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Education sector of india

  1. 1. Education Sector of India Current scenario India has the world’s largest population in the age bracket 5 to 24 years of about 450 million. It also has around 500 million in the 25 to 59 age bracket which constitutes the working population and is expected to continuously increase even as the world’s working population ages and diminishes. This phenomenon will make India a supplier of workforce to the entire world. In the wake of this reality, the Indian education system should therefore be able to produce a workforce which is globally competitive and thus reap its demographic dividend. Literacy in India is one of the key deterrents to socio economic progress of the country. The Indian literacy rate currently stands at 74% compared to 12% at the end of British rule in 1947. Although there has been a six fold growth, the level is well below the world average literacy rate of 84%, and India currently has the largest illiterate population compared to any other nation in the world. (Source from: Techonopak Analysis) An overview education sector of india Source from: KMPG (investing in india) Demand-Supply Gap Indian society puts a premium on knowledge and its acquisition -spending on education has figured as the single largest outlay for a middle class household after food and groceries. With its rapidly expanding middle class, India’s private expenditure on education is set to increase manifold. India’s public expenditure on education (centre plus state expenditure) has ranged between 3.26 % and 3.85% from 2004-05 till 2009-10 and this needs to increase if it were to come at par with the expenditure incurred by the developed economies. While there has been some private investment in setting up educational institutions, there remains a glaring mismatch in demand and supply, particularly in high quality institutions. To reduce the demand supply gap in school education, it has been proposed in the 12th FYP (2012-17) to set up 6,000 schools at block level as model schools to benchmark excellence. Of these, 2500 will be set up under Public Private Partnership. Further, easy availability of
  2. 2. education loans to students it has been proposed in Budget 2012-13 to set up a Credit Guarantee Fund for this purpose. (Source from : PwC (India- Higher education report) EDUCATION SECTOR OF INDIA Pre-School K- 12 Higher Education Vocational Education Couching institutions Sector profiles Pre-schools, Play schools and day care centers The size of Pre-schooling in India is expected to be between $ 500 mn to $ 750 mn at present, according to various industry sources. While the industry is dominated by the unorganized market (neighbourhood schools, stand-alone crèches etc.), there are around10–12 chains that constitute the organized segment and had received investments in the past. The sector is largely unregulated and has little entry barriers. Growing urbanization and attendant characteristics like nuclear family, working parents and the recently instituted practice of the child to undergo basic schooling before entering the conventional school system have largely been the drivers for growth for this segment. Secondary & K-12 Education Secondary education serves as a bridge between elementary and higher education and prepares young persons in the age group of 14-18 for entry into higher education. Higher Education At independence in 1947, India inherited a system of higher education which was not only small but also characterized by the persistence of large intra/ inter- regional imbalances. Determined efforts were made to build a network of universities, and their affiliated colleges which provided tremendous outreach to a country of vast diversities in language as also in prevailing standards of In the post independence period, higher education expanded fast and today India ranks very high in terms of the size of the network of higher education institutions. Source from Report of : Suman Sachdeva (Education scenario and needs in India: Building a perspective for 2025) Coaching centers Among the more active segments in terms of investment activity, coaching centers and the test preparation space in India has always been seen as a proxy for investing into the K-12 and higher education sector in India. Given the huge competition among students at the senior school and higher education level, test preparation and coaching centers have emerged as an attractive option for parents to enroll their students and enable them to succeed at that level. The result has been a parallel education stream with fee that is as high as, if not higher than, that charged by the conventional schooling and college system.
