1. 20
CONTENTS : needs to be changed
Contents
Page No.
Introduction 3
Education in India
Indian Education Sector Overview 4
Structure of Indian Education System 5
Key Drivers of Indian Education System 6
CONTENTS
Indian Education System
Structure, Drivers, Challenges and Remedies
Indian Education Sector is by far the largest capitalized space in India with over
$30bn of government spends and a large network of ~1m schools and 18,000
higher education institutes. Yet, the public education system is ‘insufficient’ and
‘inefficient’, leading education-hungry and affluent Indians to spend $50bn on
private education.
India seems an ideal market for investment in education because of its young
population and an economy focused on services which makes education a key
factor, illustrated by Indian presence in sectors like software, generic
pharmaceuticals, and other areas that require high level of education
A
Sucheta Jha
E-mail : jhasucheta@gmail.com
Mobile : +91- 9818349139
October, 2010

2. Contents Page No.
Introduction: Education in India 3
Indian Education Sector: An Overview 5
Structure of Indian Education System 6
Key Drivers of Indian Education System 9
Critical Challenges of Indian Education System 13
Remedies to Critical Challenges of Indian Education System 16
Key Success Factors for Private Education in India 18
Appendix 19

3. 3 Indian Education System
“Over-regulated and under-governed” best describes the largest
sector in India – Education.
With about 450mn out of India’s 1.2bn population falling in the 5-
24 year age group, the potential for the education sector is
enormous. Despite regulatory and scalability issues, private
players believe “innovative business models” would provide scale
and opportunity for players. Due to huge gap in quality of
teaching, infrastructure K-12 and pre-school, segments offer the
best bets for private players.
Govt. spending on education to double in 11th Five-Year Plan
Currently, government spending (both central and state
governments) accounts for US$30bn out of the US$75bn spent on
education annually.
The government plans to double spending on education during
the 11th Five-Year Plan (2007-12) to improve education system in
India but considering the significant number who struggle to
receive basic elementary schooling, or are deprived of it
altogether, private participation is seen as the only way of
narrowing the gap.
Significant share of private education market regulated
Education in India is regulated at both central and state
government levels. As a result, regulations often differ from state
to state. Under current regulations, only not-for-profit trusts and
societies registered under Societies Registration Act can operate
private schools.
High investor interest in ‘education revolution’
Despite being fraught with regulatory restrictions, private
investors are flocking to play a part in the “education revolution”.
Further, in order to expand to different markets to cover more
target population, capture higher market share in terms of
revenue in both private education market and government
spending on education,
Valuations to improve
Companies such as Educomp Solutions, Everonn Systems and NIIT
are market leaders in their field. With these companies building
scalable business models, which will lead to reduce the valuation
gap between domestic players and international peers.
Introduction: Education in India
Demographic Indicators
Population
~1,200 Millions
Population Growth Rate
1.54%
Life Expectancy
~69 Years
Literacy Rate
~68%
Urban Population
~30%
Population BPL
~37%
Age Structure
0-14- 31.1%
15-64- 63.6%
65 & over- 5.3%
Economic Indicators
GDP
$1.25 Trillion
GDP Growth Rate
~8.8%
Per Capita Income
$1031
Inflation- Long Term
7-8%
Gini Index
36.8
Unemployment
~11%
Schools
~1 Million

4. 4 Indian Education System
US$75bn opportunity
The Indian education sector, estimated at US$75bn, offers enormous opportunities for private
players. Despite regulatory constraints, the acute shortage of trained teachers and quality
schools combined with cash-strapped governments would open the doors for corporates to
capitalize on this opportunity.
Indian Education Sector (IES) – an interesting class
Source- IDFC-SSKI Research; *GER – General enrollment ratio

5. 5 Indian Education System
Fact sheet:
Large population
provides huge
opportunity
India’s target population is expected to reach ~486mn (34% of its total
population) by 2025E while that of China and US would be 24% and
26% respectively
Government spend
on education to
increase manifold
The 11th five year plan targets to increase education from its present
level of 3.5% to 5% of GDP by the end of the 11th plan. The Planning
Commission to set aside 19.7% of the total plan resources for
education –$48,800 mn, a five fold increase from $9,700mn in the 10th
five year plan.
Indian Middle class’s
increase in education
spending
Total spending by the middle class is expected to increase from 18% in
2005 to a 59% in 2025. Education will be among the biggest
beneficiaries of the same
Increased Role of
Private Sector
Private sector has a role in providing digital content and technology,
setting up pre-schools and K-12 schools, undertaking large ICT projects,
vocational training and electronic learning
Current Status of Education in India
Indian Education Sector : An Overview
Government spends (Centre + state) on education: $30bn; at 3.7% of GDP,
comparable to global average; 0.82% as capital expenditure, 80% on teachers’
salaries; >90% spend on K12 (kindergarten to 12th grade). Centre’s budgetary
allocation up 6x in 11th Plan period.
Private spend on education: $50 bn, 5% of average HH income (12% in USA, 15% in
China). CAGR of 8.6% vs 3.2% in consumption; 8% CAGR overFY08-20E (growing
fastest globally)
Network: ~1m schools, of which 75,000 (7%) are private – 40% of enrolled
population attends private schools; 18,000 higher education institutes (HEIs) (largest
globally)
Regulatory framework: K12 and HEIs required to be run as not-for-profit institutes
set up under a Trust/ Society; also, though 100% FDI allowed through automatic
route, no rules/ regulations in place for foreign universities to be recognized under
UGC (University Grants Commission)

6. 6 Indian Education System
THIS IS ONLY A PREVIEW SHOWING PARTS
OF THE DOCUMENT
Structure Of Indian Education Sector

7. 7 Indian Education System
The ISB approach – Using the strength of brand and quality
As long as industry quarters perceive the products to be of superior quality, the
HEI can do without cumbersome affiliations and regulations. For example, ISB
(Indian School of Business, Hyderabad) is a venerated name in the industry
corridors despite it not being affiliated to any regulatory board.
The diploma offered by ISB holds as much (arguably more) value as any UGC-
accredited certification. But importantly, this status requires maintenance of
world-class quality and strong industry support.