even when not from top-tier foreign colleges, are not ‘used cars.’
Having identified and characterized a source of market failure, we can set forth public
policies to rectify that market failure, thereby mitigating the societal problems of low quality
engineering education proliferation and leakage of talent. Before we do so, we must establish
the normative model to be achieved. The Indian constitution lays down normative principles for
governance, identifying social, economic, and political justice; liberty of thought, expression,
belief, faith, and worship; and equality of status and of opportunity as several goals for which the
republic was formed. Often, however, these normative principles are at odds; for example,
regulations that promote equity in access to engineering education through quotas for
traditionally marginalized groups (backward classes, scheduled castes, and scheduled tribes) act
to reduce the liberty of private educational institutions. Among the arguably conflicting
normative principles promulgated in the constitution of India, in our analysis we will take

8
economic justice as primary. Asymmetries in information not only lead to economic inefficiency
(Viscusi et al., 2005), but are also objectionable to the principles of economic justice. A just
economic system should allow parties to have knowledge of the goods and services that they are
dealing with. Thus we suggest public policies that would rectify the identified market failures
due to information asymmetry.
Akerlof (1970) suggests that several institutions arise to counteract the effects of quality
uncertainty. The first that he mentions is the use of guarantees and warranties. Unlike in the
market for consumer products, it seems rather unreasonable to offer guarantees or warranties in
the educational market. Brand names and chains may also arise to correct quality uncertainty
problems. Since engineering education is typically a one time purchase, the threat of curtailing
business is not particularly credible, thereby limiting the utility of brand names. Establishing
chains of engineering colleges might work, but again seems rather difficult. The most viable
option for correcting the market failure seems to be reestablishing the certification property of
the engineering degree. Imposing government regulations on the certification of the engineering
degree is most warranted. In fact, there is already an existing procedure for the approval and
accreditation of engineering colleges in India. The problem is that this approval and
accreditation process does not seem to set a sufficiently high standard which yields a credible
signaling mechanism. Let us investigate this institutional failure.
The All India Council for Technical Education (AICTE) was vested with statutory
powers by an Act of Parliament in 1987 with the mandate to organize, plan, and administer
technical education in the country. Note, however, that the IITs are outside the purview of the
AICTE (Ramachandran, 2004). The AICTE approval process for new institutions or new degree
programs is based on several criteria including the credibility of the institutional management
and program providers; assurance of compliance to AICTE norms and standards; approval by the
state government; and market sensitivity of the program output, so as to avoid the imbalance of
supply of qualified manpower. Beyond AICTE approval, there is a further process of
accreditation by the National Board of Accreditation (NBA), which is supposed to have higher
standards. NBA accreditation of programs is based on the demonstrated capability of the
institution and program to adhere to the qualitative criteria for accreditation and an assessment
by experts through institutional visit. There are several qualitative criteria on faculty, facilities,
students, industry interaction, and other such things. In particular, the NBA criterion on faculty

9
and staff states that, “The faculty strength, cadres, qualification and level of competence and
performance should be adequate to accomplish the institutional mission and goals. … The
qualifications of the faculty relevant to the programme area are generally measured by the
advanced Degrees held by them, and their scholarship, creative activities and professional
experience” (Manual of Accreditation, 2004).
As noted by U. R. Rao, who led a commission in 2004 to study the state of Indian
technical education, “Now, although accreditation has been mandatory, less than 5% of the
institutions have been accredited! Unfortunately, there is no upper limit on how long an
institution can wait to seek accreditation. There are institutions that are more than 25 years old
that do not enjoy accreditation!” (Riti, 2004). As Rao suggests, this institutional failure must be
rectified, and all institutions must be forced to seek accreditation as soon as possible. Moreover,
engineering colleges should be re-accredited after some fixed interval of time to prevent the
atrophy of quality. Engineering colleges that do not meet the accreditation criteria should be
closed by regulatory fiat. This regulatory policy assumes that the accreditation process will only
accredit colleges that meet the ascribed standards. We investigate whether the NBA criteria set
forth in the Manual of Accreditation are met by colleges that have in fact been NBA accredited,
focusing on the qualifications of faculty criterion quoted above. If the criterion is taken at face
value, there would seem to be a requirement of faculty that hold advanced degrees.
The Hindustan College of Science and Technology, Mathura, U. P., is accredited by the
NBA for the following programs: B.E. in Computer Science & Engineering, B. E. in Electronics
& Communication, and B. E. in Mechanical Engineering. Table III shows the listed faculty in
the Department of Computer Science & Engineering. The Motilal Nehru Regional Engineering
College, Allahabad, U. P., is accredited by the NBA for the following programs: B. E. in
Computer Science and Masters in Computer Applications. Table IV shows the faculty of the
Department of Computer Science & Engineering. The JSS Academy of Technical Education,
Noida, U. P., is accredited by the NBA for the following programs: B. Tech. in Electronics &
Communication Engineering, B. Tech. in Mechanical Engineering, B. Tech. in Computer
Science & Engineering, and B. Tech. in Electrical Engineering. Table V shows the faculty of the
Department of Computer Science and Engineering. These three tables are summarized in Table
VI.