  3. 3. Vocational and corporate training “India graduates millions but too few are fit to hire”, reported a recent article in the Wall Street Journal, which succinctly captured the malaise affecting the higher education sector in the country. While the country’s engineering and management colleges churn out over 2 mn students annually, repeatedly industry body reports and think-tanks have stated that the vast majority are not readily employable. Additionally, in a country of 1.2 bn people, not everyone is able to access the mainstream HEIs. A significant portion of them join vocational institutes that are aimed at enhancing employability. The government has also recognized the importance of employment-oriented education and has recently formulated schemes like the NSDC aimed towards the same. Private investments in this segment have also boomed in recent years. Online and technology-based learning Riding on the information technology boom in the late nineties, a lot of technology-based education companies, predominantly targeted at the international market were set up. These companies offered online learning and facilitated creation of modern education content medium for students and teachers in countries like the US which were facing physical challenges for growth and were looking at alternate delivery mechanisms. Subsequently, these have expanded to offering distance learning and technology-based learning solutions for the domestic market as well. Growth of education sector India Ratings expects the Indian education sector’s market size to increase to Rs 602,410 crore ($109.84 billion) by FY15 due to the expected strong demand for quality education. Indian education sector’s market size in FY12 is estimated to be Rs 341,180 crore. The sector grew at a compounded annual growth rate of 16.5% during FY05-FY12. The higher education (HE) segment was at 34.04% ($17.02billion) of the total size in FY10 and grew by a CAGR of 18.13% during FY04-FY10 Regulatory updates Key policy initiative under Budget 2013 Key Proposals • Total budgetary allocation for education increased by 17% to `65,867 crores ($ 12 bn): – SSA : `27,258 crores (US $ 5 bn) – RMSA : `3,983 crores ($ 724 mn), an increase of25.6% – Allocation of `5,284 crores ($ 960 mn) to various Ministries for providing scholarship to students of unprivileged class – Allocation of `4,727 crores ($ 860 mn) for Impact Assessment • Renewed impetus to flagship schemes of the Government facing severe implementation challenges – Likely to address issues of quality, access and inclusion in primary education – Due recognition to the importance of secondary education in overall development of an individual by substantially increasing allocation to RMSA – Likelihood of addressing relatively lower
  4. 4. medical education, training and research GER in secondary education due to dropouts – Focus on medical education and research in which the country is lagging behind its peers • Scheme to provide monetary incentive of `10,000 to every student passing a skill based training course: – NSDC to develop the curriculum of the training course – Allocation for the scheme is `1,000 crores ($ 180mn) • Effort to motivate the youth to attain formal skill training through monetary incentives: – Noble step but efficient implementation a key to achieving success – Challenge of creating decent jobs for trained youth has not been addressed in the budget Source from :(, Edu Sector Access Perspectives on education, skill and employment) Policy 100% FDI in education allowed through automatic route. A high-powered advisory body - National Knowledge Commission (NKC) set up NKC recommendations tremendously successful in increasing Government’s focus and plan outlay on education NKC has recommended that the number of universities increase from the present 370 to 1500 by 2015, considered a highly ambitious target, but inadequate to meet demand for quality education Government has identified expansion, inclusion and rapid improvement in quality throughout higher and technical education system as the core focus of its 11th Five-Year Plan (2007-12) For higher education, an expenditure of USD 37.13 billion has been projected to achieve the proposed objectives during the 12th Five Year Plan (2012-17) (Source from : PwC (India- Higher education report) KEY TRENDS Source from: KMPG (investing in india)
  5. 5. Market size of education sector India Ratings expects the Indian education sector's market size to increase to Rs 602,410 crore (US$ 111.16 billion) by FY15 due to the expected strong demand for quality education. The sector grew at a compounded annual growth rate of 16.5 per cent during FY05-FY12. The private education sector is estimated to reach US$ 70 billion by 2013 and US$ 115 billion by 2018, according to consulting firm Technopak. Technopak sees enrollments in Kindergarten-12th grade (K-12) growing to 351 million, requiring an additional 34 million seats by 2018. Further, according to the report '40 million by 2020: Preparing for a new paradigm in Indian Higher Education' released by Ernst & Young, the higher education sector in India is expected to witness a growth of 18.0 per cent CAGR till 2020. At present, the sector witnesses spends of more than Rs 46,200 crore (US$ 8.52 billion), which is estimated to grow at an average rate of more than 18.0 per cent to over Rs 232,500 crore (US$ 42.89 billion) in 10 years. Growth drivers for Indian education sector According to KMPG (Investing in india) there is two main growth drivers given impact on Indian education sector such as : Rising income levels and willingness to spend on education. Favorable population distribution. GROWTH DRIVERS FOR K-12  Consumer preference for private schools.  Untapped market.  Increase in disposable income.  Improvement in quality.  Change in urban lifestyle. GROWTH DRIVERS FOR HIGHER EDUCATION  Growth of services sector.  Private players entering education.  Growing middle class with the ability to afford a private education.  Demographic advantages.  India : service dominated economic.  Poor perception of alternative education streams .  Growing private player due to due to large demand and supply gap.  High expenditure on foreign education. GROWTH DRIVERS FOR COACHING INSTITUTES  High Student teacher ratio in schools and accompanying lack of attention.  Increasing competition for professional courses.  High propensity to spend on education .  Growth in double income unclear families .  Rising number of aspirant for foreign degrees. GROWTH DRIVERS FOR PRE-SCHOOL  Very low penetration levels today, which are expected to increase.  Franchisee model and innovative teaching models shoring the supply side.  Increasing quality pre-school.  High propensity spend on education.
