Education Sector: A Lucrative Segment for Investment

Education Sector

The market size of India’s education sector is growing exponentially. The sector may grow further as opportunities galore in the online education market. In fact, due to the COVID 19 pandemic, there has been a rapid expansion of the digital learning market. Namrata Hazarika from Elets News Network (ENN) focuses on the growing need for potential investment in uplifting technology-enabled services and boosting innovation.

For a long time, the education sector has been facing many challenges in terms of poor infrastructure development, limited investment and a shortage of trained teachers. The need of the hour is to push potential investment in the education sector in order to build the digital infrastructure and provide quality education.

Government’s allocation to the education sector

The government also needs to infuse funds in the education sector to boost infrastructure development and technological growth. One of the key demands of the education industry is increasing the budgetary allocation by the government.

In the financial year 2021-22, a total amount of Rs 93,224 crore has been allocated for the Ministry of Education. This includes Rs 54,874 crore for the Department of School Education and Literacy and Rs 38,350 crore for the Department of Higher Education. The allocation for the year 2021-22 was 6.13 percent less than the previous budget, which was Rs 99,312 crore.

Industry stalwarts are of the opinion that the government needs to meet the funding requirements of the education sector. In this context, Nirpeksh Kumbhat, CEO, SkillEnable, said, “India has spent a mere 3.1 percent of its GDP on education in 2019-20 against the 6 percent recommended by every national policy since 1968, which is 50 percent less than recommended, as indicated by the Economic Survey. The direct result of this underspending is that the 10 lakh government schools where 52 percent of India’s 24.8 crore children study have remained largely underfunded. This is the key reason why learning outcomes in India do not match higher standards.”

To meet these standards, it is vital to focus on improving the digital infrastructure of government schools. “Due to the pandemic, even government schools had to migrate to digital learning, which turned out to be a major challenge considering that only 28% of the schools had computers in 2018-19. To compound the problem, the number of kids going to government schools is likely to increase as household incomes have been severely impacted by the pandemic.”

Implementing digital infrastructure

However, this is not the case with urban school goers. Private school parents are able to afford smartphones and technologies that are required currently for online learning. There are concerns surrounding content, access, devices, testing, exams, assessment, funding, fees and salaries, which are common problems in dealing with digital learning among students, parents and teachers. The case is quite different from the remote areas in India. “According to the latest data available, only 45 percent of the total Indian households have access to the internet and that number further drops to 31 percent when we look at just rural households. The worst affected are the underprivileged sections of society,” Khumbat added.

He said that in the latest available 2019 survey by the Ministry of Rural Development, it was found that only 50.64% of the Indian households get more than 12 hours of electrical supply. It is also heart-breaking to note that over 40% of the schools operate without electricity! It is a no-brainer that students from underprivileged backgrounds are highly vulnerable to the inefficiencies of the government.

It is vital that emphasis should be given now to solve the problems arising out of the lack of digital infrastructure and limited education resources. Technological investment is required to be made by the schools, universities and other institutions to improve digital infrastructure.

Rohit Manglik, CEO, EduGorilla said, “The penetration of the Internet, the proliferation of smart devices and policy push by the government has provided a fillip to e-learning over the past few years. The COVID-19 pandemic has further accelerated this trend due to the need to sustain learning amid the suspension of classroom teaching. While the government has taken a series of initiatives to bolster digital infrastructure, the need for the hour is to bridge the digital divide. For instance, uninterrupted and reliable internet connectivity is yet to become a reality in Tier 3 and remote hinterlands of the country.”

Experts feel that investing money in virtual reality, artificial intelligence, and augmented reality will make e-learning interactive and customisable. Nevertheless, there is a need to address certain hurdles, such as setting quality benchmarks and reducing ambiguity in the policy framework to reap the tremendous benefits of online learning.

“Another important aspect is teacher training, which has also seen negligible investments from the government. The one aspect which could significantly improve classroom pedagogy and augmented learning has remained side-lined. Government funding is most definitely inadequate in the current scenario and demands greater involvement from their end in the Indian education sector,” Khumbat also added.

