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Foreign Direct Investment in the Indian Education Sector

India is a developing nation. It's population in the age group of 0-14 years is almost 26.31% which provides numerous opportunities for growth. Similarly, the education sector is one such area which not only has the potential to grow but also will benefit the nation overall. When a nation is provided with the right knowledge and skills, it will lead to economic growth and progress. India currently has the second largest higher education system in the world after United States.

This has opened avenues for investment in the education sector of our country by the residents as well as the non - residents as it has a very high potential of growth. In 2018, the online education market was valued at 39 billion and now it is expected to reach 360.3 billion by the year 2024. Number of universities in India has reached to 988 and colleges to around 40,000 by the end of year 2020.

Thus, the gross enrollment ratio has increased by 0.8% in which there has been a steady rise in enrollment of females by 18.2% according to AISHE report. This scope of development requires lot of capital and expenditure which is not possible only through the government and thus it invites and boosts private sector investments. Thus, these factors have paved a way for foreign direct investment.

Education System
The main source of knowledge were the Vedas during the Vedic period. Giurukul system was prominent. Then came the Mughal and the British era. But until the British era this sector remained almost dormant. With the advent of technology and modernization, even women were encouraged to be educated and this area started to grow and flourish.

It gave people employment, knowledge and a hope to progress which in return brought private and public investments. Currently, the world has moved to e-learning platforms due to covid-19 and businesses and IT companies are inviting investments for these platforms further. India's education system is the most rapid developing in the world with over 70 million students.

Present Scenario
  • Currently, the government of India spends around 3.1% of its GDP on education.
  • Its literacy rate is at 74.3%
  • According to, New Education Policy 2020, India aims at universalization from pre-school to secondary
  • These reforms have led to raising standards to a global level in education by revamping of the curriculum, vocational training, examination structure, e-learning etc.
  • One of the key targets is to increase the gross enrolment ratio (GER) to 50% by year 2035.
The covid-19 pandemic has restricted the traditional classroom based teaching methods and transformedit to more of digital based education.

FDI - Foreign Direct Investment
This plays a very crucial role in the development of a country. FDI means when a company takes control of ownership in a business in another country. This not only means that they invest their money but along with them they bring new skills, knowledge and technology which benefits the other nation. This helps the country to expand their businesses and take them to a global level. This fulfills the needs for funding and expansion. India is a part of Ease of Doing Business in the top 100 club.

Horizontal FDI:
This revolves around investing funds in a foreign company belonging to the same industry as that owned or operated by the FDI investor.

Vertical FDI:
An investment is made within a typical supply chain in a company, which may or may not necessarily belong to the same industry.

Conglomerate FDI:
When investments are made in two completely different companies of entirely different industries, the transaction is known as conglomerate FDI.

FDI In Education
The pandemic has given a golden opportunity to the education sector to adapt and develop according to the need of the hour which would otherwise taken even more time. The government has allowed 100% FDI in the education sector though the automatic route. This means that any foreign company can invest in India without approval from government or the Reserve Bank of India. But the Indian company is supposed to report to RBI within 30 days since the receipt of investment.

The education system in India rests on three pillars economic growth, social development and technological development. According to the report of Department of Promotion of Industry and International Trade, the FDI equity inflows stood at US$ 4495 million from April 2000 to March 2021. The ed-tech have received a US$ 2.22 billion of investment in the year 2020.

  • Confusion:
    Different sects of the government prescribe different things. Where the Department of Industrial Policy and Promotion (DIPP) permits 100 per cent FDI in the education sector, the AICTE (All India Council of Technical Education) Act states that no foreign investment is allowed, directly or indirectly, in setting up a technical institute in the country. Whereas, the University Grants Commission (UGC), a third aspect, simply does not recognize foreign universities.
  • Non -profit:
    In India, Education is treated as a service and not as a business. Due to which the "NON-PROFIT" structure of the same demoralizes the investors due to inability to monetize their capital.
  • Procedures:
    Numerals prior approvals and the rise of school regulation fee have created a lot of controversies and thus reduced the investment.
  • Management:
    This is the most important hurdle in attracting investments. There is a great need of professionalism and decentralization.
  • Technology:
    There is a very low adaption of technology from foreign countries.
  • Politics:
    Different government has different policies and frame works and thus internal bureaucracy does not allow space for growth.
  • GDP:
    Ideally 6% of the GDP should make up of education but it still lacks to reach there.

Government's Role
  • The Government of Gujarat plans to set up a farming educational institute in collaboration with Israel, offering post-graduation and PhD. programme with practical training and degree from Israeli universities.
  • The Government of India also plans to set up an Indian Institute of Agricultural Biotechnology at Ranch I with investments of Rs 287.50 crore.
  • In December 2020, two short-term courses in factory automation were launched by the Ministry of Skill Development and Entrepreneurship, in collaboration with the Tata Indian Institute of Skills.
  • Rs 38,351 crore has been allocated to The Department of Higher Education in the Union budget 2021-2022.
  • In November 2020, All India Council of Technical Education (AICTE) inaugurated 46 online AICTE training and learning (ATAL) academy faculty development programme on 'molecular manufacturing' in a drive to develop and train its faculty worldwide.
  • The Union Minister for Skill Development and Entrepreneurship and the Australian High Commissioner, participated in a virtual meeting to implement VET cooperation to promote development of occupational standards in order to strengthen cooperation in skill development and vocational education and training (VET) between India and Australia.
  • India recorded 13% growth in FDI in 2020 despite the COVID-19 pandemic, While FDI inflows decreased elsewhere, followed by investments highest in the digital sector. China was the only other country among those considered that showed FDI growth.
  • Singhania Education Services, which has five schools, is planning to make an investment of Rs 25 crore on the new venture by the end of this year. The platform will offer education in K12 space as well as other skill development and coding courses.
  • NITI AAYOG is given the responsibility to prepare a plan to make tertiary education in India to a world class level in order to attract students from overseas.
  • In April 2021, India along with Bangladesh, Brazil, China, Egypt, Indonesia, Mexico, Nigeria and Pakistan joined the United Nation's E9 initiative. E9 initiative is the first of a three-phased process to co-create an initiative on digital learning and skills, targeting marginalised children and youth, especially girls. The initiative aims to accelerate recovery and advance the Sustainable Development Goal 4 agenda by driving rapid change in education systems.
  • Rs. 54,873.66 crore (US$ 7.53 billion)has been allocated for Department of School Education and Literacy, compared with Rs. 59,845 crore (US$ 8.56 billion) in Union Budget 2020-21.
  • The government has set up National Digital Educational Architecture (NDEAR) in order to develop digital education system.
  • On January 15, 2021, the third phase of Pradhan Mantri Kaushal Vikas Yojana (PMKVY) was launched in 600 districts with 300+ skill courses. Spearheaded by the Ministry of Skill Development and Entrepreneurship, the third phase will focus on new-age and COVID - related skills. PMKVY 3.0 aims to train eight lakh candidates.

In terms of growth, there is huge gap between the demand of foreign direct investment and the supply of it. As, India has a very wide scope of development in this sector in terms of its ever growing numbers of enrollments of students, schools and colleges. In order to attract the FDI the government has to relax its policies and procedures so that investors find it attractive and easier to monetize their capital.

This is very important for the growth and expansion of the sector not only locally but globally. Government of India has taken a lot of steps from providing grants to scholars to opening up of IITs an IIMs in more locations. With the right resources and opportunities, the country can out-stand anything if it receives the right knowledge and skills.

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