Coaching centres are a sign of broken-window economics. See how China crushed it all overnight

How broken does our governance have to be, and how incredible our hypocrisy, that we cannot make profits from educating young Indians, but earn thousands of crores by giving them tuitions?

Illustration by Prajna Ghosh

Everybody who matters anywhere in our “system” is now trying to do something about the death by drowning of three young people in the basement library of Rau’s IAS Study Circle in Old Rajinder Nagar, western Delhi’s UPSC coaching hub.

The Delhi High Court has handed over the investigation to the CBI, while the Delhi government has sealed a whole bunch of such basements at multiple other coaching centres and announced that it will pass a law regulating such businesses. Some owners and senior management members have been arrested.

And to cap the absurdity, the Delhi Police have made world headlines by arresting the owner and driver of an SUV that merely happened to drive across the flooded street and, apparently, pushed the water into the basement to flood it.

Some of the owners of these coaching centres and superstar ‘teachers’ are appearing on selected media platforms, particularly those where they’ve had mutually beneficial commercial relationships, to express fake sympathy with the victims but mostly for self-exculpation.

Nobody is particularly pushed on the key question: If this is how much you charge, or you earn this much fame on Instagram from the reels you make, how come you’re still running ‘classes’ in these unsafe, unhygienic, slum-like conditions?

Or how is it that while they charge their students top dollar on the promise that they can game a system with a failure rate of about 99.8 percent, they do not spend on providing at least some basic facilities and safety?

This, in our ridiculous system where it isn’t legal to make profits from education. You run universities, colleges, schools but pretend you make no profits.

The coaching business has no such issue. Many are also either listed on stock markets or headed there. How broken does our governance have to be — and how incredibly touching our hypocrisy — that you can’t make profits from giving young Indians education, but can earn thousands of crores giving the same graduates of the same tuition?

One way of figuring out how big the coaching business is and how fast it’s growing is to just look at the GST the Centre has been collecting from them. As the figures in this fine story by Mrinalini Dhyani on ThePrint show, in 2019-2020, the GST collected at the rate of 18 percent was Rs 2,240 crore. Five years later, it has already gone up by about 150 percent to Rs 5,517 crore. It is estimated that it’ll go up to about Rs 15,000 crore by 2029.

The other way to understand the size and power of the business is simply to look at the front pages of your big daily newspapers across the country. These coaching centres have marketing budgets to buy acres and acres of that expensive real estate on newsprint, advertising not just their successful ‘students’ but their ‘teachers’.

Each is painted as a star. And each one’s name is suffixed with a ‘sir’. Or in the rare case of a woman ‘teacher’ (about one in 50 by my cursory count), ‘ma’am’. I suppose it is an early blooding of our future rulers in the ‘sir-ing’ or ‘ji-huzoori’ culture. It is also the biggest individual brand-building exercise in India outside the movie business. Because the superstardom of founders and teachers is essential to the success of a coaching business.

Now, teachers were usually self-effacing, generous and large-hearted people dispensing wisdom and knowledge to pupils with humility. The coaching business is a blot on teaching and its superstar phenomenon is two things: one, an insult to real, anonymous, modestly paid teachers and second, a reminder to us of how broken our regular education system is.

If the system wasn’t in such shambles, why would literally lakhs of young people hang around in cities for ‘coaching’?

Of course many of those selected will lend their faces to these advertisements, some will be paid for it and thereby begin their hallowed careers with a kind of a ‘bribe’. Check out Vidhu Vinod Chopra’s 12th Fail.

The main reason the coaching business has crossed Rs 30,650 crore in size (take GST of Rs 5,517 crore at 18 percent as the base) and is booming is that our public education system is broken. In so many ways, this is the biggest instance of broken-window economics in our governance besides our electricity supplies.

The idea of broken-window economics, or the broken window fallacy, is credited to a 19th-century French economist and parliamentarian, Frédéric Bastiat. He used an imaginary shopkeeper, James Goodfellow, as an example. You break a window, hire a carpenter to fix it, he buys bread from what you pay him and pays the baker, and so on. Bastiat said this wasn’t a virtuous cycle. It is the broken-window fallacy. What is missed here is opportunity cost.

In this case, Mr Goodfellow has his shop and window, and the people in the chain have their jobs. and he could buy his son shoes and himself a book with the same money. That would be a virtuous cycle.

See how this plays out in our lives. We give subsidies for power, our grids are broken, our utility companies are broke, producers aren’t getting paid and banks who lent them money are struggling. Everybody is broke while the country has a power surplus. Our power is unreliable, goes off too often and the voltage fluctuates, so we invest in generators, inverters and voltage stabilisers, buy enormous amounts of diesel and burn it to pollute the air.

This worsens our air, which is already polluted because we burn our garbage, the combination of free power and water leads to stubble burning, and so on. The solution is to buy air purifiers for our homes, which cost more than air conditioners. All these — generators, stabilisers, inverters and air purifiers — make up our massive broken-window economics. Education is no different from it. The coaching business is only its worst manifestation.

Nobody wants to learn from the Chinese, but see how Xi Jinping addressed it in 2021. He demolished his entire tuition and coaching industry overnight. Reasons given: It was straining the finances of families, causing inequality, wasting families’ time and taking young people away from more fun things.

Everything, including coaching centres for China’s famed UPSC equivalent, Gaokao, was banned. There was to be no tutoring for profit, no IPO listings, no share sales, limits on online learning, no mergers, acquisitions, franchises, foreign collaborations. End of story.

Overnight, Chinese edtech companies lost more than $1 trillion on the stock markets, way more than the damage in the 2008 global financial meltdown. Jack Ma apart (he was dismantled differently), three of the top billionaires, Larry Chen, Michael Yu and Zhang Bangxin, lost between 50 and 90 percent of their wealth — all from edtech.

Going as far as Xi Jinping may look like going too far. But if you look at the problems he was addressing, it’s the same list in India. So something must be done. This coaching-tuition-profiteering model built on the back of a broken education system is a scandal and an abomination, and must go.