Abstract

The world economy is undergoing structural transformation - there will be need for a workforce
of 3.4 billion by 2020, increasingly in the services and capital intensive manufacturing sectors.
The phenomena is also expected to happen in India in the next 5 years, 90% of India’s Gross
Domestic Product and more than 70% of employment is expected to be contributed by the
services & manufacturing sectors. Technological advancement will make several current
jobs redundant while also creating new job roles. This structural shift in employment will
increase demand for sophisticated workers, innovators, and thinkers who can thrive in a
globally connected & dynamic global economy. India, with its large workforce & increasing
pool of higher education graduates, is strategically positioned to reap the benefits of this shift.

However, the demographic dividend will be worthless unless India is able to create a globally
relevant and competitive higher education system that serves the requirements of both the
domestic as well as global economy.

India holds an important place in the global education industry. The country has more than 1.6
million schools with over 228 million students enrolled & more than 37,000 higher education
institutes. India has one of the largest higher education systems in the world. However, there
is still a lot of potential for further development in the education system.

India has become the 2nd largest market for e-learning after the US. The sector is currently
pegged at USD 2 to 3 billion, and is expected to touch USD 45 billion by 2018. The distance
education market in India is expected to grow at a Compound Annual Growth Rate of around
35 % during 2013 to 2018. Moreover, the aim of the government to raise its current gross
enrolment ratio to 32 per cent by 2020 will also boost the growth of the distance education in
India.

In the past, government was the sole education provider as it was primarily considered a social
service. However, with liberalisation & globalisation of economy, it has become evident in the
last decade or so that government alone cannot bear the cost of the education sector. While the
private sector has stepped in to fill the gap & has increasingly enhanced its profile in education
over the last decade, its role is still not properly defined.

At USD 600 billion, yearly education spend by government & households in India is larger
than that of the US at comparable prices. The CAGR of private revenue in Indian education, at
20% during 2011-2015, is also one of the fastest in the world. It is expected that revenue of
private entrepreneurs in education at USD 50 billion by 2016. A sharp rise in household spend
on education with median income elasticity of two is driving this growth. Public policy is
expected to aid the incumbents but is also likely to steer private entrepreneurs away from school
education. Skill & vocational training are emerging as big opportunities for private players.
High growth, scarcity of investable opportunities and the recession proof nature of the sector
are likely to keep valuations high.

References: Media Reports, Press Releases, Press Information Bureau, RNCOS Report, Dept.
of Industrial Policy & Promotion (DIPP), Union Budget 2016-17
 INTRODUCTION
History
Education is a trillion Dollar industry worldwide. The history & structure of education system
in India has not been stable. With India having a history of invasion during the feudal period,
the system of imparting education also kept changing. Indian educational system has moulded
itself on the pattern of British education system. Post-Independence, all government has greatly
emphasised on the importance of spreading education to all corners of the country. Education
in India was not open for private participation. However, off late, the government has given
permission to private bodies to run schools & colleges for profit. Increased demand for
education has led to major changes in supply. Higher education has now entered the market
fray. Universities that had a virtual monopoly for decades and even centuries are now
encountering a range of competitors - virtual consortia (Online Education), global branches of
universities, for-profit institutions - that are vying for revenues and profits.

Briefly the history of Education in India can be summarized as-

o Up to 17th century-
· Nalanda, Ujjain, Takshila, & Vikramshila University.

o Prior to British rule-

· School for every temple, mosque in villages.

o In British rule-
· Education was introduced & funded by the British.
· Macaulay’s recommendations of education of Indians.

o Post-Independence till 1975-76

· State responsibility
· In 1951 First Indian Institute of Technology (IIT) established at Kharagpur followed by:
Mumbai, Kanpur, Chennai, Delhi, Guwahati, Roorkee, etc.
· First two Indian Institutes of Management (IIMs) established - Ahmedabad & Kolkata
followed by IIM in Bangalore, Lucknow, Kozhikode, Indore.

o From 1976-2005
· Joint responsibility of the State & Centre.
· 1985 – Opening of Indira Gandhi National Open University (IGNOU)
· 2001 - Sarva Shiksha Abhiyan (SSA) launched

o 2005 onwards -
· Introduction of grade based education system in schools.
· More IITs, NITs, IIMs, AIMS, etc indtroduced
· Focus start on Skill based training.
The Education Industry
India is one of the largest markets for education in the world in terms of number of students.
Currently, there are more than 1 million schools in India providing education to over 300
million students. The number of teachers in India currently stands at 7 million. The Indian
Education System can be broadly divided into three segments; namely

 Schools, which include preschools and the K12 segment;

 Professional colleges imparting higher education in the field of engineering, medicine,
and management;
 Vocational training institutes, which includes IT training and teacher training institutes.

