Dear Team,
It gives me a great pleasure in introducing the Insiders Power-up series on Education sector.
Each one of you would agree to the fact that being a part of this great revolution and witnessing the way this sector is shaping up in the country, truly this has become one of the most important sectors which has captured the attention of the world.
The growth of the Indian economy in the recent past and the compulsion to sustain it is also forcing the Indian government to accelerate the process of developing all the branches of the Indian education system. Therefore, it would be very interesting to understand and analyze the various structures of education in India, its present condition and future developments.
As per the HRD Minister Kapil Sibal India requires over $ 400 billion investment in the next 10 years, the country considers educational advancement to be equally important as economic growth in ensuring India’s progress.
The India education space could be one of the largest markets in Asia with a population of over 1.13 bn. With the government planning to spend around 5% of GDP in the next 5 years on education, the market could be anywhere worth $ 50-55 bn
The sector has seen a tremendous upswing in hiring over the last few months. According to employment indices and statistics from Monster India and Naukri.com, top job portals online, the education sectors figures as the leading recruiter so far.
As the Indian education sector is on a path of exponential growth, we have Aakash Nagpal from the Delhi team giving us his inputs.
Happy reading
Cheers !
Anil S Kumar
Head – Corporate Relations; CAS
Once Mahatma Gandhi said “ We have to achieve independence without violence” and we did it.
That was the time to die for the nation, now it’s the time to live for the nation and make a difference.
Today’s slogan is “India- The skill capital of the world”
Regards,
Aakash Nagpal
"We don't need no education", sang the band Pink Floyd way back in the 70's in the famous super-hit album, "The Wall". While this may sound all right for idealistic rebels, it certainly does not apply to the current Indian scenario.
The biggest asset of any country is its people. India has the largest student population in the world with over 13.5cr pupils in primary education followed by China at over 12.1cr pupils at this level. India has the second-largest population in the world of over 110cr people (1.1bn), with a literacy rate of 61% and ranks a disappointing 172nd on this front. Educating such a large population is not only an expensive task but also a very difficult one. This task is being handled primarily by the government through its school infrastructure and large budgetary outlays.
The government intends to raise the general literacy rate in India in line with which, it introduced the Right to Education Bill 2005. This Bill seeks to guarantee elementary education to every child between the age of 6 and 14 years. It also states that every child in the specified age gets enrolment in a school in the vicinity of their domicile. The Bill promotes the usage of regional language as the medium of education by stating that as far as possible, a child should be instructed in his/her mother tongue at least for the first five years of the elementary stage.
In the last five years, the government has been focusing on the Education Sector through increased fund allocations. In the current year also, the government has increased the allocation by 20% from Rs28,674cr to Rs34,400cr. This amount would be spent under various schemes like the Sarva Shiksha Abhiyan, the Mid-day meal scheme, Kasturba Gandhi Balika Vidyalaya and teacher's education. The allocation for SSA is Rs13, 100cr, the Mid-day meal scheme would be provided Rs8, 000cr and Rs4, 554cr would be allocated to secondary education. These schemes stress on the following:
Increase the number of schools to provide access to a larger population,
Improve infrastructure of existing and new schools by building more classrooms and amenities,
Increase enrolment rates and reduce dropout rates,
Reduce gender inequality,
Recruit more teachers and train them to impart education more effectively, and
Improve the content and quality of education.
MAJOR SEGMENTS IN THE INDIAN EDUCATION INDUSTRY
Formal Indian Education System
K12 segment: At $20bn, schools (also popularly known as K12, i.e. from Kindergarten to 12th standard) form a core of the total market. A student can continue to be a part of the education system – or his/ her 10th or 12th grade scores would be recognized – only if he/ she passes out from a K12 institute affiliated to a board recognized by the system. Hence, all K12 institutes have to be affiliated to an education board – either central boards like ICSE and CBSE or a state board. While a few states confer on schools the right to act as profit-generating entities,educational boards still demand strict adherence to the not-for-profit structure.Of late, a trend has emerged wherein some schools have been seeking affiliations with various international boards such as IGCSE (International General Certificate of Secondary Education) and IB (International Baccalaureate from Geneva); in terms of operating structure, while these schools can opt for either a not-for-profit trust or a for-profit company, they can do so only after evaluating the state laws.
