Description
The Indian education sector has been recognized as a "Sunrise Sector" for investment in the recent past. This recognition stems from the fact that the sector offers a huge untapped market in regulated and non-regulated segments due to low literacy rate, high concentration in urban areas and growing per capita income.
For Private circulation only
October 2012
www.deloitte.com/in
Indian Higher Education Sector
Opportunities aplenty, growth
unlimited!
2
Contents
Message from the Education Sector Team 3
Indian Education Sector: An Overview 4
Regulatory Framework 8
Challenges facing growth 10
Opportunities for Private Sector Investment 13
Way Forward 15
Glossary 16
Our Service Offerings 17
Indian Higher Education Sector Opportunities aplenty, growth unlimited 3
Message from the
Education Sector Team
The Indian education sector has been recognized as a
“Sunrise Sector” for investment in the recent past. This
recognition stems from the fact that the sector offers a
huge untapped market in regulated and non-regulated
segments due to low literacy rate, high concentration
in urban areas and growing per capita income. The
Government has also been proactively playing the role
of facilitator in this sector.
The higher education sector, owing to its huge
potential, holds very promising prospects. With an
estimated 150 mn people in the age group of 18-23
years, the sector offers one of the most attractive yet
highly complex market for the private/foreign players.
Despite some inherent concerns with respect to choice
of entity, not for pro?t character and foreign investment
in formal education space; the industry does offer
various innovative business opportunities, which can be
explored for establishing a presence.
The Government of India has recently reignited its
reforms agenda by opening up certain sensitive sectors
to foreign investment such as retail and civil aviation,
which should ideally result in increased economic
activity and employment generation. In order to
capitalize on this huge employment opportunity, we
believe the Government should take such a positive
step in the higher education sector also by reducing the
complexities governing foreign investment. This should
also help the Government in achieving its aggressive
goals of access, equity and excellence in higher
education.
The Planning Commission in its approach paper to
12th Five Year Plan had suggested that the current
“not-for-pro?t” approach in the education sector should
be re-examined in a pragmatic manner so as to ensure
quality without losing focus on equity – we believe
that the Government should seriously consider this
suggestion to attract private/foreign investment in this
sector.
This Report provides an overview of the higher
education sector in terms of sub-segments, market
size and latest trends, regulatory framework, sectoral
challenges and present/future opportunities for
investment. The primary ?nding of our analysis is that
the opportunity for investment and capital appreciation
being offered by the Indian higher education sector is
unparalleled. However, one needs to be wary about
the various complexities in terms of structuring of
investment, market offering, entity options and tax
implications.
Happy Reading!
Deloitte Education Sector Team
[email protected]
4
Indian Education Sector
An Overview
India, today, is considered as a talent pool of the world,
having quali?ed and educated human resources in
abundance. This has been one of the primary reasons
for transformation of India into one of the fastest
growing economies in the world since liberalization in
the 1990s. As the economist Clark Kerr observed, “On a
global scale, wealth and prosperity have become more
dependent on the access to knowledge than the access
to natural resources.”
The importance of education in India was recognized by
the founding fathers of the country and the subsequent
governments, and as a result considerable importance
has been given to literacy, school enrolment, institutions
of higher education and technical education, over the
decades ever since independence.
India’s aspirations to establish a knowledge society
in the context of increasing globalization, is based on
the assumption that higher and technical education
essentially empowers people with the requisite
competitive skills and knowledge. It has been realized
that it is the quality of education that prepares one for
all pursuits of life and in the absence of an acceptable
level of quality, higher education becomes a mere
formalism devoid of any purpose or substance. As a
result, from around the turn of the century, increasing
attention has also been paid to quality and excellence in
higher education.
Post-independence India has witnessed an above
average growth in the number of higher educational
institutions vis-à-vis its population. While there were
just about 20 Universities and 500 Colleges at the time
of independence, today these numbers have grown
exponentially. Please ?nd below a snapshot of the
current higher education sector in India:
• India has a total of 610 universities. 43 central
universities, 299 state universities, 140 private
Universities, 128 deemed universities and 5 institutions
established through state legislation, 30 Institutions of
National Importance
• There are 45 technical institutes, 13 management
institutes, 4 information technology institutes, 6
science and research institutes and 3 planning and
architecture institutes
• Currently, the Government spends around 3.8% of its
GDP on education
• Less than 1% of the $38 bn of the Government spend
on education was towards Capex (2008-09)
• According to the 2011 census, the total literacy rate
in India is 74.04% compared to the world average of
83.4% (2008)
• The female literacy rate is 65.46 % and male literacy
rate is 82.14 %
• FDI infows in the education sector during May 2012
stood at $31.22 mn
Source: UGC Annual Report
2010-2011- DGET; Ministry of
Human Resource Development
(HRD) Annual Report 2011-
2012; IDFC SSKI 2010; DISE
2009-10 Flash Statistics; MHRD
Statistics: Higher & Technical
Education 2010; Planning
Commission: Midterm Review
of XI Plan
Indian Higher Education Sector Opportunities aplenty, growth unlimited 5
Industry Growth & Size
The Indian Education sector is characterized by a unique
set of attributes:-
• Huge market size both in terms of number of students
and annual revenues
• A potential growth rate of 16% is expected over the
next 5 years
• Signifcant activity in terms of new foreign entrants
and participation is expected to be witnessed in the
years ahead
• Accreditation is still not mandatory, however, reforms
are in the pipeline to address this issue
The Indian education space is evolving, which has led
to the emergence of new niche sectors like vocational
training, ?nishing schools, child-skill enhancement
and e-learning among others. Growth is driven by the
increasing propensity of the middle class to spend on
education and more aggressive initiatives by private
entrepreneurs.
Higher Education in India: Current State of Play
India possesses a highly developed higher education
system, which offers the facility of education and
training in almost all aspects of human creativity
and intellectual endeavors like: arts and humanities;
natural, mathematical and social sciences; engineering;
medicine; dentistry; agriculture; education; law;
commerce and management; music and performing
arts; national and foreign languages; culture;
communications etc. The institutional framework
consists of Universities established by an Act of
Parliament (Central Universities) or of a State Legislature
(State Universities), Deemed Universities (institutions
which have been accorded the status of a university
with authority to award their own degrees through
central government noti?cation), Institutes of National
Importance (prestigious institutions awarded the said
status by Parliament), Institutions established State
Legislative Act and colleges affliated to the University
(both government-aided and unaided)
There are three principal levels of quali?cation within the
higher education system in the country:
I. Graduation level
II. Post-graduation level
III.Doctoral degree.
Besides these three, there is another quali?cation called
a Diploma. It is available at the undergraduate and
postgraduate level. At the undergraduate level, the
duration of the course varies between one to three
years; postgraduate diplomas are normally awarded
after one year course, though some diplomas are
awarded after two years of study.
Sources: UGC; UNESCO Global Education Digest 2010; MHRD
Annual Report 2009-10; US Department of Education: National
Center of Education Statistics; CSFB Report; CLSA Report; CLSA Asia-
Paci?c Markets, Department of education
6
Structure of Indian Higher Education Sector
In our view, the higher education sector can be divided into 4 broad categories as listed below:-
Formal Education
Technical &
Professional Education
Skill Development Vocational Training
Composition • Institutes of national
importance
• Universities
• Colleges
• Polytechnics
• Engineering colleges
• Management Schools
• Law, Medical, Pharmacy
etc.
• ITIs
• ITCs
• Private Skill Development
Centers
• Finishing schools
• English training
• Air hostess Academies
Key Regulators • UGC
• State Government
• IGNOU
• AICTE
• Bar Council of India
• Medical Council of India
• ICAI
• DGET incase of ITIs/ITCs
• Unregulated for others
• No regulator
Accreditation bodies • NAAC • NBA • None • None
Key Players • IITs/IIMs/IISc
• Amity University
• SRCC
• MDI Gurgaon
• K.J. Somaiya College of
Engineering
• ITIs/ITCs
• Private centers
• VETA
• Frankfnn
Note: This report would focus only on formal education, technical & professional education. Sector Size & Growth ($ bn).
