The Context : Where do we Stand?

Education today is considered as an investment rather than an expense. There is a continuous rise in the spending on education by the households. They spend close to 9% on education which is just next to the spending on food and groceries. Moreover, in the present scenario approximately 55% of the households save for the higher education of their children. This itself reflects the potential for growth in the education sector.

Education forms the backbone of a nation and is one of the most important key indicators of a country's growth and development. Infact, the rise of knowledge economy at a global level has once again reinforced education, in all its forms (elementary, secondary, higher, vocational, and adult), as the key economic and business driver.

Education today is considered as an investment rather than an expense. There is a continuous rise in the spending on education by the households.

They spend close to 9% on education which is just next to the spending on food and groceries. Moreover, in the present scenario approximately 55% of the households save for the higher education of their children. This itself reflects the potential for growth in the education sector.

There has been a 20-25% rise in the income of people belonging to the middle class. Population growth has slowed down from 2.1% to 1.7%, indicating better accessibility to quality education and the labour force from India is entering the global arena. All these factors indicate the growing opportunities in this sector, the demand being price inelastic.

Vocational education which has not been a success in the past is the way ahead for the future. The immense opportunities for self-employment, calls for vocational training.

In the past, government was the sole education provider as it was primarily considered a social service. This was the major reason for slow growth in the education sector. However, with liberalisation and globalisation of economy, it has become evident in the last decade or so that government alone cannot bear the cost of the education sector. While the private sector has stepped in to fill the gap and has increasingly enhanced its profile in education over the last decade, its role is still not properly defined.

The problem with the Indian education sector is not about non-availability of funds or resources but about execution and accountability. It is this inefficiency that gives rise to opportunities for the players in this sector. Also, the social resistances against schools that are profit making, are now changing and the sector is opening up as a business.

The main reasons for the failure of this sector till date were outstanding neglect, insufficient financing, accountability and lack of proper planning. But now, public spending on schools is increasing and the government even proposes to triple its current spending on education form 3.5% of GDP to around 5%. Also, Private Public Partnerships (PPP) are being encouraged to enhance the critical priority sectors of education, infrastructure and facilities in schools and teachers’ training institutions and examinations reforms. PPP would be the way to go ahead for quicker execution of plans.


Accessibility: While availability of elementary schools within a reasonable distance from habitations is now fairly universal; same cannot yet be said in regard to Secondary Schools and Colleges. Pockets still exist in many remote parts of the country where the nearest Secondary School or College is much too far for everyone to be able to attend.

Drop-out rate:
Elementary education in India is characterised by high drop-out and low completion rates, persistent inequities and poor quality. While close to 90 per cent children in the 6-11 age group are formally enrolled in primary schools (formal, Education Guarantee Scheme (EGS)/Alternative Schools (AS) and private schools), nearly 40 per cent drop out at the primary stage.

Social Barriers:Children of communities engaged in scavenging, disposal of dead animals and such like “impure” occupations are shunned by other children in the school. The teachers are also not very sympathetic to their predicament. Such issues cannot be captured in macro-data or in large-scale studies. Recent qualitative micro studies done in six states have captured a range of discriminatory practices practised in schools and its impact on the schooling of children from specific social groups.

Management: Management of Indian education needs to build in greater decentralization, accountability, and professionalism, so that it is able to deliver good quality education to all, and ensure optimal utilization of available resources.

Resources: India’s stated national policy - ever since 1968 - has been to raise public expenditure on Education to the level of 6% of GDP. On the other hand, in 2004-05, outlay of Central and State Governments for Education amounted to about 3.5% of GDP. Thus, the gap in allocations for Education is still substantial, and needs to be urgently bridged.