Pre-Schools are places where formal education is not imparted, but children are taught basic
activities which help them get independent Faster. One of the largest pre school player is Kid
Zee. In the K12 segment, formal education is imparted to children. It starts with lower
kindergarten (LKG) till 12th standard, following which, students go for professional education.
Private tutoring has become a growing business in India with an estimated market size of
almost USD 3 Billion. While the sector is very fragmented, with classes being run even in
residential premises, larger players like Mahesh Tutorials, Chate Coaching Classes, etc., who
have a wide network, are benefiting from this growing market.

Coming to higher education, currently in India, there are over 7000 private colleges & 200
private universities imparting education in the field of engineering, medical & management
studies. To ease the pressure of central legislation over private universities, the government has
started granting deemed university status to private institutions. The transition from private
college to private deemed university is a new and growing trend.

Vocational training is an occupational training in which a person is trained for specific

purposes. Currently, in India there are many privately owned institutes that are providing
vocational training. NIIT's & Aptech's core Information Technology training business falls
under vocation. Frankfinn-Institute of Airhostess Training, which provides training to
airhostesses, also comes within the ambit of vocational training institutes.

Technology in Education -
E-learning and online tutoring- Online education is the need of the hour, but at the same
time, this is heavily dependent on reliable and high-speed Internet coverage. Its biggest
advantage is that a student can opt for employment while still pursuing his studies. Current
players include Educomp, Tutor Vista, Byjus, etc.

ICT in public schools- India recognized the importance of Information & Communication
Technology (ICT) in education as early as 1984 when the Computer Literacy and Studies in
Schools (CLASS) Project was initially introduced. A total of 1,000 computers were distributed
to secondary & senior secondary schools through State Governments.
 Growth trend in Supply
Type No. in 2011-12 No. in 2014-15 Growth trends

Universities (under Govt.) 329 350 Growing Slowly

Private universities 102 241 Emerging on the scene

Deemed universities 130 123 Growing slowly

Government Colleges 7450 Growing slowly

35500
Private Colleges 23874 Rapid Growth

Distance Learning 146 Growing

Vocational :- Growing slowly

Government ITIs 2027 2280 Growing

Private ITIs/ ITCs 7305 9680 Growing

Foreign Institutions 150 NA Growing

Education Services
Un-reported Rapid Growth
Providers

Medical Colleges 335 420 Growing

Healthcare Management 50 100 Rapid Growth

(Data taken from UGC Website.)

Table 1 RECENT GROWTH TREND IN EDUCATION INSTITUES

Present Situation: Why the education sector is lagging?

o Obtaining approval for setting up of a higher education institution is a lengthy, cumbersome

process and the regulation and fees fixation are also highly ambiguous.

o The sector is controlled by the government, it has traditionally been flawed by the poor
governance and high absenteeism of teachers in rural as well as urban areas.

o Delay in allowing FDI in education.

o There is an effort on the part of the government to block the entry of foreign universities into
India. The case of CFA Institute is a classic example of bureaucracy in education in India.

o In terms of spending on higher education, the situation is grimmer. India currently spends about
0.4% of GDP on higher education and this is the prime cause of outflow of students from the
country. Developed countries like US spend about 1.5% of GDP on higher education, whereas
UK spends about 1% on higher education.

Impact of Liberalization

Pre - Liberalization

The education sector during the pre-liberalized era can be marked by the prevalence of Licence
Permit Quota Raj. The entrepreneurs could not borrow commercially since their schools were
supposed to be non-profitable. One could borrow for almost any purpose, except to open a
school. During this period only public institutions were prevalent in the country and FDI was
not allowed. The schools were mostly run by trusts. The state level governments funded the
colleges of engineering, medicine etc. There was barrier even in the acquiring of land for setting
up educational institutions.