Size of Indian Higher Education Sector
The population of India has begun to appreciate
the value of education in a global economy and has
demonstrated an increased willingness to pay for quality
education and more students are now opting for higher
education after school.
India has the third largest higher education system in
the world in terms of enrolments, after China and the
US. The number of students enrolled in the universities
and colleges (formal system) has been reported to
be 16 mn in academic year 2010-11*. This does not
include enrolment in higher education offered through
ODL. India is acknowledged to have the largest higher
education systems in the world in terms of number of
institutes. The university and higher education system
comprises 610 universities and in addition, there are
33,023 colleges. An estimated $13bn is spent outside
the country. Higher education is the second largest
opportunity in the Indian education sector.
Higher Education Sector Size & Growth ($ bn)
20
22.4
31.47
0
20
40
2008 2009 2012E
C
A
G
R
1
2
%
Source: Netscribes, IDFC SSKI, Our Analysis
Indian Higher Education Sector Opportunities aplenty, growth unlimited 7
There has been phenomenal growth of higher
education in India since Independence. There were
only 20 universities and 500 colleges at the time of
independence. These numbers have increased by 26
times in the case of Universities and 66 times in the case
of colleges. Some of the other factors acting as growth
drivers to the Higher education sector are:-
• A booming economy and growing middle class
• Low GER in higher education (~15%) – the target GER
of 30% by 2020 would mean 24 mn new enrollments
• Increasing share of the services sector further
emphasizes the role of education in developing
manpower to global standards
• Several reforms by the government including the
Education Bill are on the anvil to give a push to the
education sector
• Foreign investment likely to come in with the passing
of the Education Reforms Bill
*Source: Netscribes Industry Reports (Preschool Education in India
2009; IDFC - SSKI INDIA – Research Report January 2009; MHRD,
Annual Report, 2010-11
Recent trends in the Higher Education sector
Over the past few decades, the global economy
has shifted from being manufacturing-centric to a
knowledge-driven one and as countries move up the
ladder of development, the contributions of hi-tech
manufacturing and high value-added services to the
GDP increases. Success in leveraging knowledge and
innovation is only possible with a sound infrastructure
of higher education. A successful education policy forms
the foundation of all ?elds of national development
including political, social, economic, technical, scienti?c,
and environmental. Thus, the higher the quality of
university education in a country, the more prosperous
and competitive are the people.
• Higher Education in India is decentralized under the
DHE with separate councils (e.g. AICTE, MCI etc.)
responsible for the regulation of different streams
• The UGC has allocated a general budget of Rs.5,244
crores for the year 2011-2012 to be distributed under
eight broad categories*
• Private institutions in India are focusing more on
professional courses such as engineering, medical and
MBA
• GER has increased to 15% in 2009-2010 from 11.5%
in 2005-2006. GER for 2010-2011 has been estimated
at 16%*
• Faculty-wise the fgure of enrolment of higher
education for the year 2006-2007 & 2010-2011
has been increased in certain streams. These include
arts, science, commerce/management, medicine and
agriculture. It has increased by 17.88%, 31.68%,
38.89%, 77.82% and 38.33% respectively*
• Estimated population in 18-23 age group: 150 mn
with GER of around 15%
12th 5 year plan and scope for Public Private
Partnership
The 12th Fiver Year Plan focuses on Expansion, inclusion
and quality to achieve the national goals in education.
• During the 12th-Plan period, a target enrollment of 10
mn additional seats equivalent to 3 mn seats for each
age cohort is aimed at in the higher education system.
This would signi?cantly increase the GER bringing it
broadly in line with the global average
• There is unanimous agreement of the fact that the
private sector needs to be involved to complement
and supplement the efforts of the Government
In the 12th plan, the Planning Commission’s focus is
on instilling “inclusive growth” in making headway.
The plan is expected to be one that encourages the
development of India’s education sector through
government spending.
*Source: MHRD Annual Report 2011-2012; An approach to 12th
Five Year Plan, October 2011; Netscribes; IDFC SSKI; Our Analysis.
The emergence of India as a service-based, knowledge-
driven economy has put the spot light on human capital.
Higher education is essential to build a workforce
capable of underpinning a modern, competitive
economy. The process of broadening access, making
higher education inclusive, and promoting excellence
initiated during the 11th Plan must be consolidated
and expanded further during the 12th Plan. On the
whole, with new regulatory arrangements and focused
action in key areas, particularly expansion and quality
improvement, a robust higher education system must be
built such that it would sustain rapid economic growth,
promote international competitiveness, while at the
same time meet the rising expectations of the young
enterprising Indians.
8
Regulatory Framework
Multiple regulators and onerous regulations
Education under the Indian Constitution is on the concurrent list, which makes it both a Central and a State subject.
Over the years, lack of communication and co-ordination between the two spheres of authority has resulted in
creation of multiple regulators in this sector. The complexity is further compounded due to a number of onerous
regulations governing investment in this sector.
Regulatory Environment of Higher Education Sector
Note:
* In addition to the education sector regulations mentioned above, there are a few other central
regulations applicable across the higher education sector such as IGNOU Act, FDI, FCRA, Indian
Companies Act (Section 25 Company), Indian Trusts Act, Societies Registration Act, Income Tax Act etc.
** Similarly, in case of States, some local regulations are applicable across this sector such as State Public
Trusts Act, State Societies Registration Acts etc.
Source: Our Analysis
Higher Education
Consists of
Accreditation Agencies
(Not Mandatory)
Universities/Colleges/
Polytechnics
National Assessment
and Accreditation
Council
National Board of
Accreditation
Respective regulatory
bodies
Engineering/Mgmt./
MCA/Pharma/Arch
Law/Medical/Dental/
Nursing
Technical Education Professional
Education
Central Regulators*
Key Regulations*
State Regulators**
Key Regulations**
MHRD/UGC
UGC Act, 1956/
UGC Private Univ
regulations
Dept. of Higher
Education/State level
committees
Private University Act/
Rules and Regulations
MHRD/AICTE
AICTE Act, 1987/
AICTE Regulations/
Approval Handbook
Dept. of Technical
Education/State level
committees
Noti?cations/
Guidelines/ Orders
BCI/MCI/DCI/INC
Respective Acts &
Regulations
Respective State
Dept./ State level
committees
Noti?cations/
Guidelines/ Orders
Indian Higher Education Sector Opportunities aplenty, growth unlimited 9
Choice of Entity
Formal education in India is considered as a “not for
pro?t” activity by the Government and the courts.
Therefore, the choice of entity for setting up a formal
education institution has been limited by law to Society,
Trust and Section 25 Company. All of these entities
operating in formal education sector are restricted under
law to declare dividends/income to the promoters/
bene?ciary. It is important to point out that Planning
Commission in its approach paper to the 12th Five Year
Plan had suggested re-examining of the “not for pro?t”
tag in formal education to attract investment from the
private sector.
Reforms in the pipeline
In the last 3 years, the education sector has witnessed
a number of bills addressing key industry issues such as
opening the sector to foreign universities, over-arching
regulator, tribunals and unfair trade practices, among
others, being tabled in the parliament. Some of these
bills have been revised and re-tabled in the parliament
based on the recommendations of special committees
constituted by the Government. Hopefully, we believe
that these bills will be approved by the parliament based
on consensus approach.
NCHER
UGC/AICTE/
Other Statutory
Authorities
Indian & Foreign
Institutions
National
Accreditation
Regulation
Authority
Accrediting
Agencies
State Educational
Tribunal
National
Educational
Tribunal
Dispute Settlement
(including related to unfair
practices)
Appeals
Ratings
Proposed Structures
Existing Structures
Source: Our Analysis
Key reforms in the of?ng include:
• NCHER as over-arching regulator to subsume both UGC and AICTE
• Accreditation to be made mandatory for every formal education institution. NAAC to register and monitor
accreditation authorities
• Dispute settlement mechanisms put in place to expedite adjudication of disputes in Education Sector
• Universities for Research & Innovation Bill 2012, which envisages setting up of universities of excellence is pending
in the parliament. Greater autonomy to be provided to such institutions.
