The academic inflexibility has boosted the rapid development of private initiatives in higher education. Perhaps, many providers/stakeholders in many of these private institutions are the loners who struggled to change the formal system to cater to the needs of the students. New growth theorists point out that investment in and accumulation of human capital is the main engine of growth. In a global scenario, to be successful in attracting, absorbing and benefiting from foreign direct investment, to a large extent, India will have to depend on the local supply of needed skills and technical knowledge. India should develop and enhance its pool of skilled labor and build up its own labor, both to use and improve upon technology. The necessary conditions under such an initiative are reorientation and restructuring of educational system towards more skill enhancement. This will raise both the demand for education and also make the economy more competitive.

In India, there have been private initiatives in education initially for philanthropic reasons and eventually not only to meet the growing demands but also to realize the huge and quick profit potential. Privatization of higher education has emerged in several forms and types in India: (1) privatization within government higher education institutions takes place in the form of introducing self-financing courses within government institutions; (2) converting government-aided private institutions into private self-financing institutions; and (3) allowing to expand self-financing private institutions with recognition and also without recognition, which may be termed as commercial private higher education institutions.

In 2001, the Government of India appointed a committee headed by Mukesh Ambani and Kumarmangalam Birla to suggest required reforms in the education sector. It strongly recommended for full cost recovery (user pays principle) from students even in public higher education institutions through fee hikes; introduction of self-financing courses and seats; shifting of resources from higher to primary level of education; and withdrawal of government from higher education, leaving it altogether to the private sector and confining itself to elementary and secondary education.

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