Government for FDI in education sector

Through the upcoming Union budget, the Indian government is expected to bring a larger scope for private and foreign investments in education sector. The recent move is aimed at achieving developed education infrastructure across India.

By Sai Nikesh D

The Government of India, in its upcoming budget, seems to be keen on increasing the GDP share of the Indian education sector in the country’s overall economy.

In this regard, the government is strongly willing to increase budgetary allocations in the education sector by calling for more public investments and also the foreign and private investments in the sector.

The larger gaps existing in the country’s education standards may provide scope for the government to invite more and more private institutions and foreign investments in the name of infrastructure development.

India could find it better to involve the global players through technology which would definitely play a major role in the education sector as a happening trend with virtual classrooms and online education courses.

To devise a special mechanism in the education sector that is usually intended to run on ‘not for profit’ basis, the government is likely to implement a investment process, wherein the investor is entitled to an agreed share of return on investment, like the way usually the investments happen in other sectors.

Easing the financial facilities and reducing the education loans is also another move that the government may take as a part of its economic strategy in the education sector.

Education tourism is another area that the government is likely to focus to boost its education sector. The Ministry of HRD is also looking at providing tax based incentives to the universities that would facilitate an easy flow of staff training and other university related activities.

Besides these, the HRD Ministry is also expected to place two key bills in the upcoming Union budget: Digitization of all academic credentials and the creation of a statutory body for the distance education sector.

The Digital India initiative is expected to favour these two recommendations. According to a study, the Indian education sector holds a larger scope for private investments in both regulated and non-regulated markets.

Despite the National Education Policy recommendations to allocate 6% of GDP towards education, the governments could make the sector just hold 4%-5% of the total GDP share, till date.

According to statistics, in terms of GDP percentage, the Government of India’s expenditure on education has gone up from 2.9% in 2008-09 to approximately 3.4% in 2014-15.

The report by the National Knowledge Commission states that government’s expenditure on higher education should increase to at least 1.5% of the country’s GDP and it also recommends for the increased public expenditure in the higher education.

The Government of India, besides allowing 100% FDI in education sector, has been keen on promoting investments in the education sector.

The government through Nation Skill Development Corporation, intends to contribute about 30% to the overall target of skilling and up skilling of 500 million persons in India by 2022, mainly by promoting private sector initiatives in skill development programmes.

This article was published in The Dollar Business on February 24, 2015.

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