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India, for the first time, has surpassed China to become Asia’s top market for initial public offerings (IPOs). Yet behind the celebratory headlines—like those in the Financial Times—lies a deeper narrative of ambition, growth and an urgent question: Can the country’s higher education system sustain this momentum? From a strategic perspective, this question isn’t just about volume but about the system’s capacity to align educational outcomes with national economic imperatives.

Challenges Facing India Higher Education and Economic Growth

As billions of dollars flooded into Indian equities, carried by the optimism of investors betting on everything from tech unicorns to manufacturing hubs, another pressing question loomed: Who will drive this growth in the next two decades? Will India’s universities, colleges and research institutions be ready to meet the demand for skilled talent, innovation and intellectual leadership?

Understanding this readiness requires a closer look at the state of India’s higher education system—its scale, structural challenges, and potential for reform. On paper, the nation’s higher education system looks formidable. With over 56,000 institutions catering to nearly 40 million students and supported by 1.5 million faculty members, it stands as one of the largest education ecosystems in the world. Over the past decade, the sector has witnessed a huge increase in institutions—from 600 universities in 2012 to nearly 1,150 today. Privately managed institutions, now forming 40% of the total, dominate the landscape. At the same time, student enrollment grew by nearly 16% in just five years. But size tells only part of the story. Beneath the surface lies a paradox. While the sector has grown in scale, quality remains uneven and research output lags behind global standards—an issue highlighted in analyses by EY and The MIT Press.

Bridging Talent Gaps for India Higher Education and Economic Growth

Even India’s premier institutions—the IITs and IIMs—grapple with faculty shortages, infrastructure deficits and bureaucratic inertia. Faculty vacancies stand at 40% in IITs and 31% in IIMs, highlighting a chronic gap in attracting and retaining top academic talent. These are not numbers to glance over—they are the seams holding together an educational fabric that risks unraveling under pressure.

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The stakes are high. India’s demographic dividend—a young, growing workforce—could turn into a demographic liability if the education system fails to deliver. With projections estimating that India needs to add 26 million higher education enrollments by 2035 to meet the National Education Policy’s (NEP 2020) target of 50% Gross Enrollment Ratio (GER), the clock is ticking.

“Higher education in India is at a pivotal stage”, said Vijay Pereira in an interview with me. The newly appointed senior professor, associate dean, and director of KEDGE India at KEDGE Business School, Paris, explained that on one hand, there’s an undeniable growth story, but on the other, there are structural gaps in quality, equity, and research focus that need immediate attention. Consequently, India’s education landscape requires significant alignment with global trends, particularly in fostering partnerships that bridge academic theory and industry practice. These gaps in talent supply and institutional capacity become even more apparent when examined alongside India’s recent economic performance.

Research and Innovation in India Higher Education and Economic Growth

India’s dominance in IPO fundraising in 2024 wasn’t a fluke. It resulted from years of economic recalibration, tech sector maturation and a vibrant entrepreneurial ecosystem. Companies like Swiggy, Zomato and Ola Cabs have grown into household names in India and globally. Hyundai Motor’s substantial listing in India further underscored the country’s increasing importance in global equity markets.

But behind these glittering financial victories lies a less-talked-about concern: talent. As industries scale, they need leaders, engineers, researchers and strategists. The Indian economy, now the world’s fifth-largest, cannot rely on a handful of elite institutions like the IITs and IIMs to churn out the workforce of the future. It requires systemic reform—an overhaul of teaching practices, research funding and industry alignment across thousands of smaller institutions. This imbalance between institutional capacity and industry demands underscores the urgent need for scalable, inclusive solutions in higher education. Consider the digital transformation wave. While urban universities have integrated hybrid learning models and AI tools into their curricula, smaller and rural institutions remain constrained by outdated teaching methods, poor infrastructure and limited digital access. Less than 1% of Indian colleges are registered with the Academic Bank of Credits (ABC) system, designed to allow students to transfer credits between institutions. This lack of adoption restricts mobility and flexibility for students, reinforcing systemic inequalities and limiting access to modern academic opportunities.

Digital Transformation in India Higher Education and Economic Growth

India allocates just 0.69% of its GDP to research and innovation—a stark contrast to countries like South Korea (4.2%) and Israel (4.3%). This limited investment translates into a glaring disparity in research capacity. According to 2023 data, South Korea leads with 7,498 researchers per million people, followed by Japan (5,304), the United Kingdom (4,341), and the United States (4,245). In comparison, India has just 255 researchers per million—a figure that underscores the scale of the challenge. Pereira, the president-elect of the Indian Academy of Management, explained to me that without significant investment in research infrastructure, faculty development, and policy frameworks supporting long-term research goals, India risks falling behind in both global competitiveness and innovation leadership.

International collaborations are often presented as a solution to bridge this gap, offering Indian institutions opportunities to elevate their research capabilities and align with global standards. However, such partnerships remain limited. Fewer than 10% of India’s 1,043 universities and just 1% of its 42,343 colleges actively engage in internationalization efforts. Among them, approximately 230 universities meet the criteria to offer twinning, dual, or joint degree programs. Despite government initiatives, inconsistent policies, structural barriers, and limited institutional capacity continue to hinder widespread adoption. There are, however, promising exceptions. Partnerships such as Cranfield University with Manipal Academy of Higher Education (MAHE), the University of Liverpool with IIT Palakkad, and Vijaybhoomi University with KEDGE Business School demonstrate the potential of international collaborations to drive academic excellence, research innovation, and cross-cultural expertise. Yet these remain isolated examples, largely confined to elite institutions. For internationalization to become a sector-wide catalyst rather than an exclusive privilege, India must address systemic barriers. Streamlined regulations, financial incentives, and capacity-building initiatives will be critical in empowering smaller institutions to participate meaningfully in global networks.

The Future of India Higher Education and Economic Growth

India’s higher education sector stands at a strategic inflection point. While its growth in scale and ambition is undeniable, systemic weaknesses in research, talent development and institutional alignment remain significant hurdles. Addressing these challenges requires a strategy informed by established theories. Porter’s Competitive Advantage highlights the need for institutions to build on unique strengths. The resource-based view (RBV) underscores the importance of developing inimitable assets—faculty expertise, cutting-edge research infrastructure and robust governance. Dynamic capabilities theory stresses agility and adaptability, enabling institutions to respond swiftly to trends like digital education, AI adoption and sustainability imperatives. In essence, India’s educational strategy must evolve in lockstep with its economic ambitions to ensure sustainable growth and global competitiveness. After all, the nation’s success depends not just on policy intent but on execution that aligns vision, resources and institutional culture with innovation, agility and long-term strategic clarity.

forbes.com