HEIs (Higher Education Institutes): The HE segment consists of graduation (targeting population between 18-21 years) and post graduation (>22 years) courses, offered after completion of K12 stint. The graduation market can further be classified based on the nature of education into graduate courses (18-20 years), diplomas/ non-graduate courses (16-20 years) and professional courses (18-21 years) such as Engineering (4-year tenure at graduate level) and Medical (5-year).
At $6.5bn Higher Education is the second largest opportunity in Indian Education System. HEIs seeking recognition by the apex regulatory authority named UGC (University Grants Commission) also need to be run in the form of a trust/ society. Technical education institutes find themselves regulated under various professional councils as well – e.g. AICTE (All India Council for Technical Education) is the regulating authority for engineering and MBA colleges.
Informal Indian Education System
Preschool – Playschools, more popularly known as preschools, traditionally cater to the 1.5-3 years age group. Increasing awareness among parents about the benefits of a quality preschool education has been driving penetration levels and price discovery in the segment. Led by these factors, we expect the market to expand by more than 3x in size by 2012.the $300m preschool segment is expected to be a $1bn market by 2012 (36% CAGR).
Multimedia in private schools - BEYOND CHALK & TALK- Increasing need and awareness for ‘quality education’, willingness to spend in the K12 segment and an aggressive supply (254% CAGR in schools over FY05- FY08 for Smart Class, Educomp Solutions’ Multimedia product for schools) have created a market for a complementary teaching delivery mechanism beyond the traditional black board (multimedia uses 2-D and 3-D images to explain concepts to enhance effectiveness of teaching).
ICT in government schools –In recent years we witnessed many radical changes and rapid growth in the education sector. This is due to several factors, and the one factor that needs to be mentioned first is India’s telecom success story. Thanks to extensive telecom coverage and affordable rates, bandwidth and Internet access is available pan India. The Internet offers many free tools for audio-visual instruction. State governments too have got their act together and are joining hands with private solutions providers and NGOs to use ICT for education.
Coaching Classes - India’s non-formal education market is currently dominated by coaching class business (accounting for 64% of the total). However, the business ($6.4bn; 15% CAGR till 2012E) is inherently regional in nature and person-centric (a people driven model), which implies high dependence on a ‘brand-teacher’, or a low degree of stability and scalability. It is noted that 80% of the coaching class market arises from subject/ concept-based school and tertiary level coaching, which has to be localized to suit the dynamic needs of various institutions and has high dependence on ‘brand teachers’.
Vocational training -The imperative for students/ employees to draw on skill sets to effectively compete in a dynamic business environment has given birth to vocational training – a parallel $1.5bn education system. Also, the increasing relevance of services sector in the Indian economy calls for enhanced technical/ soft skill sets. Corporates (across industries) too are gleaning from their global counterparts the culture of continuous upgradation in skill sets of employees at all levels.
Books- The Indian books market, estimated to be $1.75bn in size, can be divided into two segments – text books ($1.2bn) and supplementary books ($510m). However, private publishers have access to just 60% ($1bn) of the market given the monopoly of state boards and NCERT (National Council of Education Research and Training) in 95% of the school text book market. Further, the market is characterized by low growth due to low sell-through (100% students
do not buy books and refer to class notes, etc) and presence of a large second hand books market (70% of the target market reuses books).
Public Private Partnership (PPP) – The way ahead
In view of huge requirements of infrastructure and manpower in the field of Education and backlogs in the implementation of the SSA, the government is exploring new ways to achieve its targets, such as the public-private partnership (PPP) route. The first step is to improve the quality of education by getting content and certain school infrastructure designed and implemented by private companies.
These private companies also undertake training of teachers so that the teachers are better equipped to understand the learning requirements of the students and improve on the delivery of instructions. Thus, the companies that provide an end-to-end solution including setting up the infrastructure, systems integration, teacher training, content development and learning delivery are likely to be beneficiaries of these partnerships.