10
Challenges facing growth
Access and Equity
While India has made signi?cant progress in ensuring
access to primary education, the proportion of students
who remain in the education system until higher
education is considerably less. Ensuring equitable access
to higher education is also a challenge with disparities
seen across gender, regions and socio-economic groups.
• Enrolment: In terms of GER in higher education, India
with a GER of about 15% lags behind to a great
extent as compared to the developed world, as well
as, other developing countries, as illustrated in the
?gure below. With the rising levels of enrolments
in school education, the supply of higher education
institutes is insuf?cient to meet the growing demand
in the country.
• Equity: According to data for 2009-10
1
, while the
GER in higher education in India was 17.1 for males,
it was only 12.7 for females. Additionally, while
the overall GER for the population was 15%, the
corresponding ?gures for SCs and STs were 11.1 and
10.3, respectively. There are regional variations too
with Uttar Pradesh having a GER of 10.9 while Delhi
has a GER of 47.9. These fgures refect some of the
signi?cant imbalances within the higher education
system.
89
76
59
55
40
24
15
0
10
20
30
40
50
60
70
80
90
100
US Russia UK France Malaysia China India
GER in Higher Education (2009) - International Comparison
Source: UNESCO Institute for Statistics Database
1
MHRD, Government of India,
Statistics of Higher & Technical
Education 2009-10 (Provisional)
Indian Higher Education Sector Opportunities aplenty, growth unlimited 11
Quality
There are various dimensions of quality in education,
including content, mode of delivery, infrastructure and
facilities, employability, etc. Ensuring quality in higher
education is amongst the foremost challenges being
faced in India today, with few institutes having achieved
global recognition for excellence.
• Curriculum and Pedagogy: A key concern cited by
higher education institutes is the lack of autonomy
with respect to framing course curriculum resulting
in a course structure that is often outdated. The
curriculum is often not oriented to encourage
entrepreneurship and innovation among students.
Additionally, the adoption of new modes of delivery,
such as technology-enabled learning, has not yet
become widespread
• Infrastructure: Higher education institutes run by
the public sector suffer from poor physical facilities
and infrastructure. The higher education system also
suffers from misalignment of supply in the sense
that while there are courses in which the demand is
in excess of the available number of seats, there is
excess capacity in others
• Faculty: Faculty shortages and the inability of the state
educational system to attract and retain well-quali?ed
teachers have been posing challenges to quality
education for many years. The quality of teaching
is also often poor and there are constraints faced in
training the faculty
• Accreditation: As per the data provided by the NAAC,
as of June 2010, “not even 25% of the total higher
education institutions in the country were accredited.
And among those accredited, only 30% of the
universities and 45% of the colleges were found to be
of quality to be ranked at 'A' level”
2
• Industry Linkages: There are insuffcient levels of
meaningful industry participation in aspects like
curriculum development, research and faculty
exchange programmes. Placement services in
many universities are very limited resulting in a lack
of co-ordination between employment seeking
graduates and prospective employers who are looking
for suitably quali?ed candidates
• Employability: The Indian education system on the
whole is not aligned to the skill and manpower
needs of the market. Skills shortage across
sectors is accompanied by high levels of graduate
unemployment, highlighting the need to include
employment-linked modules in courses. In addition to
job-related skills, graduates are often reported to be
lacking adequate soft-skills such as communication
and inter-personal skills
• Research and Innovation: There is inadequate focus
on research in higher education institutes. The causes
include insuf?cient resources and facilities, as well as,
limited numbers of quality faculty to advice students
3
.
According to the data from 2009, enrolment for
Ph.D. / M.Phil. constitutes only 0.48% of enrolment in
higher education in India
4
Management and Governance
The regulatory environment governing higher education
in India has been the subject of much debate. In
particular, the envisioned role of the private sector needs
to be clearly de?ned, especially in wake of the need for
more ?nancial resources in higher education. The higher
education system also suffers from an over-centralized
structure.
• Regulatory environment: The regulatory environment
governing higher education in India is characterized
by uncertainty and conficts between multiple
regulatory authorities. The role of the private sector
in higher education is essential, particularly in the
context of a shortage of ?nancial resources for
this segment. However, as noted by the Working
Group for Higher Education in the 12th Five-Year
Plan (2012-17), “while almost all major committees
and policy documents have accepted the need for
increased involvement of private sector in higher
education, there is also lack of clarity on funding
pattern, incentives, and regulatory oversight”. There
also remains regulatory confusion relating to the role
that foreign higher education institutes can play in
the country. Some of the key regulatory hurdles have
been briefy explained below:
– Philanthropic nature: The “not for pro?t” tag
associated with the higher education sector has
been a major roadblock preventing private/foreign
investment. The higher education sector is capital
2
Compilation Based on the
Deliberations of the Working
Group for Higher Education
in the 12th Five-Year Plan
(2012-17) University Grants
Commission, Inclusive and
Qualitative Expansion of Higher
Education
3
Anitha Kurup and Jagdish
Arora, National Institute of
Advanced Studies, Trends in
Higher Education: Creation and
Analysis of a Database of PhDs
in India
4
Ministry of Human Resource
Development, Government
of India, Statistics of Higher &
Technical Education 2009-10
(Provisional)
12
intensive in nature with requirement under law for
procurement of minimum land, construction of
built-up infrastructure/libraries/hostels etc. It would
be very challenging for any private entrepreneur/
company to commit a huge investment without
any return, unless the goal is to ful?l corporate
social responsibility. The planning commission in
its approach paper to the 12th Five Year Plan had
suggested that given the aggressive GER target of
the government in the higher education sector,
the authorities must reconsider the “not for pro?t”
character. There are certain apprehensions that
permitting ‘for-pro?t’ institutions would result in
commercialisation leading to lack of quality etc
However the Government can address this issue
by ensuring adequate regulatory checks are put in
place to avoid any such situation
– FDI Anomaly: The Government has permitted
100% investment in higher education under the
FDI Policy; however, the regulations prescribed
by AICTE for setting up technical institutions
speci?cally prohibit direct or indirect investment.
Similar, issues are being faced for investment
in universities and professional institutions,
which permit only Society/Trust and Section 25
Companies as entity options
– Restrictions on fees and course curriculum: The
Government, through various committees, has
placed restrictions on fees, which can be charged
for various courses. The course curriculum
of certain technical programs, having close
industry linkages, is also being prescribed by the
Government. AICTE, for instance, prescribes model
curriculum/syllabus for MBA programs
– Tax concerns: Determination of “arm’s length”
pricing for service transactions between two Indian
related entities is challenging. In the recent past,
the Income Tax authorities have been maintaining
an aggressive stand, which has resulted in
signi?cant increase in number of litigations. Given
the “not for pro?t” tag, the private entrepreneurs
have to be extremely cautious in pricing
transactions between educational institution and
related private companies
– Lack of clarity under Foreign Education Bill, 2010:
Although the bill is presently pending in the
parliament, even in its present form, it does not
address certain key issues such as nature of entity
permitted, applicability of FCRA provisions, “not for
pro?t” character etc
• Financial resources – A shortage of fnancial resources
for higher education is amongst the key concerns in
this sector. According to the Planning Commission’s
Approach to the 12th Five Year Plan document,
“State universities and their af?liated colleges that
account for more than 90% of the enrolment suffer
from severe fund constraints and poor governance
leading to poor quality”. The paper notes that only
approximately 18% of all government education
spending or 1.12% of GDP is spent on higher
education, while the requirement is for these levels to
increase to 25% of the total education expenditure by
the Government and 1.5% of the GDP
• Structure of higher education - Management of
the Indian education faces challenges of over-
centralization, bureaucratic structures and lack of
accountability, transparency, and professionalism. As
a result of increase in number of af?liated colleges
and students, the burden of administrative functions
of universities has signi?cantly increased and the core
focus on academics and research is diluted
Indian Higher Education Sector Opportunities aplenty, growth unlimited 13
Opportunities for Private Sector
Investment
Public expenditure not enough to meet the
burgeoning requirements
The Government of India has set itself an aggressive
target of achieving 30% GER in Higher Education by
2020, which translates into doubling the GER in the next
8 years.
