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India’s Middle Class?

The Economist caused a stir recently with a cover story highlighting the extent to which the Indian middle class has been over-hyped as a ‘successor’ to the Chinese middle class. It had point. But there’s more to be said.

India has indeed made spectacular economic progress. But income distribution is more skewed than generally recognised and this has consequences.

Notwithstanding a huge total population that will shortly pass China, the size of India’s middle class is very much smaller and its purchasing power is less than half that of China’s. The Economist was at pains to point out that leading foreign firms expecting to find big consumer markets in India are being disappointed. Estimates of a middle class 300-400 million strong are frequently tossed about, but the mean GDP per capita is US$1,700 and eight in ten Indians earn less than this. This is not just a function of time, and China having taken off earlier.

The following chart helps to explain what’s going on in India: the top 10% has prospered disproportionately at the expense of the middle 40% and bottom 50%. In other emerging economies – including other high performing Asian economies – the picture is less skewed.

I’m interested in universities and global higher education markets. If big multinationals selling consumer goods are experiencing tougher than expected conditions in India, what might this mean for universities looking to engage?

Optimistic estimates put the number of Indians in post secondary education by 2020 as high as 42 million, but the competition among local institutions is already strong – there are some 35,000 colleges and 700 universities – and some Indian institutions are looking overseas to reach the global Indian diaspora. Prominent exemples include Amity University, BITS Pilani and Manipal Academy of Higher Education.

Foreign universities bring a distinctive value proposition to the Indian market. Australia is working hard on deepening engagement with India, and higher education is a prominent part of this effort. My home state of Victoria has recently launched an admirable India strategy. And my university is making good progress with its own strategy of building deep research and education partnerships with Indian institutions. Should we be lowering our hopes and expectations?

Certainly realism is essential. The number of families that can afford a premium international education will not be on the same scale as China any time soon. Furthermore, foreign universities seeking not just to receive students coming from India but to engage directly in India itself, face a very much more restrictive regulatory environment than in, say, China.

As against this, several points are worth keeping in mind. First, the structure of the global higher education market is fundamentally different to that of, say, mobile telephones or cars. Ours is an industry with a very large number of suppliers (universities) world-wide, each seeking only a tiny increment of available demand (students). Even though, in macro terms, we do indeed need to factor in the much smaller size of the addressable market in India than China, for individual universities the prospects are still promising.

Second, as in many other successful emerging economies, education is a high priority for Indian families: way ahead of regular middle class consumables.

Third, price is a key factor in determining the size of the addressable market: less expensive Chinese mobile phones are spreading much faster than premium competitors like the iPhone. Those foreign universities that are able to develop strong partnerships with local institutions and sustain price-points aligned with what the Indian market will bear, have reasonable prospects.

National higher education markets have distinctive characteristics and challenges, and India is no exception. The trajectory of India’s higher education market is different from that of China. As is the trajectory of its own higher education institutions and the regulatory environment that shapes them.

India may indeed be challenging, but some foreign universities will succeed in forging sustainable partnerships that enable them to make significant and distinctive contributions to India’s continued socio-economic development.

From Singapore to China

Last week I was visiting two of RMIT’s priority countries, Singapore and China.

In Singapore, my focus was on building personal and institutional links.  The personal links were with Australia’s new High Commissioner, Bruce Gosper, as well as significant alumni and philanthropic contacts.   On the institutional front, it was about opening an important new institutional partnership with Singapore’s 5th autonomous university, the Singapore Institute of Technology and working with our longstanding partner, the Singapore Institute of Management on a proposal for RMIT & SIM to deliver ‘micro-credentials’ in support of Singapore’s efforts to reskill its workforce.

The changes taking shape in Singapore are really quite fascinating, and I will return to them later with a more substantial communication. I’ll focus here on the China leg of the trip, particularly the visit to Tianjin.

On this visit, the core objectives were to formalise the deepening research partnership RMIT has with Tianjin University (in Advanced Automotive Technologies and Design Innovation & 3D Printing) and to explore possibilities for productive links with the surge of entrepreurial and technological innovation taking place in Tianjin’s Binhai New Area. Thanks to our long-standing leaders’ training program with the Tianjin Municipal government, we have a high reputation with senior officials there. (This has proved particularly valuable following the fall of the former mayor.)

RMIT has built up wonderful links in China over many years. The emphasis now is to focus our efforts through what we’re calling our ‘Three Rivers’ strategy: the Pearl river in the south, the Yangtze in the middle and the Haihe river in the north. Tianjin is on the Haihe river and a sister-city for Melbourne.

Tianjin is doing very well indeed; last year economic growth there was among the very highest of any region in China. The Binhai New Area has multiple precincts – ranging from a Free Trade Area to Science & Technology parks.

The part that particularly caught our attention was the Sino Singapore Tianjin Eco-City precinct: a diverse, green and ultra-connected new development. Among other things, it’s home to one of Binhai’s suddenly flourishing clusters of incubators that are nurturing a wide array of start-ups. We came away with a plan to establish a sister-incubators framework, to parallel the sister-cities relationship.

It’s hard not to be impressed by the scale of what is taking place in the greater Tianjin area. We saw real opportunities for RMIT to make a valuable contribution to its social and economic development, in ways that could have very exciting implications for our students in Melbourne and elsewhere. This sentiment was very much reinforced in conversations we had in Beijing with the Ministry of Education and Australia’s Ambassador, Jan Adams and Minister-Counsellor for Education,  Katherine Vickers.

The following short video interview with RMIT Vice-Chancellor, Martin Bean, gives a sense of the excitement he and I both felt .