Post - Liberalization

The post liberalization era is marked by abolishment of Licence Permit Quota Raj which
lowered the entry barrier for the educational institutions. Approval of FDI, infrastructure
generation, removal of barrier to the use of land was also started during this period. The 93rd
Amendment done in this time makes education free and compulsory for all children in the age
group of 6 -14. Government also introduced Sarva Shiksha Abhiyan (SSA), in an effort to
universalize elementary education. The Sarva Shiksha Abhiyan is to provide useful and
relevant elementary education for all children in the age group of 6 to 14 by 2010. Mid-day
meal scheme was also started by government to attract poor children into govt. schools. There
is also another goal to bridge social, regional and gender gaps, with the active participation of
the community in the management of schools. The Government expenditure on Education has
greatly increased since the First five-year plan. The GOI has highly subsidized higher
education. A number of foreign institutes have emerged in this period.

Impact of Globalization

Globalization has resulted in exchange of different educational programmes and even

immigration and emigration of students between countries in the world. Many overseas
business schools have come to India seeking a big revenue boost, and a chance to understand
the concerns of a developing economy. The Foreign Educational Institutions (Regulation of
Entry and Operations, Maintenance of Quality and Prevention of Commercialisation) Bill is
expected to be approved, and it is being observed closely by some foreign institutions like
Canada York University, Ohio University and the Tuck School of Business which want to
make a foray into India. A number of Indian B-schools have established off-shore campuses
and the Middle Eastern nations and Singapore are clearly emerging as favourite destinations.

Examples-

 Xavier Labour Relations Institute (XLRI), Jamshedpur offers an executive management

education programme in Dubai and now has a campus in Singapore.
 IIM Bangalore offers an advanced master's programme, in collaboration with the City
University of Hong Kong, SDA Bocconi School of Management in Italy and Anderson
School of Business Los Angeles, USA.
 Harvard Business School will start an executive education programme in India,
targeting companies with global ambitions to address what it believes is the typical
challenge in the booming economy & managing hyper growth.

The internet has emerged as an important source of providing education to students through
various correspondence courses, online study materials, tests etc. There has been a temporary
movement of teachers to provide education services abroad.

Key Private Players in the Industry:

o Indian companies
 Educomp
 NIIT
 Everonn
 Amity
 Symbiosis
o US
 Apollo group
 Devry inc.
o Others
 Mega study (South Korea)
 ABC learning centres (Australia)
 Benesse corporation (Japan)
OBJECTIVE
The objective of the study was to

1. Understand the structure of Indian Education market and the major players

2. Analyse the size of Indian education market

3. Understand the growth of market and the key drivers behind the growth.

4. Understand the market characteristics of education sector with respect to

different factors.

5. SWOT Analysis

6. Conclude the growth trend and opportunities for various segments in Indian
Education Sector.
METHODOLOGY
 The methodology adopted was to identify the market segments on the basis of :

o Level of education: K-12, Technical Education, Higher Education.

o Ownership of education: Private and Government owned

o Medium of education: Classroom and Distance Learning.

 The growth in education market size along with the growth in public expenditure as a
percentage off GDP was analysed.

 The drivers were identified responsible for the investment and growth in education
sector.

 Households were grouped on the basis of their income levels and the percentage
composition of enrolments and Income spent from each group was analysed.

 Demand elasticity was calculated and plotted with respect to change in per capita
income (current)

 Porters analysis for each segment of the education was carried out.

 On the basis of porter five force analysis a comprehensive SWOT analysis was done
and recommendations were put forward.
STRUCTURE OF INDIAN EUCATION SYSTEM
Three key stages of the educational system –

Formal education comprises of school, college/ university and technical/professional

education. The formal education system in India is highly regulated. A key policy condition is
that formal education institutes need to operate on a non-profit basis.

Parallel education: This system is largely informal, runs parallel to the core, and mainly
supplements formal education. The components of the parallel system include pre-school,
private tuition/coaching, test/examination preparation and job/skill-oriented vocational
institutes, corporate training and finishing schools. Parallel education is virtually outside the
scope of any specific regulatory or supervisory system.

