The Role and Impact of FDI in Development of Indian Education Sector

Abstract

In India, education is the key to the task of nation-building. It is also a well-accepted fact that providing the right knowledge and skills to the youth can ensure the overall national progress and economic growth. The Indian education system recognizes the role of education in instilling the values of secularism, egalitarianism, respect for democratic traditions and civil liberties and quest for justice. The ongoing demand to strengthen the Indian education sector has opened up many avenues for people of India as well as non-residents of India (NRI) to invest in education sector.Mumbai, Nov. 2013: India, which has the third largest higher education system in the world in terms of enrolments, after China and the US, needs more FDI to meet its target of doubling the Gross Enrolment Ratio (GER) by 2020, a global consultancy firm has said in its report. 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, Deloitte Touche Tohmatsu India said in a recent report titled ‘Indian Higher Education Sector: Opportunities aplenty, Growth unlimited. It says higher education is the one of the largest opportunity in the Indian education sector and it is important for foreign direct investment (FDI) to flow in this sector in order to transform Indian higher education institutions into the world’s top league. Success in leveraging knowledge and innovation that could contribute to hi-tech manufacturing and high value-added services is only possible with a sound infrastructure of higher education. As per projections, the sector is expected to register a CAGR of 12% from 2008 to reach a size of $31.47 billion, the report says.With the estimated number of students at 16 millions enrolled in the academic year 2010-11 in the formal system, consisting of regular universities and colleges and excluding the enrollment in open universities and distance learning, the Indian higher education system stands only third in the world after US and China.India is also believed 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 $13 billion is spent outside the country.The government has set an aggressive target of doubling the GER (gross enrollment ratio) in higher education from the existing 15% to 30% by 2020. To meet such a target, huge investment will be required in terms of capital and operating expenditure which the government alone will not be able to provide. Thus the role of private sector in higher education has significantly increased in the last decade. However due to various impediments the amount of FDI attracted by this sector since 2000 is dismally low at just $ 400 million.This paper quantifies the impact of FDI in Indian education sector. It aims to gain an insight into current scenario which implies need to have more FDI to achieve GER target. The results hold that increase in FDI will have significant relationship with increase in employment & improvement in infrastructure.