The education industry

There is common saying that goes..”The roots of education are bitter but the fruit is sweet.” The roots in our country is the system. Being the world’s largest democracy the educated youth of the country has had to pay the price. The price being to forgo their entry into professional colleges, thanks to the quota system. In some states with quotas upto 70% of the seats the youth belonging to the so called “upper castes” do not find a place in Government colleges/institutions.

 

 

This gave rise to the opening up private educational institutions across India.

 

Private Educational Institutions in India could be classified into the following categories:
(a) Aided Colleges these are colleges that are privately managed but aided by the government.

(b)Unaided colleges these are colleges that are privately managed and also raise their own funds.

 

Professional colleges across India have sprung up in such large numbers making it into an industry of sorts. We are calling this “Industry” because of the employment and the revenues that these institutions generate.

 

 

 

Private spending on education in India in $US

 

Schooling (tuition fee, tutoring, textbooks, preschool etc.)

29413 million

Professional Courses (engineering, medical, MBA)

7054 million

Test Preparation (engineering, UPSC, medical test prep, GRE/GMAT etc.)

1664 million

Skill development (vocational training, child skill enhancement for mental arithmetic etc. IT training, teacher training etc….)

2436 million

Estimated total market size in private sector

40,565 million

 

 

There are institutions often funded by rich individuals or even by organizations. The market for these private institutions has survived and indeed blooming by the day although new colleges come across high legal barriers to enter.

 

Many of these institutions cannot confer degrees on their students unless they meet set guidelines that have been set by the government body the AICTE and the UGC. This growth can be attributed to the phenomenal growth of the IT industry the country has witnessed. As a country we also have to use the huge educated population to our advantage.

 

 

Today, four out of five engineering students attend private colleges, even though those institutions charge five to 10 times more in tuition than government colleges. The private schools also demand an upfront entry or “capitation” fee in a range of anything between 20 lakhs to 50 lakhs—which is in many cases a small fortune for middle-class families. One has to remember that the returns on these investments are also high.

 

The Planning Commission reports that in the period 2002-2007, the share of private institutions in higher education increased from a third to over half of all enrolment. And this trend, by all accounts, will continue into the future. Engineering, Medical and Management are the favorite streams for most of these private institutions. Over sixty percent of private engineering and medical colleges are located in the 4 southern states of Karnataka, Andhra Pradesh, Tamil Nadu and Maharashtra. These states account for 25 % of the population but house more than half of the number of engineering and medical colleges. The central government too encourages these private institutions as it takes the pressure off its own self and ensures availability of skilled manpower, the main requirement for a growing economy.

 

 

Another measure adopted by the government to ensure students are able to pay the high fees is by persuading Public Sector banks in providing education loans to the students. The student loan disbursement of Public sector banks stood at a whopping Rs. 20,000 crores till the end of the financial year 2007-08.

 

The education market is leaning on the back of the workforce proving itself equal to their counterparts elsewhere in the world in productivity. The Indian workforce is the much sought after lot by global giants across the world. Hence it is safe to say that the education system and the industry behind this workforce is witnessing a boom time.

 

 India’s youth, often referred to as its demographic dividend, accounts for over 50 per cent of its total population, with 367 universities and 18,000 colleges with half-a-million teachers and about 11 million students on the rolls. As mentioned earlier as a country we must use this demographic dividend to our advantage. In the last five years there are about 1,500 management colleges, close to about 3,500 engineering colleges and about 1,200 medical colleges.Besides these private engineering and medical colleges the state has also witnessed investments from private equity players in the education segment.

Below are mentioned a few of such ventures:

 

India-focused PE firm Gaja Capital Partners invested 8.25 million dollars in Career Launcher. SAIF Partners invested 10 million dollars in the English training academy Veta and ICA Infotech. Some of the other listed companies in the education segment are Educomp Solutions, which posted a return of 374 per cent. Everonn Systems, which got listed in August 2007, gave a return of 130 per cent in just five months. The older names like Aptech and NIIT, fetched returns of 162 per cent and 124 per cent in 2007. This market also runs into crores of rupees.

 

It is believed that based on the current and future manpower requirements of the various sectors, there is a huge demand-supply gap in the education space. The education sector has opened up to brand new areas and subjects. Whoever thought of taking up courses like graghic designing or retail management and going on to make a successful career out of it. This has attracted many players to invest in education and training institutions.

 

In conclusion:

 

Although the primary education scenario in the country is not very glossy one can paint a very rosy picture of higher education in the country. One can only hope for that much concern in  primary education which still remains very illusive for many.

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