He added that there is undoubtedly a great need for technological investment in India. Although the penetration of smartphones and internet connectivity has grown by leaps and bounds, we are still a long way from complete digitisation. Unless that is achieved, leveraging technology to augment education will remain impossible.

National Education Policy and its opportunities

To facilitate learning, the government’s National Education Policy (NEP) plays an important role and aims to make good decisions on the induction, deployment, and use of technology, by providing to the leadership of education institutions, state and central governments, and other stakeholders, the latest knowledge and research, as well as the opportunity to consult and share best practices.

“The NEP also recognises that the need for integrating technology into education has never been greater. Until it can be determined how exactly we can benefit from the use of technology, the existing methods of imparting knowledge online will have to be optimised. For these strata, the NEP clearly mentions that Special Education Zones will be created in the less fortunate regions that lack facilities. But the opportunities to digitise our educational institutions and the underprivileged areas cannot be leveraged unless the digital divide is dealt with through concentrated efforts,” Kumbhat added.

The NEP does not explicitly mention how investments will be drawn to solve these issues. However, the 100% FDI in the education sector through the automatic route should provide some respite as Ed-Tech companies become key growth enablers. These are the Ed-Tech players that will bring transformation where it is needed the most.

Private investment in the education sector

The government should focus on launching an ed-tech focused fund that will flow into the sector and help startups as well as mid-sized companies for scaling technology in the educational institutions. However, it is extremely important to open the education sector to private investment. “According to the World Economic Forum, 320 million learners have been affected by the COVID-19 pandemic in India. Regional disparities in access to the internet and technology have made it extremely difficult for educators as well as those students to make the transition to digital mediums. In light of the above, the only entities who can accelerate the process are private corporations who have structured frameworks to take up social work under their wing and execute it with quality deliverables. They also have a well-organised manner of managing such projects which we know may not turn out as well if left to the government,” added Manglik.

He added that opening the education sector to private investment would allow access to credit, resources and technical expertise in the education sector. The PPP model has been a remarkable success in large-scale projects. The opening of the education sector to private investment will augment human capital and pave the way for a higher growth trajectory.

However, he also emphasized that there is no shortage of initiatives on the policy front, the key challenge here is to address the inadequacies in infrastructure and arrest the low dropout rate, especially among girls. There is a need to provide certain incentives to ensure the retention of students in school. The private sector can play an instrumental role in plugging the gaps in rural education through its corporate social responsibility initiatives. At the same time, it is essential to map learning outcomes and ensure that they are in line with standard benchmarks.

Bhavesh Thakkar, Managing Director, Edinfra, said, “It has become very important for investors to analyse and direct its funds in the education sector as it has great opportunity ahead. Public investment percentage, which is currently 6% of GDP could have been set higher. It is rightly said by KR Shyam Sundar, Professor, HRM Area, XLRI Jamshedpur that “Grand plans require grand infrastructure”. As there’s an immense need for a quality & upgraded education system overall they should open doors for private investors.”

The education sector has become the biggest bet for investors. Investment in education will witness significant growth due to the increasing opportunities in technology-enabled services. According to the Indian Private Equity and Venture Capital Association (IVCA) and PGA Labs report, the investments in Indian Edtech startups surged to $2.22 billion in 2020 compared to $553 million in 2019. The market size of the education sector is $117 billion.

“The next 10 years there will be growth in digital education. Technological investment is so important in reshaping our education system and approach,” added Thakkar.

In fact, edtech startup companies such as Byjus, Unacademy and Vedantu accounted for the highest share of funding in the last five years. Byju’s raised the highest capital in the last five years at $2.32 billion (latest valuation at $12 billion), followed by Unacademy at $354 million (valuation at $2 billion).

According to the report, a total of $4 billion has been raised by the Indian online education platforms in the last five years (2016-2020). The education market is expected to grow 2x to $225 billion by financial year 2025 at 14 per cent compound annual growth rate (CAGR) in the next five years.

Therefore, the education sector has immense scope for expansion and investments that will be quite lucrative for the investors.


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