Overfunded But Underperforming: Why We Need to Rethink India's Postgraduate Education

India’s university system is at a crossroads. On the one hand, the state spends enormous sums of public money to subsidise higher education; on the other, outcomes – whether measured in jobs, skills or research – remain woefully inadequate. This paradox demands attention at a moment when India needs to prepare its young population for an economy being reshaped by technology, particularly artificial intelligence.

The scale of the subsidy is striking. Government spending per student in higher education is several times greater than what is spent on school education. The Ministry of Education’s Analysis of Budgeted Expenditure on Education (2023) shows that, on average, the state spends about Rs 2.5 lakh annually on a postgraduate student, compared with about Rs 2 lakh on an undergraduate student. In contrast, it spends only about Rs 22,000 per child at the primary level and Rs 44,000 at the senior secondary level.

Source: Ministry of Education, “Analysis of Budgeted Expenditure on Education,” 2023. Figures rounded to the nearest thousand.

These averages are raised by higher-technical institutions such as IITs, IIMs and AIIMS; costs in state universities are somewhat lower. Yet even allowing for this correction, the asymmetry remains overwhelming: a postgraduate seat consumes resources equivalent to educating dozens of primary schoolchildren.

This imbalance might be defensible if postgraduate education delivered transformative outcomes for the economy and society. Unfortunately, the evidence points the other way.

For most generalist jobs, including the civil services, a master’s degree does not confer a significant advantage over an undergraduate qualification. Employers in both private and public sectors consistently report that undergraduate education is sufficient, provided it is supplemented by skills relevant to a changing economy – digital literacy, AI, communication and problem-solving. Yet lakhs of students pursue postgraduate courses, not because these make them more employable, but because they see no other pathway in a saturated job market. The result is a ballooning number of postgraduates, many of whom remain underemployed, despite the heavy public subsidy that financed their degrees.

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Even in the one area where postgraduate education should matter most – research and knowledge creation – Indian universities underperform. According to international databases such as Scopus and Web of Science, India’s share in global research output remains disproportionately small compared to the size of its postgraduate enrolment. Quality is an even bigger concern: a troubling proportion of published papers appear in predatory journals, with little originality or theoretical depth. Social sciences and humanities, which should provide intellectual frameworks for India’s developmental challenges, are particularly weak. The university system is producing a glut of degrees but very little knowledge that shapes global debates, informs policy or drives innovation.

In effect, taxpayers are funding an expensive postgraduate system that neither generates enough jobs nor produces enough research. Meanwhile, India’s schools – especially in rural areas – struggle with inadequate infrastructure, teacher shortages and learning gaps. Redirecting even a portion of the subsidy locked up in postgraduate education towards improving school quality could have far-reaching effects on equity and human capital.

The challenge is not to abandon higher education but to rethink its purpose. Instead of subsidising mass postgraduate enrolments with little labour-market payoff, the state should focus on three priorities. First, strengthen undergraduate education so that it produces job-ready graduates. This means integrating technology, particularly artificial intelligence, into curricula across disciplines. Whether one is a commerce graduate, a historian or a biologist, AI literacy will be indispensable in the job market of the next two decades.

Second, restrict postgraduate subsidies to areas where they are clearly warranted – research, teaching and advanced professional expertise – while encouraging private investment and cost-sharing in generalist PG programmes. Third, rebuild research ecosystems in universities by linking funding to quality metrics such as publication impact, originality and contribution to global knowledge.

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This transition from mass production of postgraduates to a smaller number of research and teaching-oriented ones will require a radical shift in qualifications for hiring. Most jobs, except research and teaching, must prohibit the hiring of post-graduates. This would drastically reduce public pressure to open new postgraduate colleges and universities almost immediately. The existing universities will rapidly re-purpose themselves.

India’s young population is its greatest strength, but the demographic dividend could be squandered if public money continues to flow into unproductive postgraduate expansion. A bold rebalancing of priorities – towards school education, towards undergraduate quality and towards research excellence – is imperative. Only then can universities justify the scale of public support they currently enjoy.

Until then, higher education will remain what it is today: overfunded but underperforming, producing more degrees than knowledge, and more postgraduates than jobs.

Arvind Mayaram is a former finance secretary, Government of India. He teaches public policy and is chairman of the Institute of Development Studies, Jaipur.

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