Corporate India and Education
The corporate India provides a tangible answer to the woes of Investment in IES. The gigantic organizations that have a huge market capitalization and are market leaders in their sectors of operation are interested in the educational sector.
Example: The recent announcement by the Reliance Group to open a World Class university to promote education in India. Reliance has plans in place to open a university meeting international standards and providing facilities to promote research in areas ranging from Liberal Arts to Technology. As per the official statement by Mr.Mukesh Ambani, “It will be international in scale and in best practices, but with an Indian soul”
The Aditya Birla Group has already played its hand at commercial education with the Sarala Birla Academy in Bangalore and Vedanta Group has announced a large university near Puri in Orissa.
If the corporate sector makes Education an important part of their business portfolio and strives to maintain high quality standards, the IES might see a real beneficial turnaround going forward. The affordability might still remain a question but then, it will at least pave way for having world class infrastructure right in the country. The migration of the student community to the west in the want of best of the class facilities might see a decline in time which might also help in reducing the Brain Drain.
GATS and Education Sector
Entry of foreign educational institutions to India was covered by the Foreign Educational Institutions (Regulation of Entry and Operation, Maintenance of Quality and Prevention of Commercialization) Bill of 2007, which has stalled in parliament due to political opposition. Key proposals in the bill include:
Foreign institutions be granted university status.
Eligibility for exemption from “national treatment” on enrolments, admissions and fees.
Restriction of surplus revenue usage within India
Investment of at least 51% of total capital required for establishing an institution in India.
Some 100,000 of India’s students leave each year to study abroad, at a cumulative cost of US$4bn. China has seen a surge in foreign educational institutions partnering with local institutions; its policies and objectives very much in line with India’s views that foreign universities should not eye India as a market, but should invest adequately to set up their own campuses.
Challenges before Indian Education
Access - While availability of elementary schools within a reasonable distance from habitations is now fairly universal, same cannot yet be said in regard to Secondary Schools and Colleges. Pockets still exist in many remote parts of the country where the nearest Secondary School or College is much too far for everyone to be able to attend.
Participation & Equity - Gross Enrolment Ratios for the elementary, secondary and tertiary stages of education in 2003-04 were 85%, 39% and 9%, respectively. These participation rates are undoubtedly low, and need to be raised very substantially, for India to become a knowledge society / economy.
Quality- The challenge of quality in Indian education has many dimensions-
Providing adequate physical facilities and infrastructure,
Making available adequate teachers of requisite quality,
Effectiveness of teaching-learning processes,
Attainment levels of students, etc
Relevance- Education in India needs to be more skill-oriented – both in terms of life-skills as well as livelihood skills.
Management-Management of Indian education needs to build in greater decentralization, accountability, and professionalism, so that it is able to deliver good quality education to all, and ensure optimal utilization of available resources.
Challenges before Indian Education
The sector is the best for the ones who want to be an entrepreneur, as a lot of global conglomerates whether they are in education business or not are looking to invest in the sector in India as the population is the youngest on the planet. The placements history of ISB showcases a 8 fold increase (in no. companies since 2003 in the same sector) , where the students were hired directly by the companies operating in the sector.
This number above doesn't include the students hired for the sector by the conglomerates for the ir education business or even for the PE funds helping the sector. Companies like NIIT, Educomp, Global International school, IMS and Jamboree Education and ISB itself hires regularly for their middle management to senior management roles. Apart from these companies there are more players like Everonn, Career Launcher, Time, and other Indian and foreign universities who are interested in hiring from campus.
A confidential report from one of the world’s best consulting and auditing companies shows that a company in Delhi having PAT of INR 8 million in 2006 will have a PAT of INR 1015 million by 2015.
To Conclude: With the strong growth expected in the Indian economy going ahead, a strong foundation in the form of a robust education system will be the cornerstone to leading India's growth over the next many years. With the Government showing a clear willingness to engage the private sector in accomplishing the daunting task of educating India's13.5cr students, Education sector is the sunrise industry of today and tomorrow. Well that’s a trailer..and as SRK said “picture abhi baaki hai mere dost” there is a lot more to come.
