CNBC's Inside India newsletter: An education scandal years in the making

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Members of the Youth Congress are protesting against the alleged government irregularities, paper leaks, and a sharp rise in perfect scores in the state of Jammu and Kashmir. (Photo by Firdous Nazir/NurPhoto via Getty Images) This report is from this week's CNBC's "Inside India" newsletter which brings you timely, insightful news and market commentary on the emerging powerhouse and the big businesses behind its meteoric rise. Like what you see? You can subscribe here. Cram schools are a well-known phenomenon in India. Each year, thousands of aspiring students, mostly from middle-class families, move to Kota, a city in the desert state of Rajasthan, where they spend two years rote learning to pass competitive entrance tests to a handful of universities. Yet, the system has also exacerbated the social divide between the haves and have-nots, who are confined to the largely abysmal state-run education system. Competition is fierce in India, whether for jobs or admissions to elite institutions. For the millions entering the labor market each year, the government has been unable to develop policies that will create jobs fast enough to absorb them all. That means entrance tests and examinations are a high-stakes juncture in a person's life. They open doors to dreams or often close them shut permanently. So, many do whatever it takes — including cheating — to get ahead. Last month, for instance, the government canceled the tests determining admissions into elite medical schools in India after reports of widespread cheating. The government said its cybercrime enforcement agency had indicated that the "integrity" of those "examinations may have been compromised." The head of India's National Testing Agency, the body that conducts the medical entrance test, was sacked following protests by students and opposition political parties. However, it wasn't an isolated incident. In 2015, the Reuters news agency revealed that one out of every six of the country's 398 medical schools had been accused of cheating, citing government records and court filings. Cheating has also not been limited to university tests. The same year, parents and friends of students were caught on tape climbing school walls to pass on answers during school exams. That blatant case of cheating led to the arrest of about 300 people, in addition to the 750 students who were expelled. Incidents of cheating had shot up after a local government introduced a reward with seemingly good intentions. Students from lower castes, a form class system in India, were offered 10,000 rupees ($120) to get at least half the questions right. The financial reward meant teachers and supervisors colluded with students to rig the system. Supervisors took bribes to allow others to help test-takers, and teachers looked the other way since cheating inflated grades in their classes. To fix this system, the Indian government passed a law to deter individuals from cheating with three to 10-year prison sentences earlier this year. But perhaps the fault lies in the quality of education in the country, which leaves many unqualified despite holding qualifications. India has not taken part in the Programme for International Student Assessment, more commonly known as PISA, since 2009 when it ranked 73 out of 74 participating countries, beating only Kyrgyzstan. A half-hearted attempt at testing the country's education system in 2021 was aborted when the Covid-19 pandemic hit the country. Could tech solve testing woes? In 2011, a startup named Byju's saw a gap in the market and wanted to capture a slice of the multi-billion-dollar education market. The company, which offers services ranging from online tutorials to offline coaching, attracted billions of dollars from investors worldwide during the pandemic when online education services were in high demand. In 2022, the firm was valued at $22 billion, enabling it to sponsor the FIFA World Cup. With a lofty valuation, Byju's went on an acquisition spree. One of the companies it bought was an offline test preparation service called Aakash Education Services, which is still expected to IPO this year. All of their gains are now being undone by what shareholders say is "financial mismanagement and compliance issues" at the company, leaving it at the risk of bankruptcy. However, the company's remote learning services, enabled by technology, has provided education at lower cost to the masses. So more broadly, tech can hold the potential to provide a more affordable alternative to India's cram school system. But a word of warning. Technology could just as easily enable further cheating, just as it has in the case of a Turkish student who was reportedly caught using artificial intelligence software to answer questions during a university entrance exam.