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Education industry in India, an overview

  • Growth of private universities in the nation
  • Future potential of the education industry in India

 

The education sector in India is estimated to be worth USD 91.7 billion and is expected to witness a major growth in the coming years. The industry in India can be broadly classified into two categories; the formal education industry comprising schools, colleges and universities and the tutorial industry comprising private tutorials and coaching institutes.

A major contribution to the formal education market is the higher education segment as shown in the below chart. The university count in India has gone up in the last two decades. The number of universities in India has increased at a CAGR of 8.5% from 367 (2010) to 850 (2018). Globally, the nation is ranked 1st in terms of the number of universities. Most of the schools, colleges and universities in the country were operated by the state, union or the local government. However, the scenario saw a change in the last two decades. India has seen a surge in private universities such as Amity and Sikkim Manipal universities entering the market. According to the University Grants Commission (UGC), private universities account for 34.8% of the total universities in India in 2018 compared to 3.4% in 2008. The number of colleges has also increased from 34,852 (2012) to 40,026 (2017).

India is a young democracy and a progressing country. The literacy rate was lower than 30% at the time of independence in 1947 and 72 years after, it presently stands at more than 75%. This is a phenomenal growth, considering the fact that the population of the country has also risen from 33 million to 1.3 billion during the period. Currently, 29% of the population is under 14 years of age. The government has given special attention towards education through initiatives such as ‘Right to Education Act’ and ‘Sarva Shiksha Abhiyan’ (education for all). Resultantly, people in the rural areas have an increased awareness of the importance of education for their children. This has created a significant increase in the demand for education at all levels. India is a developing country, the GDP per capita and the personal disposable income of people are increasing and they are now willing to spend more on education than in the last millennium. The students’ enrolment in universities has gone up from 29 million (2012) to 36 million (2017). These socio-economic factors have created a conducive ecosystem for the rise of private players in the education industry.

Additionally, the education sector is very lucrative in India as the people seeking higher education are forecasted to increase. The industry is completely recession-proof since no matter what circumstances the economy is going through, people would still want to take at least the undergraduate education in the best possible institutes. Another peculiar feature of this industry is the negative working capital requirement as fee is taken in advance from students. The government support for this sector has been immense. The Ministry of Human Resources Development (MHRD) is planning to raise USD 15.52 billion from private companies to finance improvements in the education infrastructure in India. The foreign investors have also realised a huge potential in this sector. After the government allowed a 100% FDI in the education sector in 2002, the cumulative foreign direct investment (FDI) in this sector is USD 1.7 billion to date. The government wants to take active steps towards the growth of this sector for a brighter future of the country. It has given various incentives such as the exemption on the service tax to meet this goal and is also increasing budget allocations for the sector. The government is also encouraging more foreign investments in India with the aim of procuring USD 150 billion over the next decade. Moreover, it is promoting public-private partnership (PPP) model in the sector.

The K.B. Pawar Committee constituted by the University Grants Commission has recommended four different models of PPP in the higher education (Source: PwC Report), which are:

  1. Basic infrastructure model: the private sector invests in infrastructure, while the government retains the responsibility for operations and management of institutions. The government does annualised payments to private investors.
     
  2. Outsourcing model: the private sector invests in the infrastructure and also has the responsibility of operations and management of institutions, while the government pays private investors for specified services.
     
  3. Equity or hybrid model: investments in infrastructure are shared between the government and the private sector, while operations and management are with the private sector.
     
  4. Reserve outsourcing model: government invests in infrastructure and the private sector takes the responsibility of operations and management.

The major benefit of FDI and PPP in the education sector is that it will open gates for reputed foreign universities to set up campuses in India. It will also bring more visiting faculties from these reputed overseas universities to India. The new trends in technology to enhance the quality of knowledge transfer can also be implemented as a result of this initiative. Indians can expect the quality of education to improve and this may prevent people from going abroad to study in foreign universities in search of better educational opportunities. It will also be possible to tame the domestic talent and sharpen the skillset in India so that the domestic talent makes a valuable contribution to the economy.

Another parallel industry that has emerged in a big way is the private tuition and coaching industry. According to the National Sample Survey Organisation (NSSO), 26% of the total number of students in the country take private tuitions. The private coaching industry is estimated to be worth USD 70 billion in India. There are two segments; tutoring for formal academic curriculum and tutoring for competitive entrance exams for professional courses. Few of the coaching institutes have created a brand image and have launched franchise models to scale up at a faster pace. The newest trend in private coaching industry is the use of technology to scale up multifold in a short span of time by reaching millions of users through launch of apps. The BYJU’s – The Learning App, launched by an education tech start-up for preparation of competitive exams has more than 5.5 million downloads and more than 0.25 million paid subscribers within 6 years of its launch.

In conclusion, it can be stated that the education industry in India has a huge potential for the future growth and it is bound to grow in the next two decades. It presently offers immense opportunities to investors seeking low-risk returns as it is a recession-proof industry. If the initiatives of the government succeed, India may see more skilled workforce emerging in the next few years.

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