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 Name Rank Degree Qualification
Mr. Suneet Gupta HOD I/C Lect. M.Tech.
Mr. Jagadeesh G. Sr. Lect. M.Tech., B.E. (Comp Sc.), P.G.D.S.M.
Mr. A. Senthil Sr. Lect. B.E. (Comp Sc.)
Ms. Sarika S. Khandelwal Lect. B.E. (Comp Sc.)
Ms. Lavanya Narasimha Rao Lect. B.E. (Comp Sc.)
Mrs. Nilima P. Fulmare Lect. B.E. (CSE)
Mr. Ajay Kr. Singh Lect. B.E. (CSE)
Mr. Samik Tiwari Lect. B.Tech. (CSE)
Mr. Vijay S. Katta Lect. B.E. (CSE)
Mr. Raj Kumar Singh Lect. B.Tech. (CSE)
Mr. Prateek Srivastava Lect. B.Tech. (CSE)
Ms. Nidhi Agrawal Lect. B.E. (CSE)
Mr. Sudeep Pandey Lect. B.Tech. (CSE)
Mr. Sushanta Narayan Padhi Lect. B.E. (CSE)
Mr. Law Kumar Singh Lect. B.E. (CSE)
Ms. Rashmi Singh Lect. B.Tech. (CSE)
Ms. Ankita Singh Lect. B.Tech. (CSE)
Mr. Bablu Pandey Lect. B.E. (CSE)
Table III. Faculty of Department of Computer Science & Engineering, Hindustan College of Science and
Technology, Mathura, U. P. Data obtained from Hindustan College of Science and Technology
(http://www.sgei.org/facultyHCST.htm).

Name Degree Qualification

Prof. Gulab Singh Ph.D.
Prof. Krishna Kant Ph.D.
Prof. A.K. Mishra Ph.D.
Dr. (Mrs.) S. Agarwal Ph.D.
Mr. Manoj Madhav Gore M.E.
Sri Rajesh Tripathi B.Tech.
Sri R.S. Yadav M.E.
Sri Anil Kumar Singh M.C.A.
Sri Dharmendra Kr. Yadav B.E.
Sri Rajesh Kr. Singh B.E.
Sri Shashi Kant Gautam M.C.A.
Sri S. Anand Kumar M.E.
Table IV. Faculty of Department of Computer Science & Engineering, Motilal Nehru Regional
Engineering College, Allahabad, U. P. Data obtained from Motilal Nehru Regional Engineering College
(http://mnrec.nic.in/html/computer_science.html).

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 Name Rank Degree Qualification
Prof. P. S. Gill Prof. (HOD) B.E., M.E.
Mrs. Poornima Mehta Asst. Prof. B.Tech., M.Tech.
Mrs. Seema Shukla Sr. Lect. B.Tech., M.Tech.
Mrs. Jyoti Sr. Lect. B.E., M.E.
Ms. Jyoti Shukla Lect. B.Tech., M.Tech.
Mr. Naveen Kr. Jayant Lect. B.Tech., M.Tech.
Mr. Neeraj Kr. Awasty Lect. B.Tech.
Mr. Nitin Kr. Saran Lect. B.Tech., M.Tech.
Mrs. Pratibha Singh Lect. B.Tech.
Mr. Birendra Kr. Verma Lect. B.Tech.
Ms. H. Sudha Lect. B.E., M.E.
Ms. Meetika Agarwal Lect. B.E., M.S. (IT)
Ms. Sowmya Arun Lect. B.E. (IS)
Mr. Vivek Kataria Lect. B.E., M.Tech.
Ms. Naina Lect. B.Sc., M.Sc., M.Tech.
Ms. Deepti Sharma Lect. B.Sc., M.Sc., M.Tech.
Mr. Krishnanand Chaturvedi Lect. B.Tech.
Table V. Faculty of Department of Computer Science and Engineering, JSS Academy of Technical
Education, Noida, U. P. Data obtained from JSS Academy of Technical Education
(http://www.jssaten.ac.in/departments.html).

Engineering College Bachelors Masters Doctorate

Hindustan College of Science and Technology 16 2 0
Motilal Nehru Regional Engineering College 3 5 4
JSS Academy of Technical Education 5 12 0
Table VI. Highest degree qualifications of faculty at three departments of computer science and
engineering with NBA approved degree programs.

As can be observed from Table VI, there is a great disparity among the degree
qualifications of the faculty at the several engineering colleges. All of the listed colleges have
faculty members that do not hold advanced degrees; in fact only 11% of the Hindustan College
of Science and Technology faculty hold advanced degrees, and none hold doctorates. Similarly,
none of the faculty at the JSS Academy hold doctorates. Since the colleges do not appear to
meet the NBA standards, and yet they are NBA accredited, it does not appear that the NBA
criterion on faculty and staff for accreditation is being applied in any meaningful manner,
suggesting another level of institutional failure. We can see from (p. 215, Annual Report 2005–
06) that the “Accreditation process of institutions was expedited by the AICTE. During 2003–
2004, 409 programmes were accredited where as during 2004–2005, 570 programmes were

12
accredited. For the year 2005–2006, 279 programmes have been considered for accreditation.”
Perhaps this expedited accreditation process is leading to the institutional failure. A bureaucratic
solution to reduce the apparent failure of the accreditation process is simply to slow down and
improve the assessment of the standards.
Although there are regulatory mechanisms in place to rectify market failures, these
regulatory mechanisms suffer from institutional failure. Thus the public policy that we suggest
is to simplify require not only AICTE approval but also immediate NBA accreditation, with
frequent re-accreditation. Furthermore, when the NBA accreditation is carried out, the NBA
Manual of Accreditation should be followed. Once the regulatory mechanisms are executed, it
seems that the market failures will be mitigated. The information asymmetry problem will be
reduced, since NBA accreditation will signal quality in the labor market, thereby reducing
quality uncertainty in the education market. Thence, the proliferation of low quality engineering
education will be mitigated, as regulation will not allow such low quality products to appear in
the market. Once the quality of engineering education in India increases to a suitable level, the
flight to foreign engineering colleges should also subside, thereby solving the two major social
ills associated with adverse selection in the engineering education market.

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