  6. 6. GROWTH DRIVERS FOR VOCATIONAL EDUCATION  Demand for skilled labour on the increase.  Low employability levels in the system.  Strong demand from the IT boom.  Inefficiency of public education.  Increasingly comparative business environment. Source from: KMPG (investing in india) Gross enrolment ratio in india At the lower secondary level (grades nine and 10), enrolment rate is 52%, while at the senior secondary level (grades 11 and 12), it is 28%. While the enrollment rate in pre-school is merely 18%, there is a 48% drop-out rate in elementary education.(source : Fortress Team Research) The government has set a target of gross enrolment ratio (GER) in higher education of 30% by 2020 With a current GER of 20% already achieved, this target appears eminently attainable. However, India should aspire for a higher GER considering that this ratio in developed countries is 50-60 %. Drop out ratio of education sector in india More children have dropped out in 2010-2011 as compared to 2009-2010 in 10 of the 30 states where RTE has been notified. These include progressive states like Tamil Nadu and Gujarat that have seen an increase in drop out ratio from 0.1% to 1.2% and 3.9% to 4.3% respectively between 2009-2010 and 2010-2011. Others that have also slipped from their earlier mark include Madhya Pradesh, Haryana, Mizoram, Sikkim, Tripura and union territories like A&N Islands, Daman & Diu. Incidentally, fund allocation under RTE has doubled from Rs 13,100 crore in 2009-2010 to Rs 25,555 crore in 2012-2013. the annual average drop out rate for the country has come down from 9.1% to 6.8% while enrolment has increased 13.34 crore to 13.52 crore for the same period. The expenditure on education as percentage of GDP was 3.1 per cent in 2011–12. Student teacher ratio According to education minister of india the states should take steps to hasten the process of teachers appointment as the Centre has already sanctioned six lakh posts. He said as against mandated teacher student ratio of 30:1, 43 per cent primary schools have over 40 children per one teacher. Challenges for education sector In Indian education sector there are many challenges are arise such as: Challenges for k-12  Low gross enrolment ratio (GER) and high dropout rates.  Low penetration of technology and multimedia content in schools.
  7. 7. Challenges for Higher education  Low GER.  Low public spending on higher education.  Not-for-profit mandate of the government.  Lack of large players in the market. Challenges for couching institutions  Fragmented and person centric Business.  Lack of adequate teaching talent.  Lack of government and financial support. Challenges for Pre school  Lack of awareness on the requirement for preschool education.  Operational challenges including availability of quality teachers. Challenges for Vocational education  Poor perception of vocational diplomas.  Lack of adequate financial support for students. Source from: KMPG (investing report) OPPERTUNITY  Establishing formal educational institutes under PPP mode and expanding the existing ones  Twinning arrangements/ academic and financial collaborations with Indian institutions  Course content development, training (faculty and students) and other innovative service offerings  Providing infrastructure services including construction development, I.T.  Establishing campuses of foreign universities/ technical institutions in India  Unsaturated demand for quality global education  Low GER of 15% in Higher education as compared to 84% in USA  Sharp decline in dependency ratio predicted in the next 30 years  India is expected to emerge as a Global hub in education in Asia Pacific region  Low focus on R&D Source from :( Deloitte Education Sector Team ,, Indian Higher Education Sector Opportunities aplenty, growth unlimited!) The Opportunity for Private Participation Government resource allocation is inadequate to meet its own targets (30% GER by 2020)leaving enough scope for private participation. The Eleventh Five Year Plan (2007-12)allocation for technical and higher education has been raised by almost nine fold to ~USD 18.8 billion from ~USD 2.1 billion in the Tenth Plan. However, this is still a fraction of the estimated requirements for achieving the targets. SEGMEN MARKE REGUL KEY GROWTH BUSINESS T T ATION FACTURES DRIVERS POTENTIALS SIZE PreSchool $770 bn NO -Urban driven -Peer pressure -Unorganised -Free pricing -Franchise based -Low penetration K-12 1,320 -Largest market HIGH -Pref to Pvt. -Capital intensive -Scale ability is an issue -Lucrative investment -Newer business
  8. 8. bn -Low quality -Structuring issue Higher Educatio n VERY HIGH -Variety of courses -Regional disparity -Well organised Vocation al Educatio n NO Couching institutio ns NO -Unregulated pvt. Mkt. -Number of streams -Franchise based -No regulation -High unorganised -Urban drive Source from : Schools -Aspiration to parents -High stickiness -Growing economy -Govemment policy -High population models -Large scope of PPP -Structure: a dampener -Large scope of pvt. Technical institutes -Scope in semi urban areas -Scope for distance edu. -Job/placement -Scope of PPP -Newer sector -Capital intensive -Affordable -Lucrative fees investment -Quality education -Free pricing -Peer pressure -Scalability issue -Capital intensive