Traditionally higher education has been a responsibility of the state with several arguments in the favour of the role of the State particularly to enhance access and foster quality and excellence. The role of the State was redefined in the era of globalization and market economy with the argument for higher education as a private good or at most a quasi-public good due to higher private returns to the individuals who pursue higher education. Therefore, in response to such changes along with the adoption of the principles of new public management particularly by developing countries, financing of higher education was re-looked with an efficiency angle. Apart from a relative decline in public funding, several cost sharing measures and income generating activities were persuaded to be adopted by the public institutions. India is no exception to this trend and encouraged privatization of public higher education institutions through several reforms and policies from time to time. However, such changes in financing of public higher education institutions during a period of massification of higher education have gravely impacted the governance of such institutions. This chapter based on an empirical study conducted by the Centre for Policy Research in Higher Education shows how universities have responded to such financial constraints and how governance is reorganized. The relative decline in public funding and limited capacity to generate additional resources by many public higher education institutions has impacted severely the management of such institutions. The impact is seen on recruitments of teaching and non-teaching staff and their remunerations and development and maintenance of infrastructure facilities. Many institutions are looking for generation of resources from alternative sources. These changes in the financing are affecting the governance of institutions.