As per recent estimates by NUEPA, in order to achieve
this target an additional investment of Rs. 9.5 lakh
crore* (USD 190 bn ), which includes capital expenditure
and operating expenditure, has to be made in the next
8 years. To give a perspective, the total allocation to the
entire education sector under the 11th Five Year Plan
(2007-12) was Rs. 2.7 lakh crore (USD 55 bn) out of
which higher education’s share was only about 30%.
Therefore, given the limited support, which Government
can provide to this sector in terms of investment, the
private sector needs to play a much larger role.
Growing role of private sector
The private sector’s role in the higher education sector
has been growing at a rapid pace over the last decade
and needs to further expand at an accelerated rate in
order to achieve the GER target.
Current Status**
Central
Universities
7%
State
Universities
49%
Private
Universities
23%
Deemed
Universities
21%
Total Universities 610
Govt
Colleges
24%
Private
Colleges
76%
Total Colleges 33,023
Source: UGC website, UGC Annual Report 2010-11
**Please note that a number of universities conferred the “Deemed Universities” status are private and, therefore, the
share of private universities is much higher than 23% depicted above.
*Source: Indian Express article
“Doubling higher education
enrolment to meet target will
cost Rs. 9.5 lakh crore by 2020”
dated May 2012, UGC website,
UGC Annual Report 2010-11
14
Existing & Future Opportunities for Private &
Foreign Sector Participation
The number of people entering the Indian higher
education sector is growing at a signi?cant rate.
According to MHRD data, enrolments have increased
from 15.5 mn (GER of 12.4%) in 2006-07 to 17.3 mn
(GER of 15%) in 2009-10*. These fgures also refect an
increasing number of young working-age people who
continue in the education system instead of dropping
out. The number of people in the age bracket of 15-24
years enrolled in educational institutes grew from
approximately 30 mn in 2004-05 to over 60 mn in
2009-10*. These trends present a huge opportunity
for private & foreign sector players looking to provide
quality education and services in this sector.
Opportunities for Private & Foreign Sector
Twinning
arrangements/
academic and ?nancial
collaborations with
Indian institutions
Establishing formal
educational institutes
under PPP mode
and expanding the
existing ones
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
Future opportunities
Current opportunities
Source: Our Analysis
In case of PPP, the Government is actively considering
the following models**:
• Basic Infrastructure Model: Here, the private sector
invests in infrastructure. The government manages
the operations of the institution, making annualized
payments to the private investor
• Outsourcing Model: In this case, the Private sector
invests in infrastructure, manages operations in lieu of
payment from the Government for speci?ed services.
• Equity/Hybrid Model: Here the investment in
infrastructure is shared between government and
private sector while operation and management is
vested with the private sector
• Reverse Outsourcing Model: As per this model,
Government invests in infrastructure and the private
sector takes the responsibility of operation and
management
Source:
*An approach to 12th Five Year
Plan, October 2011 , Selected
Educational Statistics 2006-07;
Statistics of Higher Technical
Education 2009-10, MHRD,
GoI.**UGC Report on “Inclusive
and Qualitative expansion of
Higher Education”
Indian Higher Education Sector Opportunities aplenty, growth unlimited 15
Way Forward
SWOT Analysis
Despite the huge potential in the higher education sector, not everyone has been able to achieve success. The
challenges/threats, which the private sector players face in India are signi?cant and therefore, approaching the
market with a well thought-out strategy is advisable.
Indian Higher Education Sector
Source: Consolidated Working Group report for XII Five Year Plan on Higher Education, Administration, Deloitte Analysis
Strengths
• Few globally renowned educational institutions
• Huge demand – estimated 150 mn population in
18-23 age group
• Growing middle class with increasing incomes
• Growing economy with numerous employment
opportunities
• Huge demand for Indian students in overseas
markets
Opportunities
• 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 Paci?c region
• Low focus on R&D
Weaknesses
• Lack of infrastructure
• Shortage of trained faculty to meet the increased
demand
• Highly complex and unclear regulatory framework
at Central & State level
• Regional imbalances
• “Not for pro?t” tag in formal education
Threats
• High time lag in introduction of reforms due to
various reasons
• Deterioration in quality of education specially in
private sector due to lack of availability of trained
faculty
• Over regulation – Control over course curriculum,
entrance tests, fees etc
16
Glossary
AICTE All India Council of Technical Education
BCI Bar Council of India
CapEx Capital Expenditure
DCI Dental Council of India
DEC Distance Education Council
DGET Directorate General of Employment & Training
DISE District Information System for Education
DTTIPL Deloitte Touche Tohmatsu India Private Limited
FCRA Foreign Contribution Regulation Act, 1976
FDI Foreign Direct Investment
FEI Foreign Educational Institutions
FEP Foreign Education Provider
GDP Gross Domestic Product
GER Gross Enrolment Ratio
GOI Government of India
HE Higher Education
HEIs Higher Education Institutes
IGNOU Indira Gandhi National Global University
IIM Indian Institute of Management
IISc Indian Institute of Science
IIT Indian Institute of Technology
INC Indian Nursing Council
ITI Industrial Training Institutes
ITC Industrial Training Centres
MCI Medical Council of India
MBA Master of Business Administration
MHRD Ministry of Human Resource Development
MIS Management Information System
M.Phil. Master of Philosophy
NAAC National Assessment and Accreditation Council
NBA National Board of Accreditation
NCHER National Commission for Higher Education &
Research
NUEPA National University of Educational Planning and
Administration
MCA Master of Computer Application
OpEx Open and Distance Learning
Ph.D. Doctor of Philosophy
PPP Public Private Partnership
SC Scheduled Caste
ST Scheduled Tribe
UGC University Grants Commission
UNESCO United Nations Educational, Scienti?c and
Cultural Organization
Indian Higher Education Sector Opportunities aplenty, growth unlimited 17
Our Service Offerings
In India, Deloitte has created a specialized service and practice for our education clients. Over the course of years
and numerous engagements, our ?rm’s educational industry specialists have developed knowledge of and earned a
reputation for a thorough understanding of tax & regulatory environment and business issues impacting clients in this
industry.
Partnering for Success
Entry Phase Implementation Phase Management Phase Post Entry
• Location Strategy
• Market Assessment
• Financial / Project
Feasibility
• Business Model
• Partner Selection
– Financial
– Technical
• Public Private Partnership
• Transaction Support
• Fund Raising
• Valuation / Due Diligence
• Tax effcient and
regulatory compliant
structuring
• Choosing optimal entity
for Indian operations
• Review of collaboration
agreements from a
tax and regulatory
perspective
• Registration of entities
• Obtaining clarifcation
on regulations from
respective regulators
• Assistance in obtaining
tax and regulatory
registrations/ approvals
• Marketing and
Positioning Strategy
• Corporate Governance
• Human Capital Advisory
• Systems and Processes
• Monitoring and
Evaluation
• Tax & Regulatory
compliance
• Tax and Regulatory
Services
• Financial Reporting
• Diversifcation / Growth
Strategy
• Technology Services
– Data security, mining
and MIS
– Content management
and archiving system
• ERP services
18
Contacts
Ahmedabad
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Vidhyapith
Ahmedabad 380 014
Phone: +91 (079) 6607 3100
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Deloitte Centre, Anchorage II,
100/2, Richmond Road,
Bangalore 560025
Phone: +91 (080) 6627 6000
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Alkapuri,
Baroda 390007
Phone : +91 (0265) 2333 776
Chennai
Ol No. 37th, New No: 52, 7th Floor,
ASV N Ramana Towers,
Venkatnarayana Road,
T Nbagar, Chennai 600 017
Phone: +91 (044) 66885000
Coimbatore
Shanmuga Mandaram, 41 Race Course
Coimbatore 641018
Phone: +91 (0422) 24392801
Delhi/NCR
7th Floor, Building 10 Tower B,
DLF Cyber Ciity Complex,
DLF City Phase II,
Gurgaon 122002
Phone: +91 (0124) 679-2000
Goa
5th foor, Suyash Complex,
Panaji, Goa 403 001
Phone: +91 (0832) 2431821
Jamshedpur
8-B ,Circuit House Area, North-East
Road No.11,
Jamshedpur 831 001
Phone : +91 (0657) 2225883
Kochi
First Floor, Wilmont Park,
Business Centre
Warriam Road, Kochi 682 016
Phone: +91 (0484) 2354305
Kolkata
1st foor, Block–EP & GP, Sector–V,
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Kolkata 700 091
Phone : +91 (033) 6612 1000
Mumbai
India Bulls Financial Centre
Tower 3, 27th-32nd Floor,
Senapati Bapat Marg, Elphinstone Road (W),
Mumbai 400013
Phone: + 91 (022) 6185 4100
Pune
706, B - Wing, 7th foor,
ICC Trade Tower
Senapati Bapat Marg,
Pune 411 016
Phone : +91 (020) 6624 4600
Hyderabad
1-8-384 & 385,
3rd Floor, Gora Grand,
S.P. Road, Begumpet,
Hyderabad 500 003
Phone : +91 (040) 40312600
Indian Higher Education Sector Opportunities aplenty, growth unlimited 19
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doc_658644837.pdf
The Indian education sector has been recognized as a "Sunrise Sector" for investment in the recent past. This recognition stems from the fact that the sector offers a huge untapped market in regulated and non-regulated segments due to low literacy rate, high concentration in urban areas and growing per capita income.
