Friday, February 17, 2006

Indian universities and endowments

Here is an interesting article from

"Yale University's School of Music has received an anonymous $100 million gift that will, among other things, result in free tuition for students, starting next year."

Everytime I see such news stories, I certainly feel happy for the recepient universities. At the same time I feel so sad for Indian universities and other institutions of higher education. Anyone who kept his/her eyes open during the during the last 10 years knows that quite a few industry bigwigs and entrepreneurs who made it big (and there were many during the dot-com boom) donateed big money to the IITs (and probably to other colleges as well, but the news about IITs was really prominent). For example, IIT-B benefited from gifts from its alumni such as Kanwal Rekhi and Nandan Nilekani.

The IITs that received these donations used them to start new programs, notably in management, and for other purposes such as sprucing up their facilities, including their hostels. Everything was going great, until the then Minister of Human Resources Development, Murli Manohar Joshi, intervened, and the rest, as they say is history.

In this case, it was a truly sad history. One particularly dark episode is recounted by Urmi Goswami:
In the summer of 2003, Gururaj Desh Deshpande, co-founder of high-end optical technology company Sycamore Networks, tried in vain to donate $10 million to his alma mater IIT Madars. The purpose of this grant was for his alma mater to undertake an optical research project. His grant was rejected by the ministry of human resources development. Deshpande finally took his money where it was wanted — to the Massachusetts Institute of Technology. The MIT received a grant of $20 million to set up the ‘Deshpande Centre of Technological Innovation’.

Why? Because, gifts to individual institutions became impossible in the new, warped regime imposed by M.M. Joshi. From the same report by Goswami:

In January 2003, a fund -- Bharat Shiksha Kosh -- was set up. All donations made to educational institutions or for educational purposes were to be routed through the BSK. Set up as the brainchild of Murli Manohar Joshi, the Bharat Shiksha Kosh was meant to help channel funds — especially from smaller contributors — to the education sector, particularly the institutes of higher education.

All right. That was then, and this is now. How have things changed? When the regime change took place in May 2004, Arjun Singh, the new minister at the helm at MHRD, immediately changed the rules back to those that existed earlier. Now, people can make donations directly to the institutions of their choice. However, this year, in an announcement about the new scheme (called 'block-grant' schme' -- I don't even know what it means!) for funding IISc, IITs and IIMs, I found this interesting passage:

...The modified scheme will provide a matching contribution to the corpus equalling the net income of the institute, that is income after all expenditure has been met. The scheme would be implemented in all these institutions with the stipulation that the level of corpus may be allowed up to Rs 100 crore in the case of IITs and IISc and Rs 50 crore in respect of other institutions [IIMs].

Please correct me if I am wrong, here. Isn't this passage saying that the corpus (which is the term equilvalent to 'endowment' used in the US) cannot grow to more than 100 crores? Why should there be a cap at all -- except perhaps a cap on the government's contribution?

The US universities get big gifts all the time, and universities build fairly huge endowments with them. Harvard is truly well endowed with some $25 billion in its kitty! Other universities such as Michigan, Cornell and UCLA have endowments of about $3 billion each (info from Satya). Remember, Michigan and UCLA are state universities! They have been using it for all kinds of purposes, such as a new building, new academic programs, establishing a scholarship program, etc. The gift to Yale's School of Music seems to break new ground in that it will go towards waiving the tuition fees for all the students in that school! In times of distress, an endowment is a great stabilizer. One can go on and on, but I am sure you get the point.

I am sure there are still many people who would be willing to donate big money to the corpus funds of higher ed institutions -- IIMs and IITs in particular. A corpus of some 1000 crore (10 billion) rupees should be quite easy to build in a short time for an IIT if it makes a concerted effort; such a corpus would help it become financially independent. In principle, the government can either reduce or even stop its funding of those institutions with big corpus funds, and use the money thus saved to create new IITs, IIMs and so on.

Sure, the corpus funds may not be large now. However, by removing the cap on them, and by encouraging institutions to tap their alumni and other philanthropists, our universities too can benefit from all the good things made possible with a big corpus.

Aren't we missing out on all of this good stuff?


neathra said...

Wonderful blog & good post.Its really helpful for me, awaiting for more new post. Keep Blogging!

Colleges in India

Anonymous said...

A small question. What do some of these universities do with this much money? If some of them utilize just 1% for research, doesn't it mean that there is corruption?

Singh said...

The public library system, the university system etc in USA did not start from pittance- receiving large endowments from individuals and land grants from the state is what gave the initial and long-term capital. What is stopping the Indian billionaires from giving large endowments towards a charitable trust that operates as a non-state not-for-profit university, like Harvard (which is NOT a profit making entity).

Private universities are booming in India. Boasting better infrastructure, they however are still far from world class. Reason: they are profit making and are just a diploma mill for the wealthy. India is the only country in the world where private for-profit universities are booming!

Let us also look at the non-university sector: Where is the Indian equivalent of Carnegie to set up a public library system in India- which is in a complete shambles. This, when public libraries are proven to be the cornerstone of an educated and liberal/progressive society? The money is there.

Look at healthcare- it takes a foreign billionaire (Bill Gates) to fund India's polio eradication campaign.

To blame government rules and restrictions is ridiculous. The simple fact is that Indians are greedy and selfish. And not just the billionaires- the masses of middle class millionares too, who in USA would leave all their wealth to set up a "Mr and Mrs Smith scholarship at xyz University". Capitalism is based in inequality and it only works in USA because most people have a conscience- they feel obliged to redistribute their wealth. Capitalism therefore relies on goodwill of the rich. In India however it is the opposite: Amassing and hoarding of wealth, avoiding tax and exploiting the poor, rather than helping create a more equitable society.

Singh said...

And to anonymous above (posted Friday, January 11, 2013): Do your research before making false statements: The endowed universities earn 10% return on capital, spend half on growth and re-invest half. There is no corruption, they want the money to be spread out for future generations and even a few percent of several billions means hundreds of millions of dollars of growth every year.