Fdi newcollege- 9-2-2012

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Fdi newcollege- 9-2-2012

  1. 1. Foreign Direct Investment in India – (a study on Education Sector) G.Ramkumar M.COM,AICWA,(CA),MBA,MPhil,NET,SLET,(PhD) Assist Professor – D.G.Vaishnav College. Dept of Business Economics Introduction : At the outset of 1990s India marching towards economic and Financial reforms aptly backed by Narasimha Rao Government where we find new Words : 1) Globalisation 2) Liberalisation 3) Foreign Investment – either Direct or Jointly Now after a Span of 20 years of Liberalisation India has Grown in almost all sectors with Phase changing from restrictive economy to liberal economy. India still needs more Foreign Direct Investment (FDI) in Marching towards a super status. The FDI is mainly entering the Fields of Manufacturing , Technology, Service and Finance Sectors. Indian Ministry of Finance and Company Affairs , Department of Economic Affairs , Foreign Investment Promotion Board and aptly supported by Ministry of Commerce and industry in Policy framing Network. Investments are made more attractive and also easily Repatriable excepts when there is any Lock-in-period .All activities were brought in automatic route under Power of RBI.Indian Companies are allowed to raise Funds through : 1) Global Depositiory Receipts (GDRs) 2) American Depository Receipts 3) Convertible Bond These Investment to a certain extent or Percentage could be approved by RBI and incase exceeding the Limit Shall have to Approval from Government of India. Present Scenario : India has long history of educational institutions : a) Schools were under : a. National Council of Educational Research and Training (NCERT) b. Central Institute of Education Technology (CIET) c. Central Board of Secondary Education (CBSE) d. National Institute of Open Schooling (NIOS) e. Kendriya Vidyalaya Sangathan (KVS) f. Navodaya Vidyalaya Samiti (NVS) g. Central Tibetan Schools Administration (CTSA) h. State Board of relevant States b) College aided by: University – UGC, AICTE, AIIMS etc.
  2. 2. FDI in Educational Sector were almost NIL for upto 2005 and then started with a minimum phase.The investment till 2011 were Rs 2,051 Crores . This is because of Policy of Indian Government that School or College or University has to be Non-Profit Oriented , i.e Sec 25 of Companies act registered as trust. The RBI does not allow the Automatic route to Trust or Society. Even big corporates cannot have educational institution directly but allowed vide trust. A few instance of Corporate having Colleges Through Trust were 1) TATA – Institute of Social Science , Memorial Hospital 2) BIRLA – BITS Pillani , Birla Institute of Management,Birla Heart Reserch Centre 3) India Cements- T.S.Narayanasamy college – Arts and Science 4) Relience – Life Science & Institute of Technology and Communication etc. Basically all earnings from the Institutions has to be ploughed back and no dividends could be earned out of it. Only Indirect mode of FDI is created now-a-days. That is A trust is created by a Company which starts educational Institutions and FDI is made into the company rather than the Trust and the company create a subsidiary institution which provides all services to the educational institution. In reward the subsidiary company gets Technical and other fees paid which will be reverted to FDI investors. As all College and University are under the control of UGC and AICTE , These boards does not allow 1) Franchise from Foreign Universities 2) Direct operation of their Universities. 3) No Foreign university can Grant a Degree in Indian Soil. The Indian Government has passed a Bill in 2010 in the Parliament which named “Foreign educational Institutions Regulation of entry and Operations bill 2010” The Bill has been ratified and passed unanimously in the Union Cabinet. The bill was referred to Standing Committee of Human Resources by Lok sabha and also they will be under the supervisory of UGC , AICTE and AIIMS.Proper Authority will be setup to Monitor working of these institutions which provides Collegiate and higher education. Objectives of Study: 1. The Potentiality in this Sector to Intake FDI. 2. The Government Policy in this Sector 3. The Fututre Growth of this Sector 4. Indian Educational Sector colloboration. 5. Review and Feed Back.
  3. 3. Importance of This Sector: India has Private-Public Partnership of Educational Institutions both in Schools and Colleges. India has 3rd Largest Education system globally. Indian Educational Growth had a take off only by the dawn of 2000. The Private College rose to numbers where the Government colleges remain same. It is Presumed that Indian educational sector worth by 50billion as evaluated by Standard and Poor as in 2010. Although there is an Enormous flow of Revenue the curriculum standard remain average. This is because outdated Lessons and lack of Technology. Even today 90% Indian school works with Black board and Chalks. Only Few B-Schools were Computer Potential and uses Power Point Teaching and Slides. Indian Educational Society faces major problem of More Dropout in the Preliminary round i.e before 10th or plus two. Most students were eventually moving away from schools due to Poverty or family situation and taking the Employment in the earlier stage. It is reported that nearly 65% of students in India dropout early from school. According to Census by 2011 the literacy rate in India is 74.04 % and out of Which Male literacy is 82.14 and female literacy is 65.46 . India has around 1.5 million schools and 25000 colleges with 250 universities and 110 deemed universities with that of Government: 1) 13 IITs , 2) 7 IIMs 3) Indian Institute of Science in Bangalore 4) 23 Central Universities 5) 4 National Institute of Technology 6) 4 Indian Institute of Information Technology. This the one area still untapped by the Foreign Investments. Already a number of foreign universities and companies that operate in the education sector have shown keen interest to enter India. One of the first proposals has come from Denmark-based Egmont Imaginations that has submitted a proposal to the Indian government to set up 200 playschools in India. Also American major universities like Yale, Stanford and Georgia Institute of Technology have announced that they are keen to set up Greenfield campuses in India as and when the country liberalises education. Indian economy currently incurs an outgo of more than $4 billion as presently 2.46 lakhs of students studying in United States and Europe for higher studies. Government Policy Frame Work :