For Private circulation only
October 2012
www.deloitte.com/in
Indian Higher Education Sector
Opportunities aplenty, growth
unlimited!
2
Contents
Message from the Education Sector Team 3
Indian Education Sector: An Overview 4
Regulatory Framework 8
Challenges facing growth 10
Opportunities for Private Sector Investment 13
Way Forward 15
Glossary 16
Our Service Offerings 17
Indian Higher Education Sector Opportunities aplenty, growth unlimited 3
Message from the
Education Sector Team
The Indian education sector has been recognized as a
“Sunrise Sector” for investment in the recent past. This
recognition stems from the fact that the sector offers a
huge untapped market in regulated and non-regulated
segments due to low literacy rate, high concentration
in urban areas and growing per capita income. The
Government has also been proactively playing the role
of facilitator in this sector.
The higher education sector, owing to its huge
potential, holds very promising prospects. With an
estimated 150 mn people in the age group of 18-23
years, the sector offers one of the most attractive yet
highly complex market for the private/foreign players.
Despite some inherent concerns with respect to choice
of entity, not for pro?t character and foreign investment
in formal education space; the industry does offer
various innovative business opportunities, which can be
explored for establishing a presence.
The Government of India has recently reignited its
reforms agenda by opening up certain sensitive sectors
to foreign investment such as retail and civil aviation,
which should ideally result in increased economic
activity and employment generation. In order to
capitalize on this huge employment opportunity, we
believe the Government should take such a positive
step in the higher education sector also by reducing the
complexities governing foreign investment. This should
also help the Government in achieving its aggressive
goals of access, equity and excellence in higher
education.
The Planning Commission in its approach paper to
12th Five Year Plan had suggested that the current
“not-for-pro?t” approach in the education sector should
be re-examined in a pragmatic manner so as to ensure
quality without losing focus on equity – we believe
that the Government should seriously consider this
suggestion to attract private/foreign investment in this
sector.
This Report provides an overview of the higher
education sector in terms of sub-segments, market
size and latest trends, regulatory framework, sectoral
challenges and present/future opportunities for
investment. The primary ?nding of our analysis is that
the opportunity for investment and capital appreciation
being offered by the Indian higher education sector is
unparalleled. However, one needs to be wary about
the various complexities in terms of structuring of
investment, market offering, entity options and tax
implications.
Happy Reading!
Deloitte Education Sector Team
[email protected]
4
Indian Education Sector
An Overview
India, today, is considered as a talent pool of the world,
having quali?ed and educated human resources in
abundance. This has been one of the primary reasons
for transformation of India into one of the fastest
growing economies in the world since liberalization in
the 1990s. As the economist Clark Kerr observed, “On a
global scale, wealth and prosperity have become more
dependent on the access to knowledge than the access
to natural resources.”
The importance of education in India was recognized by
the founding fathers of the country and the subsequent
governments, and as a result considerable importance
has been given to literacy, school enrolment, institutions
of higher education and technical education, over the
decades ever since independence.
India’s aspirations to establish a knowledge society
in the context of increasing globalization, is based on
the assumption that higher and technical education
essentially empowers people with the requisite
competitive skills and knowledge. It has been realized
that it is the quality of education that prepares one for
all pursuits of life and in the absence of an acceptable
level of quality, higher education becomes a mere
formalism devoid of any purpose or substance. As a
result, from around the turn of the century, increasing
attention has also been paid to quality and excellence in
higher education.
Post-independence India has witnessed an above
average growth in the number of higher educational
institutions vis-à-vis its population. While there were
just about 20 Universities and 500 Colleges at the time
of independence, today these numbers have grown
exponentially. Please ?nd below a snapshot of the
current higher education sector in India:
• India has a total of 610 universities. 43 central
universities, 299 state universities, 140 private
Universities, 128 deemed universities and 5 institutions
established through state legislation, 30 Institutions of
National Importance
• There are 45 technical institutes, 13 management
institutes, 4 information technology institutes, 6
science and research institutes and 3 planning and
architecture institutes
• Currently, the Government spends around 3.8% of its
GDP on education
• Less than 1% of the $38 bn of the Government spend
on education was towards Capex (2008-09)
• According to the 2011 census, the total literacy rate
in India is 74.04% compared to the world average of
83.4% (2008)
• The female literacy rate is 65.46 % and male literacy
rate is 82.14 %
• FDI infows in the education sector during May 2012
stood at $31.22 mn
Source: UGC Annual Report
2010-2011- DGET; Ministry of
Human Resource Development
(HRD) Annual Report 2011-
2012; IDFC SSKI 2010; DISE
2009-10 Flash Statistics; MHRD
Statistics: Higher & Technical
Education 2010; Planning
Commission: Midterm Review
of XI Plan
Indian Higher Education Sector Opportunities aplenty, growth unlimited 5
Industry Growth & Size
The Indian Education sector is characterized by a unique
set of attributes:-
• Huge market size both in terms of number of students
and annual revenues
• A potential growth rate of 16% is expected over the
next 5 years
• Signifcant activity in terms of new foreign entrants
and participation is expected to be witnessed in the
years ahead
• Accreditation is still not mandatory, however, reforms
are in the pipeline to address this issue
The Indian education space is evolving, which has led
to the emergence of new niche sectors like vocational
training, ?nishing schools, child-skill enhancement
and e-learning among others. Growth is driven by the
increasing propensity of the middle class to spend on
education and more aggressive initiatives by private
entrepreneurs.
Higher Education in India: Current State of Play
India possesses a highly developed higher education
system, which offers the facility of education and
training in almost all aspects of human creativity
and intellectual endeavors like: arts and humanities;
natural, mathematical and social sciences; engineering;
medicine; dentistry; agriculture; education; law;
commerce and management; music and performing
arts; national and foreign languages; culture;
communications etc. The institutional framework
consists of Universities established by an Act of
Parliament (Central Universities) or of a State Legislature
(State Universities), Deemed Universities (institutions
which have been accorded the status of a university
with authority to award their own degrees through
central government noti?cation), Institutes of National
Importance (prestigious institutions awarded the said
status by Parliament), Institutions established State
Legislative Act and colleges affliated to the University
(both government-aided and unaided)
There are three principal levels of quali?cation within the
higher education system in the country:
I. Graduation level
II. Post-graduation level
III.Doctoral degree.
Besides these three, there is another quali?cation called
a Diploma. It is available at the undergraduate and
postgraduate level. At the undergraduate level, the
duration of the course varies between one to three
years; postgraduate diplomas are normally awarded
after one year course, though some diplomas are
awarded after two years of study.
Sources: UGC; UNESCO Global Education Digest 2010; MHRD
Annual Report 2009-10; US Department of Education: National
Center of Education Statistics; CSFB Report; CLSA Report; CLSA Asia-
Paci?c Markets, Department of education
6
Structure of Indian Higher Education Sector
In our view, the higher education sector can be divided into 4 broad categories as listed below:-
Formal Education
Technical &
Professional Education
Skill Development Vocational Training
Composition • Institutes of national
importance
• Universities
• Colleges
• Polytechnics
• Engineering colleges
• Management Schools
• Law, Medical, Pharmacy
etc.
