For K-12, the private sector already does address 40 percent of the market. By removing the restriction that only allows non-profit institutions, the capacity will grow and thus permit the scarce public funds to address the needs of the 140 million children not in school currently. The role of the government could then shift from funding schools to funding school children.
What Indian education urgently requires is a different way of approaching the matter. The ostensible reason for not allowing private for-profit institutions is to safeguard the interests of those who are poor. But one can be sceptical of that and a reasonably argue that through its monopolistic control, the government and its agents find an opportunity to extract rents from the supply-constrained market. This creates a system in which only the rich can afford to pay the rents and the poor get rationed out.
India cannot afford the current education system any more. Too many of its children are denied an education today. Globalisation is a double-edged sword: it rewards talent as handsomely as it penalises those who are unskilled. It is quite possible for India to employ global capital to solve its local problems—provided that policy-makers understand that voluntary trade is beneficial to both parties and both profit from it. Undoubtedly global capital will profit from investing in education in India. But that is only because India will profit even more from an educated population.