The ever expanding share of service sector, along with banking and finance and IT sector require employees with some formal education.
India’s poor literacy rate of around 67% can also be seen as an opportunity for the investors in this sector.
The total enrolment in higher education has increased from about 3.3 million in 1983-84 to about 9.2 million in 2002-03.
The government has recently announced 100% FDI (Foreign Direct Investment) in Education Sector, subject to sectoral rules and regulations as applicable.
There has been a continuous increase in government spending on education.
Demand in education sector is become more price inelastic, thus reflecting that a change in cost of education, would not stop households from getting their children educated.
With over 200 Fortune 500 companies recruiting from Indian campuses regularly, the government now plans to establish India as a brand in the higher education sector and grab the attention of global education community.
India has a potential of about 50,000 foreign students in next couple of years, whereas presently only 10,000 are studying in India.
Number of target countries is being increased from 8 last year (which mainly included students from Nepal, Bhutan and Middle-east) to 24 this year.

Education for all: Policy framework.

From 1950 onwards the Government of India (GOI) has created policy instruments to promote Universal Elementary Education (UEE) in an attempt to eliminate all forms of discrimination based on caste, community and gender.

Through its education policies Government has continuously tried to improve the quality of education and make it a joyful experience. It has tried to decentralize education planning and administration, and bring it closer to people so that it reflects the special needs and aspirations of the community.

Considering the urgent need for development in education sector, the government has declared XIth five year plan as National Education Plan, with an increase in Gross budgetary support from 17.6% to 19%. Total spend by the Govt of India on the education sector is set to cross Rs.1.25 lakh cr. in fiscal 2008. IT is expected to account for anywhere between7-10% of this spend, resulting in an opportunity worth Rs.8,750 - 12,500 crore.

To enlarge the pool of scientific manpower and foster research in the sciences, a new programme entitled "Innovation in Science Pursuit for Inspire Research" (INSPIRE), is being launched. Under this programme, over the next 5 years, 10 lakh school students will be given science innovation scholarships of Rs 5,000 each. The Plan will also support Scholarships for Higher Education (SHE), providing 10,000 scholarships of Rs. One lakh (Rs 100,000 million) per year, to attract talented students to enroll in B.Sc. and M.Sc. courses.

Government also introduced Sarva Shiksha Abhiyan (SSA), in an effort to universalize elementary education. The Sarva Shiksha Abhiyan is to provide useful and relevant elementary education for all children in the 6 to 14 age group by 2010. There is also another goal to bridge social, regional and gender gaps, with the active participation of the community in the management of schools. Efforts are now being made to universalize secondary education too.

Expenditure on Education in India.

The Government expenditure on Education has greatly increased since the First five-year plan. The Government of India has highly subsidized higher education. Nearly 97% of the Central Government expenditure on elementary education goes towards the payment of teachers' salaries.

Impact of Union Budget 2007-08 on Education Sector

The union budget 2007-08, had a positive impact on the education sector. The following points prove the same:
Increase in allocation for school education by about 35% from Rs 17,133 crore in FY 2007 to Rs 23,142 crore in FY 2008.
Increase in the provision for strengthening teachers training institutions from Rs.162 crore to Rs.450 crore.
1,396 Indian Technical Institutes to be upgraded.
Rs 750 crore allocated for setting up ITIs.
Rs 50 crore provided to begin work on vocational education mission for which Task Force in Planning Commission is chalking out a strategy.
1% additional cess on all taxes to fund secondary education.
Government plans to appoint 200,000 more teachers and construct 500,000 more classrooms.
Sarva Shiksha Abhiyan (SSA) will be provided Rs. 10,671 crores.


Indian Education sector will witness robust growth going ahead and the space will augur well for players who make the first move. The business models adopted by these players are highly scalable with them only needing to replicate a successful model in newer locations every time. There are many companies who are entering into this private school business.

The India education space could be one of the largest markets in Asia with a population of over 1.13 bn. With the government planning to spend around 5% of GDP in the next 5 years on education, the market could be anywhere worth $ 50-55 bn.

Massive programme is urgently needed, implemented as a public-private-partnership (PPP) and focusing on the disadvantaged, especially in poorer areas. Such an effort can increase productivity, create jobs, and provide substantial benefits to individuals and society.