• ITIs
• ITCs
• Private Skill Development
Centers
• Finishing schools
• English training
• Air hostess Academies
Key Regulators • UGC
• State Government
• IGNOU
• AICTE
• Bar Council of India
• Medical Council of India
• ICAI
• DGET incase of ITIs/ITCs
• Unregulated for others
• No regulator
Accreditation bodies • NAAC • NBA • None • None
Key Players • IITs/IIMs/IISc
• Amity University
• SRCC
• MDI Gurgaon
• K.J. Somaiya College of
Engineering
• ITIs/ITCs
• Private centers
• VETA
• Frankfnn
Note: This report would focus only on formal education, technical & professional education. Sector Size & Growth ($ bn).
Size of Indian Higher Education Sector
The population of India has begun to appreciate
the value of education in a global economy and has
demonstrated an increased willingness to pay for quality
education and more students are now opting for higher
education after school.
India has the third largest higher education system in
the world in terms of enrolments, after China and the
US. The number of students enrolled in the universities
and colleges (formal system) has been reported to
be 16 mn in academic year 2010-11*. This does not
include enrolment in higher education offered through
ODL. India is acknowledged to have the largest higher
education systems in the world in terms of number of
institutes. The university and higher education system
comprises 610 universities and in addition, there are
33,023 colleges. An estimated $13bn is spent outside
the country. Higher education is the second largest
opportunity in the Indian education sector.
Higher Education Sector Size & Growth ($ bn)
20
22.4
31.47
0
20
40
2008 2009 2012E
C
A
G
R
1
2
%
Source: Netscribes, IDFC SSKI, Our Analysis
Indian Higher Education Sector Opportunities aplenty, growth unlimited 7
There has been phenomenal growth of higher
education in India since Independence. There were
only 20 universities and 500 colleges at the time of
independence. These numbers have increased by 26
times in the case of Universities and 66 times in the case
of colleges. Some of the other factors acting as growth
drivers to the Higher education sector are:-
• A booming economy and growing middle class
• Low GER in higher education (~15%) – the target GER
of 30% by 2020 would mean 24 mn new enrollments
• Increasing share of the services sector further
emphasizes the role of education in developing
manpower to global standards
• Several reforms by the government including the
Education Bill are on the anvil to give a push to the
education sector
• Foreign investment likely to come in with the passing
of the Education Reforms Bill
*Source: Netscribes Industry Reports (Preschool Education in India
2009; IDFC - SSKI INDIA – Research Report January 2009; MHRD,
Annual Report, 2010-11
Recent trends in the Higher Education sector
Over the past few decades, the global economy
has shifted from being manufacturing-centric to a
knowledge-driven one and as countries move up the
ladder of development, the contributions of hi-tech
manufacturing and high value-added services to the
GDP increases. Success in leveraging knowledge and
innovation is only possible with a sound infrastructure
of higher education. A successful education policy forms
the foundation of all ?elds of national development
including political, social, economic, technical, scienti?c,
and environmental. Thus, the higher the quality of
university education in a country, the more prosperous
and competitive are the people.
• Higher Education in India is decentralized under the
DHE with separate councils (e.g. AICTE, MCI etc.)
responsible for the regulation of different streams
• The UGC has allocated a general budget of Rs.5,244
crores for the year 2011-2012 to be distributed under
eight broad categories*
• Private institutions in India are focusing more on
professional courses such as engineering, medical and
MBA
• GER has increased to 15% in 2009-2010 from 11.5%
in 2005-2006. GER for 2010-2011 has been estimated
at 16%*
• Faculty-wise the fgure of enrolment of higher
education for the year 2006-2007 & 2010-2011
has been increased in certain streams. These include
arts, science, commerce/management, medicine and
agriculture. It has increased by 17.88%, 31.68%,
38.89%, 77.82% and 38.33% respectively*
• Estimated population in 18-23 age group: 150 mn
with GER of around 15%
12th 5 year plan and scope for Public Private
Partnership
The 12th Fiver Year Plan focuses on Expansion, inclusion
and quality to achieve the national goals in education.
• During the 12th-Plan period, a target enrollment of 10
mn additional seats equivalent to 3 mn seats for each
age cohort is aimed at in the higher education system.
This would signi?cantly increase the GER bringing it
broadly in line with the global average
• There is unanimous agreement of the fact that the
private sector needs to be involved to complement
and supplement the efforts of the Government
In the 12th plan, the Planning Commission’s focus is
on instilling “inclusive growth” in making headway.
The plan is expected to be one that encourages the
development of India’s education sector through
government spending.
*Source: MHRD Annual Report 2011-2012; An approach to 12th
Five Year Plan, October 2011; Netscribes; IDFC SSKI; Our Analysis.
The emergence of India as a service-based, knowledge-
driven economy has put the spot light on human capital.
Higher education is essential to build a workforce
capable of underpinning a modern, competitive
economy. The process of broadening access, making
higher education inclusive, and promoting excellence
initiated during the 11th Plan must be consolidated
and expanded further during the 12th Plan. On the
whole, with new regulatory arrangements and focused
action in key areas, particularly expansion and quality
improvement, a robust higher education system must be
built such that it would sustain rapid economic growth,
promote international competitiveness, while at the
same time meet the rising expectations of the young
enterprising Indians.
8
Regulatory Framework
Multiple regulators and onerous regulations
Education under the Indian Constitution is on the concurrent list, which makes it both a Central and a State subject.
Over the years, lack of communication and co-ordination between the two spheres of authority has resulted in
creation of multiple regulators in this sector. The complexity is further compounded due to a number of onerous
regulations governing investment in this sector.
Regulatory Environment of Higher Education Sector
Note:
* In addition to the education sector regulations mentioned above, there are a few other central
regulations applicable across the higher education sector such as IGNOU Act, FDI, FCRA, Indian
Companies Act (Section 25 Company), Indian Trusts Act, Societies Registration Act, Income Tax Act etc.
** Similarly, in case of States, some local regulations are applicable across this sector such as State Public
Trusts Act, State Societies Registration Acts etc.
Source: Our Analysis
Higher Education
Consists of
Accreditation Agencies
(Not Mandatory)
Universities/Colleges/
Polytechnics
National Assessment
and Accreditation
Council
National Board of
Accreditation
Respective regulatory
bodies
Engineering/Mgmt./
MCA/Pharma/Arch
Law/Medical/Dental/
Nursing
Technical Education Professional
Education
Central Regulators*
Key Regulations*
State Regulators**
Key Regulations**
MHRD/UGC
UGC Act, 1956/
UGC Private Univ
regulations
Dept. of Higher
Education/State level
committees
Private University Act/
Rules and Regulations
MHRD/AICTE
AICTE Act, 1987/
AICTE Regulations/
Approval Handbook
Dept. of Technical
Education/State level
committees
Noti?cations/
Guidelines/ Orders
BCI/MCI/DCI/INC
Respective Acts &
Regulations
Respective State
Dept./ State level
committees
Noti?cations/
Guidelines/ Orders
Indian Higher Education Sector Opportunities aplenty, growth unlimited 9
Choice of Entity
Formal education in India is considered as a “not for
pro?t” activity by the Government and the courts.
Therefore, the choice of entity for setting up a formal
education institution has been limited by law to Society,
Trust and Section 25 Company. All of these entities
operating in formal education sector are restricted under
law to declare dividends/income to the promoters/
bene?ciary. It is important to point out that Planning
Commission in its approach paper to the 12th Five Year
Plan had suggested re-examining of the “not for pro?t”
tag in formal education to attract investment from the
private sector.
Reforms in the pipeline
In the last 3 years, the education sector has witnessed
a number of bills addressing key industry issues such as
opening the sector to foreign universities, over-arching
regulator, tribunals and unfair trade practices, among
others, being tabled in the parliament. Some of these
bills have been revised and re-tabled in the parliament
based on the recommendations of special committees
constituted by the Government. Hopefully, we believe
that these bills will be approved by the parliament based
on consensus approach.