Ancillary education: This last rung in the educational system feeds the other two, and
comprises teacher training, text books and stationery, IT-enabled teaching aids and
management of education services. The ancillary rung too is virtually outside the scope of any
specific regulatory or supervisory system.

Figure 1 STRUCTURE OF INDIAN EDUCATION SECTOR

Nature of education according to ownership and management:-

Government institutes: Public sector entities own and manage government institutes. This
constitutes the bulk, nearly 75%, of India’s educational system, but the rate of expansion of
these institutes is slowing.
Private-aided institutes: Private aided institutes are managed by private entities but receive
grants from public authorities. The fee for students and salary structure for teaching and non-
teaching staff is aligned to the public sector. This segment is part of the public education
system.

Private-unaided institutes: These are owned and operated by private trusts / societies / non-
profit companies / individuals. This report considers only institutes in this category as private
institutes. Private institutes operate at all levels of the system : core, parallel and ancillary. In
the case of formal education, if private institutes generate any surplus, it has to be retained by
the institute and cannot be distributed to other entities.

Rising trends in education spend

Household spend on education is the primary source of revenue for private education providers,
as 85% of the government spend on education goes to pay salaries. Sharply rising household
spend (~17% annually since 2005, and 20% expected in the next 3 years) is driving the demand
for private education. High concentration of demand – 57% spend in urban areas and 44% by
the richest 10% of population – helps private education providers focus on location strategies.
Tuition fees (34% of overall household education spend) are the largest source of revenue for
private players. Within this, technical / professional education is the most rewarding segment
(20% of household spend with just 2.7% of total student population).

PERCENT OF HOUSEHOLDS IN
VARIOUS INCOME GROUPS
>10 Lakh 5-10 Lakh 2-5 Lakh 90,000-2 Lakh <90,000

120

100
Percent of House holds

80

60

40

20

0
2005 2015 2025

Figure 2 SCENARIO OF HOUSEHOLD INCOME IN INDIA

However, household spend on primary education (23% household spend with 47% of total
student population) is likely to reduce with the enactment of the RTE Act.
Urban-centric, concentrated growth :

Growth in public spend is trailing growth in household spend:

India’s overall education spend to GDP rose from less than 1% in the early 1950s to over 5%
currently (see Fig 3). Though growth in public spend on education has accelerated since the
1990s (post liberalization), it is now trailing the growth in household spend.

Graph1: Public Expenditure on Education

Public Expenditure on Education

PERCENTAGE OF GDP SPEND ON EDUCATION

5
4.5
4.28 4.18 4.29
4 3.95 4.05
3.84
3.5 3.48 3.40 3.56
3.34
3 2.98
2.5
2 2.11
1.5 1.48
1
0.5 0.64
0
2011- 2012-
1951- 1960- 1970- 1980- 1990- 2000- 2005- 2006- 2007- 2008- 2009- 2010-
12(RE 13(BE
52 61 71 81 91 01 06 07 08 09 10 11
) )
Series 1 0.64 1.48 2.11 2.98 3.84 4.28 3.34 3.48 3.40 3.56 3.95 4.05 4.18 4.29
YEAR OF SPENDING

Figure 3 GOVERNMENT EXPENDITURE ON EDUCATION (AS % OF GDP)

Urban households account for 57% of private spend.

Urban households constitute 26% of the overall population, but account for 57% of overall
private expenditure on education (see Fig. A sizable part of the rural student population travels
to urban centres to avail of tertiary educational institutes. Therefore, a large part of education
spend by rural households is in urban centres. This implies that under the current situation, it
is not viable for private players to make major forays into rural education.
Top 10% of population accounts for 44% of household spend.

Income Group Annual spending capacity on School

Education (in Rs.)
10 Lakh 1 Lakh
5- 10 Lakh 50,000
2- 5 Lakh 25,000
90,000- 2 Lakh 9,000
<90,000 3600
Table 2 Annual spending capacity on School Education
 PERCENTAGE SPENDING ON
EDUCATION AS PERCENTAGE OF GDP
Percentage spending on Education as percentage of GDP

0
UK USA India Pakistan Srilanka China

Figure 4 Public Expenditure on Education as percentage of GDP in different countries:

Education spend and its proportion of overall consumer spend is rising rises sharply with the
increase in capacity to spend. The top 12% of population, in terms of spend, accounts for 44%
of the overall private spend on education. The top 20% accounts for 62% of spend. At the
lowest end, the poorest 10% of the rural population spends 1.4% of their consumer spend on
education and at the highest end, the richest 10% of the urban population spends 10.3% of their
consumer spend on education. On a per capita basis, the richest 10% of the urban population
spends 90 times more on education than the poorest 10% of the rural population. The main
opportunity for private entrepreneurs in India’s education sector is in capturing students from
higher-income categories. Hence, revenue generation for entrepreneurs in private education
lies in opening institutions in strategic locations, rather than in opening a large number of
institutions.