  4. 4. Foreign Education Bill has a some of salient features : 1) Entry restriction , Quality assurance and non Commercialisation of Institution. 2) The Institution should have operated in their country for a Minimum of 20 years. 3) The Institute shall have infrastructure and a Corpus Fund of around INR500 mn 4) The Courses should meet Indian national standards as well as their own country standards. 5) They should plough back the Funds and should not Repatriate. 6) All the Institutions shall be following the FEB Provisions or UGC Provisions and any violations will be strictly dealt with Huge Fine. FEB Draw Backs : 1) The Entity will ask to set up in Section 25 Companies act as Society etc. 2) They will under the control of UGC, AICTE, DEC etc. 3) No state of Autonomy will be allowed 4) 500 million INR Corpus fund is not easily in one transaction. 5) No Repatriation will be the biggest Loss ever. 6) May cause a Brain Drain to Indian Universities as foreign universities are highly Paid. 7) Financial and academic Disclosure Transparency Norms Initiated BILLS on Educations: a) The Foreign Educational Institution (Regulation of Entry and Operation) Bill, 2010 b) The National Accreditation Regulatory Authority for Higher Educational Institutions Bill, 2010 c) The Educational Tribunals Bill, 2010 provides for the establishment of the State Educational Tribunals and the National Education Tribunal. d) The Prohibition of Unfair Practices in the Technical Educational Institutions, Medical Educational Institutions and Universities Bill, 2010 e) The RBI Under the FDI scheme allows an automatic route subject to Foreign exchange Management Act 2000. f) Income Tax act (amendments) for giving tax benefits g) Ministry of human resource development has circulated a draft of the Universities for Innovation Bill 2010
  5. 5. Collaboration – ( by Standard and Poor) 1) Harvard Business School has a agreement with Harvard India Research 2) Wharton and University of Pensylvania has tied up with ITC Ltd. 3) Duke University has Tied up with IIM Ahmedabad. 4) Lancaster University with IIM Bangalore etc. 5) Harvard Law School with O.P Jindal University 6) Max Planc University with IIT Chennai.etc. Growth of the Sector – (By Ernest and Young) 1) 40 million will be preparing for higher education in by 2020. 2) Current spending of INR Rs 45000 crores will be expected to grow by INR Rs 250000 crores. 3) Students Pursuing currently for Higher education 16 million in India. 4) India targets to achieve Gross Enrollment ratio to 30% as to present 12% 5) With this expectancy India needs another 30000 Institutions by 2020. 6) This GER needs an Investment of INR 100000 Crores. Conclusion : The Government has made massive increases in budgetary allocations. It has also acknowledged the importance of private participation. There is a wide and growing spectrum of services being offered in this sector. These are almost entirely on a legitimate for-profit basis. We have the potential of becoming a global hub for education. The Government should work with all stake holders and seek to harness the creativity, energy and capability of the private sector and create synergies by working with, rather than in competition with it. The opportunity is real –all stakeholders need to work together to capture it. ------------------
  6. 6. Collaboration – ( by Standard and Poor) 1) Harvard Business School has a agreement with Harvard India Research 2) Wharton and University of Pensylvania has tied up with ITC Ltd. 3) Duke University has Tied up with IIM Ahmedabad. 4) Lancaster University with IIM Bangalore etc. 5) Harvard Law School with O.P Jindal University 6) Max Planc University with IIT Chennai.etc. Growth of the Sector – (By Ernest and Young) 1) 40 million will be preparing for higher education in by 2020. 2) Current spending of INR Rs 45000 crores will be expected to grow by INR Rs 250000 crores. 3) Students Pursuing currently for Higher education 16 million in India. 4) India targets to achieve Gross Enrollment ratio to 30% as to present 12% 5) With this expectancy India needs another 30000 Institutions by 2020. 6) This GER needs an Investment of INR 100000 Crores. Conclusion : The Government has made massive increases in budgetary allocations. It has also acknowledged the importance of private participation. There is a wide and growing spectrum of services being offered in this sector. These are almost entirely on a legitimate for-profit basis. We have the potential of becoming a global hub for education. The Government should work with all stake holders and seek to harness the creativity, energy and capability of the private sector and create synergies by working with, rather than in competition with it. The opportunity is real –all stakeholders need to work together to capture it. ------------------

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