NCHER
UGC/AICTE/
Other Statutory
Authorities
Indian & Foreign
Institutions
National
Accreditation
Regulation
Authority
Accrediting
Agencies
State Educational
Tribunal
National
Educational
Tribunal
Dispute Settlement
(including related to unfair
practices)
Appeals
Ratings
Proposed Structures
Existing Structures
Source: Our Analysis
Key reforms in the of?ng include:
• NCHER as over-arching regulator to subsume both UGC and AICTE
• Accreditation to be made mandatory for every formal education institution. NAAC to register and monitor
accreditation authorities
• Dispute settlement mechanisms put in place to expedite adjudication of disputes in Education Sector
• Universities for Research & Innovation Bill 2012, which envisages setting up of universities of excellence is pending
in the parliament. Greater autonomy to be provided to such institutions.
10
Challenges facing growth
Access and Equity
While India has made signi?cant progress in ensuring
access to primary education, the proportion of students
who remain in the education system until higher
education is considerably less. Ensuring equitable access
to higher education is also a challenge with disparities
seen across gender, regions and socio-economic groups.
• Enrolment: In terms of GER in higher education, India
with a GER of about 15% lags behind to a great
extent as compared to the developed world, as well
as, other developing countries, as illustrated in the
?gure below. With the rising levels of enrolments
in school education, the supply of higher education
institutes is insuf?cient to meet the growing demand
in the country.
• Equity: According to data for 2009-10
1
, while the
GER in higher education in India was 17.1 for males,
it was only 12.7 for females. Additionally, while
the overall GER for the population was 15%, the
corresponding ?gures for SCs and STs were 11.1 and
10.3, respectively. There are regional variations too
with Uttar Pradesh having a GER of 10.9 while Delhi
has a GER of 47.9. These fgures refect some of the
signi?cant imbalances within the higher education
system.
89
76
59
55
40
24
15
0
10
20
30
40
50
60
70
80
90
100
US Russia UK France Malaysia China India
GER in Higher Education (2009) - International Comparison
Source: UNESCO Institute for Statistics Database
1
MHRD, Government of India,
Statistics of Higher & Technical
Education 2009-10 (Provisional)
Indian Higher Education Sector Opportunities aplenty, growth unlimited 11
Quality
There are various dimensions of quality in education,
including content, mode of delivery, infrastructure and
facilities, employability, etc. Ensuring quality in higher
education is amongst the foremost challenges being
faced in India today, with few institutes having achieved
global recognition for excellence.
• Curriculum and Pedagogy: A key concern cited by
higher education institutes is the lack of autonomy
with respect to framing course curriculum resulting
in a course structure that is often outdated. The
curriculum is often not oriented to encourage
entrepreneurship and innovation among students.
Additionally, the adoption of new modes of delivery,
such as technology-enabled learning, has not yet
become widespread
• Infrastructure: Higher education institutes run by
the public sector suffer from poor physical facilities
and infrastructure. The higher education system also
suffers from misalignment of supply in the sense
that while there are courses in which the demand is
in excess of the available number of seats, there is
excess capacity in others
• Faculty: Faculty shortages and the inability of the state
educational system to attract and retain well-quali?ed
teachers have been posing challenges to quality
education for many years. The quality of teaching
is also often poor and there are constraints faced in
training the faculty
• Accreditation: As per the data provided by the NAAC,
as of June 2010, “not even 25% of the total higher
education institutions in the country were accredited.
And among those accredited, only 30% of the
universities and 45% of the colleges were found to be
of quality to be ranked at 'A' level”
2
• Industry Linkages: There are insuffcient levels of
meaningful industry participation in aspects like
curriculum development, research and faculty
exchange programmes. Placement services in
many universities are very limited resulting in a lack
of co-ordination between employment seeking
graduates and prospective employers who are looking
for suitably quali?ed candidates
• Employability: The Indian education system on the
whole is not aligned to the skill and manpower
needs of the market. Skills shortage across
sectors is accompanied by high levels of graduate
unemployment, highlighting the need to include
employment-linked modules in courses. In addition to
job-related skills, graduates are often reported to be
lacking adequate soft-skills such as communication
and inter-personal skills
• Research and Innovation: There is inadequate focus
on research in higher education institutes. The causes
include insuf?cient resources and facilities, as well as,
limited numbers of quality faculty to advice students
3
.
According to the data from 2009, enrolment for
Ph.D. / M.Phil. constitutes only 0.48% of enrolment in
higher education in India
4
Management and Governance
The regulatory environment governing higher education
in India has been the subject of much debate. In
particular, the envisioned role of the private sector needs
to be clearly de?ned, especially in wake of the need for
more ?nancial resources in higher education. The higher
education system also suffers from an over-centralized
structure.
• Regulatory environment: The regulatory environment
governing higher education in India is characterized
by uncertainty and conficts between multiple
regulatory authorities. The role of the private sector
in higher education is essential, particularly in the
context of a shortage of ?nancial resources for
this segment. However, as noted by the Working
Group for Higher Education in the 12th Five-Year
Plan (2012-17), “while almost all major committees
and policy documents have accepted the need for
increased involvement of private sector in higher
education, there is also lack of clarity on funding
pattern, incentives, and regulatory oversight”. There
also remains regulatory confusion relating to the role
that foreign higher education institutes can play in
the country. Some of the key regulatory hurdles have
been briefy explained below:
– Philanthropic nature: The “not for pro?t” tag
associated with the higher education sector has
been a major roadblock preventing private/foreign
investment. The higher education sector is capital
2
Compilation Based on the
Deliberations of the Working
Group for Higher Education
in the 12th Five-Year Plan
(2012-17) University Grants
Commission, Inclusive and
Qualitative Expansion of Higher
Education
3
Anitha Kurup and Jagdish
Arora, National Institute of
Advanced Studies, Trends in
Higher Education: Creation and
Analysis of a Database of PhDs
in India
4
Ministry of Human Resource
Development, Government
of India, Statistics of Higher &
Technical Education 2009-10
(Provisional)
12
intensive in nature with requirement under law for
procurement of minimum land, construction of
built-up infrastructure/libraries/hostels etc. It would
be very challenging for any private entrepreneur/
company to commit a huge investment without
any return, unless the goal is to ful?l corporate
social responsibility. The planning commission in
its approach paper to the 12th Five Year Plan had
suggested that given the aggressive GER target of
the government in the higher education sector,
the authorities must reconsider the “not for pro?t”
character. There are certain apprehensions that
permitting ‘for-pro?t’ institutions would result in
commercialisation leading to lack of quality etc
However the Government can address this issue
by ensuring adequate regulatory checks are put in
place to avoid any such situation
– FDI Anomaly: The Government has permitted
100% investment in higher education under the
FDI Policy; however, the regulations prescribed
by AICTE for setting up technical institutions
speci?cally prohibit direct or indirect investment.
Similar, issues are being faced for investment
in universities and professional institutions,
which permit only Society/Trust and Section 25
Companies as entity options
– Restrictions on fees and course curriculum: The
Government, through various committees, has
placed restrictions on fees, which can be charged
for various courses. The course curriculum
of certain technical programs, having close
industry linkages, is also being prescribed by the
Government. AICTE, for instance, prescribes model
curriculum/syllabus for MBA programs
– Tax concerns: Determination of “arm’s length”
pricing for service transactions between two Indian
related entities is challenging. In the recent past,
the Income Tax authorities have been maintaining
an aggressive stand, which has resulted in
signi?cant increase in number of litigations. Given
the “not for pro?t” tag, the private entrepreneurs
have to be extremely cautious in pricing
transactions between educational institution and
related private companies
– Lack of clarity under Foreign Education Bill, 2010:
Although the bill is presently pending in the
parliament, even in its present form, it does not
address certain key issues such as nature of entity
permitted, applicability of FCRA provisions, “not for
pro?t” character etc
• Financial resources – A shortage of fnancial resources
for higher education is amongst the key concerns in
this sector. According to the Planning Commission’s
Approach to the 12th Five Year Plan document,
“State universities and their af?liated colleges that
account for more than 90% of the enrolment suffer
from severe fund constraints and poor governance
leading to poor quality”. The paper notes that only
approximately 18% of all government education
spending or 1.12% of GDP is spent on higher
education, while the requirement is for these levels to
increase to 25% of the total education expenditure by
the Government and 1.5% of the GDP
• Structure of higher education - Management of
the Indian education faces challenges of over-
centralization, bureaucratic structures and lack of
accountability, transparency, and professionalism. As
a result of increase in number of af?liated colleges
and students, the burden of administrative functions
of universities has signi?cantly increased and the core
focus on academics and research is diluted
Indian Higher Education Sector Opportunities aplenty, growth unlimited 13
Opportunities for Private Sector
Investment
Public expenditure not enough to meet the
burgeoning requirements
The Government of India has set itself an aggressive
target of achieving 30% GER in Higher Education by
2020, which translates into doubling the GER in the next
8 years.