• Venture capital fund Acumen has invested in two Hyderabad-based education start-ups—
Ignis Careers (USD 250,000) and SEED (USD 650,000)—working in the low-cost school
education space.

• India Educational Investment Fund, an early stage impact investment fund focused on the
educational sector funded by Dell Foundation, has made its first two investments in education-
based startups

• Tata Institute of Social Sciences (TISS) launched the ‘School of Vocational Education’
program to offer vocational training courses in 20 verticals in association with relevant training
partners in 25 different cities across India.

• Anuna Education, a partner to National Skills Development Corporation (NSDC) has

announced the eEntrepreneurship Program in collaboration with eBay India. Anuna Education
trains entrepreneur to sell their products on eBay globally in collaboration with eBay India
along with a practical training on how to sell the products to global buyers.
• The Confederation of Indian Industry (CII) has launched Strategic Manufacturing Skill
Council (SMSC) to train workforce for defence equipment manufacturing, ship building-
repair, homeland security equipment and firefighting equipment.

• The Central Board of Secondary Education (CBSE) has mandated the appointment of a
special educator for children with learning disabilities so that they could be assimilated with
other students. This directive came as a part of “inclusive practices” philosophy of CBSE and
guidelines of ‘Right to Education” Act.

• In an attempt to improve health care infrastructure in West Bengal, nine new medical colleges
will be opened and out of which five will be government-run while the other four will be set
up under the Public Private Partnership (PPP) model.

INVESTMENT RATIONALE

Demand Supply Value

Demand
(for any price)
Supply Wealth

Demand-Supply Gap
Indian society puts a premium on knowledge and its acquisition - spending on education has
figured as the single largest outlay for a middle class household after food and groceries. With
its rapidly expanding middle class, India’s private expenditure on education is set to increase
manifold.
India’s public expenditure on education (centre plus state expenditure) has ranged between 3.8
% and 3.95% from 2004-05 till 2010-11 and this needs to increase if it were to come at par
with the expenditure incurred in the developed economies.
While there has been some private investment in setting up educational institutions, there
remains a noticeable mismatch in demand and supply, particularly in high quality institutions.
Example - only 1 out of approximately 150 applicants gets admission into the elite Indian
Institute of Management (IIMs) compared with the ratio of 1:10 for MIT. It is therefore not
surprising that an industry chamber has recently reported that 460,000 Indian students spend
over USD 14 billion each year in acquiring higher education overseas.
To reduce the demand supply gap in school education, it has been proposed in the 12th FYP
(2012-17) to set up 6,000 schools at block level as model schools to benchmark excellence. Of
these, 2500 will be set up under Public Private Partnership. Moreover , easy availability of
education loans to students has been proposed in Budget 2012-13 to set up a Credit Guarantee
Fund for this purpose.
Market Size

The education sector in India is poised to witness major growth in the years to come as India
will have world’s largest tertiary-age population and second largest graduate talent pipeline
globally by the end of 2020. In FY 2015-16, the education market was worth about USD 110
billion and is expected to reach USD 117.4 billion in FY 2016-17. Currently, higher education
contributes 60.7 % of the market size, school education 38.1 %, pre-school segment 1.6 %, and
technology and multi-media with the remaining 0.6 %
Higher education system in India has undergone rapid expansion. Currently, India’s higher
education system is the largest in the world enrolling over 70 million students while in less
than two decades, India has managed to create additional capacity for over 40 million students.
At present, higher education sector witnesses spending of over INR 46,200 crore (USD 6.78
billion), and it is expected to grow at an average annual rate of over 18 per cent to reach INR
232,500 crore (USD 34.12 billion) in next 10 years.
India’s IT firms are working with academic institutions and setting up in-house institutes to
groom the right talent as these companies move to Social Media, Mobility, Analytics and Cloud
(SMAC) technologies.

