"... the scale of the scam in the central state of Madhya Pradesh is mind-boggling. Police say that since 2007, tens of thousands of students and job aspirants have paid hefty bribes to middlemen, bureaucrats and politicians to rig test results for medical schools and government jobs.

So far, 1,930 people have been arrested and more than 500 are on the run. Hundreds of medical students are in prison — along with several bureaucrats and the state’s education minister. Even the governor has been implicated."

A billion-dollar fraud scheme, perhaps dozens murdered, nearly 2000 in jail and hundreds more on the run. How can we defend a system that does this to people? Though opportunities for corruption may be higher in India, it is not peculiar to the culture. It is worth remembering that more than two-thirds of high school Canadian students cheat (I have seen some estimates that are notably higher - this was just the first in the search results and illustrates the point well enough):

According to a survey of Canadian university & college students:

• Cheated on written work in high school 73%
• Cheated on tests in high school 58%
• Cheated on a test as undergrads 18%
• Helped someone else cheat on a test 8%

According to a survey of 43,000 U.S. high school students:

• Used the internet to plagiarize 33%
• Cheated on a test last year 59%
• Did it more than twice 34%
• Think you need to cheat to get ahead 39%

Source: http://www.cbc.ca/manitoba/features/universities/

When it is a majority phenomenon, this is the moral norm, not an aberration. The problem is a system that makes this a plausible and, for many, a preferable solution, despite knowing it is wrong. This means the system is flawed, far more than the people in it. The problems emerge primarily because, in the cause of teaching, we make people do things they do not want to do, and threaten them/reward them to enforce compliance. It's not a problem with human nature, it's a rational reaction to extrinsic motivation, especially when the threat is as great as we make it. Even my dog cheats under those conditions if she can get away with it.  When the point of learning is the reward, then there is no point to learning apart from the reward and, when it's to avoid punishment, it's even worse. The quality of learning is always orders of magnitude lower than when we learn something because we want to learn it, or as a side-effect of doing something that interests us, but the direct consequence of extrinsic motivation is to sap away intrinsic motivation, so even those with an interest mostly have at least some of it kicked or cajolled out of them. That's a failure on a majestic scale. If tests given in schools and universities had some discriminatory value it might still be justifiable but perhaps the dumbest thing of all about the whole crazy mess is that a GPA has no predictive value at all when it comes to assessing competence.