India: Regulatory Hot Broth: Why Private Participation Would Add To The Flavour Of The Indian Education Sector

Last Updated: 29 August 2017
Article by Saurya Bhattacharya

"The foundation of every state is the education of its youth," said Diogenes, the ancient Greek philosopher.

Herein lies the crux of why education remains vital for any government across the world, often as a charitable and social responsibility.

This piece intends to provide an overview of the education sector in India; to highlight some of the key legislations and regulatory regimes that govern education in the country; shed light on some of the recent government initiatives in the sector; and, in conclusion, make a case for increased private participation in Indian education.

Education Sector in India: Large yet Growing

India has one of the largest education systems in the world, and can be broadly divided into the following segments:

  1. Higher education, covering colleges, universities and institutes of further studies after the twelfth standard.
  2. K-12 education, being the full tenure of school education from kindergarten to the twelfth standard.
  3. Pre-school education, for those providing learning opportunities or training to children prior to their joining formal K-12 schooling.

In addition, there are associated areas like education-related services, vocational/ preparatory education and educational technology or "Ed-tech" – education provided through the utiliation of technology, media and innovation.

Industry reports indicate that well over 200 million students are presently enrolled into various levels of education in India. The biggest piece of the pie expectedly is higher education; it is also the largest higher education system in the world.

The education sector market itself is estimated to be in excess of USD 100 billion. But with education still spreading geographically through the country and a young and aspirational population, this number can only grow. This itself makes for a strong case for continuous reform on the regulatory side to make education more easily accessible for all; as well as for greater private investment for a large and growing market.

Regulators and their Regulation(s)

The legal and regulatory regime governing Indian education is well known to be labrynthine; sometimes it is even considered intimidating.

Depending on the nature of education being disseminated, for instance, a higher education institution could be governed by the University Grants Commission (University Grants Commission Act, 1956, and its various regulations); as well as (i) the All India Council for Technical Education (All India Council for Technical Education Act, 1987) – in the case of a university that offered technical education like engineering, or (ii) Bar Council of India (Advocates Act, 1961, with Bar Council Rules), and a plethora of similar ones.

For K-12 schools, basic union legislations like Right of Children to Free and Compulsory Education, 2009, co-exist with state legislations on fee caps that may not have been completely successful (for instance, the Maharashtra Educational Institutions (Regulation of Collection of Fee) Act, 2011) or very well received (The Gujarat Self-Financed Schools (Regulation of Fees) Act, 2017). In addition to these are affiliation-related regulations by national boards (e.g. Central Board of Secondary Education, Council for the Indian School Certificate Examinations), state boards (like the Karnataka Secondary Education Examination Board, West Bengal Board of Secondary Education etc) or international boards (International Baccalaureate).

Further, given that most education still has not-for-profit status, an educational institution also often ends up being governed at the state level by legislations like the Maharashtra Public Trusts Act, 1950 (in case of Maharashtra), and its daunting regulator – the Charity Commissioner.

As a natural consequence, those areas that have less onerous regulatory hurdles, like ed-tech, test-preparatory services and the like, attract private investments more easily, although they form almost marginal segments of the larger education basket. By implication then, there is a potential gap in the regulated education sphere for further private investment.

As a supplement for a foreign investor, the extant Foreign Direct Investment Policy as well as Foreign Contribution (Regulation) Act, 2010, would also become relevant: legal structures for remitting investment monies should not fall foul of these legislations.

Latest Government Initiatives

It must be noted that the government continues to try and improve the regulatory regime with a view to making education more easily accessible and more effectively governed. Only a few weeks back, the Ministry of Human Resource Development revived the discussion on a new regulator for higher education in India (Higher Education Empowerment Regulation Agency), which is proposed to replace not just the University Grants Commission but also the All India Council for Technical Education. Such streamlining of regulatory supervision should bode well for the sector.

Similarly, the effectiveness of Swayam, the Central Government's new four-pronged digital education foray, would certainly be worth keeping an eye on. Expertise from specialist private players could certainly add value to such initiatives.

Looking Forward

The education sector will continue to evolve. It may well be called a sector without sunset, as its importance neither rises nor falls with changes in economic or market conditions. The growth that the sector needs to see would justify increased private participation and beyond limited urban pockets – be it from strategic or financial investors..

There is also a case to be made for a public-private partnership model for greater reach. While both the government and the private sector could bring in capital, the expertise and best practices of a private participant could be best utilised by the reach and facilitative strength of the government. In a regulated market that is not saturated either in terms of growth or players, this can only mean good news for an investor with an eye towards the medium to long term.

Originally published July 10, 2017

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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