Public funding crunch;

Inadequate facilities. Public spend in education accounts for over 60% of overall education
spend. Yet, current educational facilities are inadequate in terms of both quantity and quality.
Seats available for post-higher-secondary (tertiary) education are JUST sufficient for 12% of
the population in the age group. Technical and professional education receives only 4% of
budgetary spend and, therefore, a large number of private technical/ professional education
institutes have cropped up to meet the capacity shortfall. With serious budget constraints faced
by public authorities, large private participations are required to expand infrastructure, create
adequate access and improve the quality of education.

PUPIL TEACHER RATIO

Pupil Teacher Ratio

45
40
35
30
25
20
15
10
5
0
Primary Upper Primary Secondary Senior Secondary Higher Education

Figure 5 Pupil Teacher Ratio: (Supply side Constraints)

Perceived quality gap in public education.
Perceived quality gaps are driving even lower income students to shift from public education
to private. This shift is happening even in the case of elementary education, despite the free
tuition, mid-day meals, uniforms and books offered by public elementary education. With the
proportion of students pursuing private education rises, there is a significant increase in private
investment entering the sector.

Rising household spend:

Rising affordability and increased awareness of the strong benefits of education, particularly
technical and professional, has led to a major increase in the demand for education. The share
of education in total consumer spend rises sharply from 1.5% for the poorest. Factors such as
lack of public funding, households’ willingness and ability to pay for quality education and
public authorities’ pro-active stance on education reform are driving private investment in the
sector to over 10% for the richest. All This indicates that as per head income increases in the
country and more people transcend the poverty line, there should be explosive growth in
household spend on education.

Education reforms:

Despite the rising demand for skilled manpower as a result of India’s rapid economic growth,
employers find a majority of new graduates are unemployable on account of inadequacies in
the educational system. Consequently, legislative efforts are underway to reform the education
system. Important education bills are at different stages of deliberation in the Indian Parliament.
These target of improving quality, accessibility, transparency and competition in the sector.
The Central government’s pro-active stance and supportive statements have created the
impression that private investment in education is reaching inflection point for explosive
growth

Private Sector in education:

India’s private education industry is expected to grow to USD 45 billion by 2016. It is expected
that the dynamic growth in private investment in education is because there is strong and rising
demand for such services and the public education system is not equipped to supply the same
in terms of quality and quantity. Pending key changes in public policy on education system,
these 3 major trends are expected to emerge over the next 5 years:

 Incumbent private players are going to consolidate their position in formal education
 The integrated K12 model will come under attack with greater specialization at pre-school
and secondary and higher levels
 New private education players is to compete in unregulated but highly lucrative areas such
as skill and vocational training and private coaching.
Market Structure Segmentation:

Pre-schools
Pre-schools are outside the official formal educational system and there is little government
spend on this segment. It enables private entrepreneurs to legally operate pre-schools for profit.
Rising urbanization and the increasing proportion of women joining the workforce, rising
aspirations for quality education for offspring, and affordability are major factors driving the
strong growth in this segment. High growth, low entry barriers, low-funding requirements and
the virtual absence of public policy restrictions make this segment attractive. It is observed that
private revenue in the pre-school segment at USD 2bn in 2012 and US$2.9bn in 2015. RTE
norms are expected to shift the balance in favors of pure pre-school and against integrated pre-
schools with K-12.

Aspects of Pre-School –

 Strong growth, low funding requirements

As per World Bank data, the size of the pre-school segment in India was about USD 1.3
billion in 2005. Industry estimates CAGR for the segment at 38%. The segment size was
USD 2 billion in 2012 and USD 2.9 billion in 2015. Pre-schools lay the foundation for
formal education. They typically cater to the age group of 1 to 4 years and may also offer
nursery, junior kindergarten and senior kindergarten classes. Rising urbanization, increased
proportion of women joining the workforce, rising aspirations for quality education for
offspring and improved affordability are major factors driving the strong growth in this
segment. High growth, low entry barriers, low-funding requirements and the virtual
absence of public policy restrictions – including the policy relating to not-for-profit status
– make the segment attractive to investors. With low capital requirement, pre-schools
possess a highly scalable model, especially with regard to franchises.

