With increasing population in India, the demand for educational institutes has also augmented. Today, the Indian education sector is one of the biggest education systems in the world. The sector is one of the leading areas for investment opportunities.
Education in India is divided into two main segments; the core segment comprises of schools and higher education, while the non-core comprises of coaching classes, pre-schools and vocational trainings.
With a growth rate of 10 to 15 per cent expected over the next decade, the Indian education market has witnessed a series of developments and changes in the last few years. This has resulted in a significant increase in the market size of the education industry compared to previous years.
In fact, the private education sector is estimated to reach US$ 70 billion by 2013 and US$ 115 billion by 2018, according to consulting firm Technopak.
India has emerged as a strong potential market for investments in training and education sector, due to its favourable demographics (young population) and being a services-driven economy. Further, India's expanding role in sectors such as software development, generic pharmaceuticals and healthcare, would require the country to invest into learning and training segment as well.
India's education sector is also considered as one of the major areas for investments as the entire education system is going through a process of reformation, according to a report 'Emerging Opportunities for Private and Foreign Participants in Higher Education' by PricewaterhouseCoopers (PwC).
India needs 1.2 million more teachers under the Right to Education Campaign, according to Shri Kapil Sibal, Union Minister for Human Resource and Development. He also added that with 546 million people under 25 years of age, there is huge potential in India in this sector that needs to be tapped.
According to data released by the Department of Industrial Policy and Promotion (DIPP), FDI in education sector stood at Rs 1170.09 crore (US$ 221.71 million) in the month of May 2012. The Government of India allowes 100 per cent FDI in education sector through the automatic route.
The country's fast-growing education sector holds a potential to attract a US$ 100 billion investment over the next five years, driven by demand for skilled professionals and need for infrastructure development, according to research firms such as KPMG.
There is clearly an opportunity for private players to enter the education space. This opportunity exists in all three segments - schools, higher education and vocational training. Some success stories are Manipal University, Amity University and the Indian School of Business. Public-private partnerships (PPP) arrangements, tax concessions for education and encouraging foreign capital to build infrastructure in India would encourage the creation of new capacities by the private sector.
The education in India is expected to witness huge investments from PE funds over the next couple of years on the back of increased Government spending and expansion plans of private players.
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