As per recent estimates by NUEPA, in order to achieve
this target an additional investment of Rs. 9.5 lakh
crore* (USD 190 bn ), which includes capital expenditure
and operating expenditure, has to be made in the next
8 years. To give a perspective, the total allocation to the
entire education sector under the 11th Five Year Plan
(2007-12) was Rs. 2.7 lakh crore (USD 55 bn) out of
which higher education’s share was only about 30%.
Therefore, given the limited support, which Government
can provide to this sector in terms of investment, the
private sector needs to play a much larger role.
Growing role of private sector
The private sector’s role in the higher education sector
has been growing at a rapid pace over the last decade
and needs to further expand at an accelerated rate in
order to achieve the GER target.
Current Status**
Central
Universities
7%
State
Universities
49%
Private
Universities
23%
Deemed
Universities
21%
Total Universities 610
Govt
Colleges
24%
Private
Colleges
76%
Total Colleges 33,023
Source: UGC website, UGC Annual Report 2010-11
**Please note that a number of universities conferred the “Deemed Universities” status are private and, therefore, the
share of private universities is much higher than 23% depicted above.
*Source: Indian Express article
“Doubling higher education
enrolment to meet target will
cost Rs. 9.5 lakh crore by 2020”
dated May 2012, UGC website,
UGC Annual Report 2010-11
14
Existing & Future Opportunities for Private &
Foreign Sector Participation
The number of people entering the Indian higher
education sector is growing at a signi?cant rate.
According to MHRD data, enrolments have increased
from 15.5 mn (GER of 12.4%) in 2006-07 to 17.3 mn
(GER of 15%) in 2009-10*. These fgures also refect an
increasing number of young working-age people who
continue in the education system instead of dropping
out. The number of people in the age bracket of 15-24
years enrolled in educational institutes grew from
approximately 30 mn in 2004-05 to over 60 mn in
2009-10*. These trends present a huge opportunity
for private & foreign sector players looking to provide
quality education and services in this sector.
Opportunities for Private & Foreign Sector
Twinning
arrangements/
academic and ?nancial
collaborations with
Indian institutions
Establishing formal
educational institutes
under PPP mode
and expanding the
existing ones
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
Future opportunities
Current opportunities
Source: Our Analysis
In case of PPP, the Government is actively considering
the following models**:
• Basic Infrastructure Model: Here, the private sector
invests in infrastructure. The government manages
the operations of the institution, making annualized
payments to the private investor
• Outsourcing Model: In this case, the Private sector
invests in infrastructure, manages operations in lieu of
payment from the Government for speci?ed services.
• Equity/Hybrid Model: Here the investment in
infrastructure is shared between government and
private sector while operation and management is
vested with the private sector
• Reverse Outsourcing Model: As per this model,
Government invests in infrastructure and the private
sector takes the responsibility of operation and
management
Source:
*An approach to 12th Five Year
Plan, October 2011 , Selected
Educational Statistics 2006-07;
Statistics of Higher Technical
Education 2009-10, MHRD,
GoI.**UGC Report on “Inclusive
and Qualitative expansion of
Higher Education”
Indian Higher Education Sector Opportunities aplenty, growth unlimited 15
Way Forward
SWOT Analysis
Despite the huge potential in the higher education sector, not everyone has been able to achieve success. The
challenges/threats, which the private sector players face in India are signi?cant and therefore, approaching the
market with a well thought-out strategy is advisable.
Indian Higher Education Sector
Source: Consolidated Working Group report for XII Five Year Plan on Higher Education, Administration, Deloitte Analysis
Strengths
• Few globally renowned educational institutions
• Huge demand – estimated 150 mn population in
18-23 age group
• Growing middle class with increasing incomes
• Growing economy with numerous employment
opportunities
• Huge demand for Indian students in overseas
markets
Opportunities
• 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 Paci?c region
• Low focus on R&D
Weaknesses
• Lack of infrastructure
• Shortage of trained faculty to meet the increased
demand
• Highly complex and unclear regulatory framework
at Central & State level
• Regional imbalances
• “Not for pro?t” tag in formal education
Threats
• High time lag in introduction of reforms due to
various reasons
• Deterioration in quality of education specially in
private sector due to lack of availability of trained
faculty
• Over regulation – Control over course curriculum,
entrance tests, fees etc
16
Glossary
AICTE All India Council of Technical Education
BCI Bar Council of India
CapEx Capital Expenditure
DCI Dental Council of India
DEC Distance Education Council
DGET Directorate General of Employment & Training
DISE District Information System for Education
DTTIPL Deloitte Touche Tohmatsu India Private Limited
FCRA Foreign Contribution Regulation Act, 1976
FDI Foreign Direct Investment
FEI Foreign Educational Institutions
FEP Foreign Education Provider
GDP Gross Domestic Product
GER Gross Enrolment Ratio
GOI Government of India
HE Higher Education
HEIs Higher Education Institutes
IGNOU Indira Gandhi National Global University
IIM Indian Institute of Management
IISc Indian Institute of Science
IIT Indian Institute of Technology
INC Indian Nursing Council
ITI Industrial Training Institutes
ITC Industrial Training Centres
MCI Medical Council of India
MBA Master of Business Administration
MHRD Ministry of Human Resource Development
MIS Management Information System
M.Phil. Master of Philosophy
NAAC National Assessment and Accreditation Council
NBA National Board of Accreditation
NCHER National Commission for Higher Education &
Research
NUEPA National University of Educational Planning and
Administration
MCA Master of Computer Application
OpEx Open and Distance Learning
Ph.D. Doctor of Philosophy
PPP Public Private Partnership
SC Scheduled Caste
ST Scheduled Tribe
UGC University Grants Commission
UNESCO United Nations Educational, Scienti?c and
Cultural Organization
Indian Higher Education Sector Opportunities aplenty, growth unlimited 17
Our Service Offerings
In India, Deloitte has created a specialized service and practice for our education clients. Over the course of years
and numerous engagements, our ?rm’s educational industry specialists have developed knowledge of and earned a
reputation for a thorough understanding of tax & regulatory environment and business issues impacting clients in this
industry.
Partnering for Success
Entry Phase Implementation Phase Management Phase Post Entry
• Location Strategy
• Market Assessment
• Financial / Project
Feasibility
• Business Model
• Partner Selection
– Financial
– Technical
• Public Private Partnership
• Transaction Support
• Fund Raising
• Valuation / Due Diligence
• Tax effcient and
regulatory compliant
structuring
• Choosing optimal entity
for Indian operations
• Review of collaboration
agreements from a
tax and regulatory
perspective
• Registration of entities
• Obtaining clarifcation
on regulations from
respective regulators
• Assistance in obtaining
tax and regulatory
registrations/ approvals
• Marketing and
Positioning Strategy
• Corporate Governance
• Human Capital Advisory
• Systems and Processes
• Monitoring and
Evaluation
• Tax & Regulatory
compliance
• Tax and Regulatory
Services
• Financial Reporting
• Diversifcation / Growth
Strategy
• Technology Services
– Data security, mining
and MIS
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and archiving system
• ERP services
18
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Indian Higher Education Sector Opportunities aplenty, growth unlimited 19
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