higher education in india opportunities for private investment
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Higher Education in India: Opportunities for Private
InvestmentArticle | 30 Apr 2012
Consumer and government spending on education in India are on the rise due to its rapidly expanding
population. This has led to an increase in the number of higher education students in India, which offers
opportunities for businesses in the education sector. However, challenges remain in the country's higher
education system as there are shortages of both teachers and availability of places for students.
The demand for education places in India now outstrips availability as India is one of the most populous
and youngest nations in the world. In 2011, 596,405, or 49.3% of India's 1.2 billion strong population
were under 25, imposing a burden on its education system. For example, the University of Mumbai in
2011 received 37,000 applications for 800 places for junior college level;
India faces serious shortages in qualified teaching personnel in educational institutions. In 2011, the
number of higher education teaching staff in India was 948,600, which is very small in comparison with
the demands of the population;
According to Global Competitiveness Index 2011, India's gross enrollment ratio for secondary education
and tertiary education is 60% (ranking it 108th out of 142 countries) and 13.5% (100th out of 142
countries) respectively. This is a low rate compared with other countries in the region such as Indonesia
(with enrollment rates of 79.5% and 23.5% respectively);
The number of universities and higher education institutions has increased from 17,332 in 2006 to
28,652 in 2011, which requires further investment in infrastructure and training programs. A survey by
the Ministry of Education of India in 2010 estimated the current faculty shortage in the country at
54.0%.
Higher Education Establishments in India: 2006-2011
Number
Source: Euromonitor International from national statistics/ UNESCO
Implications
Due to its rapid economic growth (7.3% total real GDP growth in 2011) and low quality of education,
India faces major labour skills shortages. Many of the most able students go to study abroad and then
stay abroad for a better paid job, resulting in brain drain in India. For example, according to a World
Bank report in 2010, there were 20,300 migrated Indian physicians;
A lack of relevant education leads to high unemployment rate in India. Despite greater opportunities in
opening sectors thanks to high economic growth, the youth unemployment rate is very high; 68.5% of
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the total unemployed population in 2011 were under 25. This weakens the spending power of this key
consumer group;
Government expenditure on education increased from US$9.1 billion in 2006 to US$17.2 billion in 2011.
However, most of this amount goes to elementary education, and the share of total government
expenditure accounted for by education declined from 3.9% in 2006 to 3.4% in 2011.Total consumer
expenditure on education increased from US$10.9 billion in 2006 to US$27.0 billion in 2011 as a result
of rapidly rising disposable income levels;
• Government and Consumer Expenditure on Education in India: 2006 - 2011
US$ billion
• Source: Euromonitor International from International Monetary Fund (IMF), Government Finance Statistics
Along with more expenditure on education, the demand for education-related products such as books,
computers and stationery products is opening more opportunities for businesses in those sectors;
Due to an increasing demand for higher educational institutions, the government of India is now opening
up the education market to foreign institutions. The Foreign Educational Institutions (Regulation of Entry
and Operations) Bill was introduced by the government in Parliament in 2010 to allow foreign
universities to operate in India. The government allows 100% foreign direct investment in the education
sector. The Bill is now waiting to be passed. Middle and upper class Indian parents tend to send their
children to private schools due to the poor quality of the public education system, creating further
opportunities for private investment across all education levels.
Prospects
The potential for India's education sector is huge. According to OIFC (Overseas Indian Faciliation
Center), India will need 800 more universities and another 35,000 colleges in order to increase the
higher education enrollment rate in India. It is expected to attract US$100 billion investment by 2015,
driven by huge demand for skilled professionals; Consumer expenditure on education is set to increase from US$28.9 billion in 2011 to US$46.4 billion in
2016 driven by rising annual disposal income levels and a continued trend towards private education
instead of public;
15 more bills to reform the higher education sector are waiting to be debated by Parliament in 2012. If
they are passed, this is likely to reduce India's brain drain in future and improve labour productivity.
For further information please contact Carrie Lennard, Government Labour and Education Manager;