Teacher Employment in Recognized schools

Teachers(in adult literacy/ non-recognized) + non- Teacher staff
16

14

12
5.02
10 4.95
Millions

4.85
8

4 8.9
7.53
6.59
2

0
2013 2017 2022

Figure 6 Distribution of workforce in School Education

 Focus on K-12 admission helps increase fees
Unorganized neighborhood institutions currently dominate the preschool segment.
However, this situation is changing: 11 major playschool chains and about 10 smaller
organized players are making strong headway in the segment. Fees charged by pre-schools
depend on the spending power of the local area in which they operate. Two hours of
playschool activity fees may be anywhere between `1,000-12,000/- per month in the major
cities. The amount is much lower in smaller towns. The revenue-expenditure streams for
pre-schools in India. Most parents enroll their children in play schools when they are a year
old, to meet the challenges of the entrance interview for admission to the K-12 school of
their choice.

Figure 7 Pre-School Revenue Stream

 Business model for pre-schools

Being predominantly neighborhood institutions, pre-schools address a micro market and
are driven by local conditions. Individual pre-school hence require low capital as compared
to other educational institutes. In addition, no education board regulates these schools.
However, branding and an internal set of teaching structures are increasingly becoming
mandatory due to the increasing demands of parents. All this, in turn, has thrown up a huge
opportunity for organized players that have the resources to open multiple centers.

 Financial models for pre-schools

Both at the EBITDA and at PAT levels, the own-school model is comparatively less
profitable than the franchisor model. However, the own-school model provides greater
quality control and cash flow certainty. Greater capital expenditure requirement under the
own-school model, however, makes the franchisee model more scalable. Better profit
margins are earned by opening own outlets than by being a franchisee. In the case of the
franchisee, one has to pay for the ongoing royalty and has to incur higher capital
expenditure as license fees paid to franchisor is taken as a part of capital expenditure or
sunk cost. Yet, access to better course structure, teacher training and most importantly, a
better-known brand name is shifting the preference in favors of franchisee models versus
the stand-alone neighborhood school.
 Table 3 PRESCHOOL MARKET SIZE

Table 4 PRESCHOOL ANNUAL REVENUE ESTIMATION

 K-12: large spend

While the size of spend in this sector is around US$75bn per year, the predominant part of this
comprises of public spend. The estimated revenues for private players in the K-12 segment was
USD 15 billion in 2012 and USD 20 billion in 2015. The RTE mandates private schools to
offer 25% of seats free to weaker sections and disadvantaged groups. All this coupled with
stringent and unequal penal provisions – such as compulsory closure for private schools (vs.
public schools) which do not meet RTE norms – is likely to deter fresh private investment in
the segment.

K-12 is the most regulated segment of India’s education sector. India has an elaborate
structure for K-12 education. While the size of spending in this sector is around USD 75 billion
per year, the predominant part of this is public spend. The opportunities for private players in
this segment are estimated at around USD15 billion and sees a CAGR of 15%. In addition to
the not-for-profit clause, private schools also face the RTE Act mandate that requires 25% of
seats to be given free to students from weaker sections and disadvantaged groups. Despite the
non-profit clause, 25% of the primary (standard I-IV), 21% of middle (standard V-VIII) and
24% of the secondary and higher secondary (standard IX to XII) students attend private
schools.

Institutions providing School Education in

2012-13
102558
131287

790640
401079

Primary Upper Primary Secondary Senior Secondary

Figure 8 Institutions Providing School Education in India

Asset-heavy business model

In the case of an asset-heavy model, apart from establishing a school as a trust / society /
section 25 company, the private education company creates two separate companies,
namely an infrastructure company and a management company. The infrastructure
company has all the assets i.e. land, building, furniture and provides the same to the trust
on a lease basis. The management company provides with services such as content,
accessories and teacher training and, in turn, charges fees. Such contracts are generally
long-term – a minimum of 30 years – if not, getting affiliation from boards could become
difficult.

Dry management – Asset-light business model

The long gestation period, coupled with substantial upfront capital expenditure
requirement under the asset-heavy model led some private education players to approach
local partners which have the ability to invest in infrastructure and are keen in being
involved in the sector. The private player plans and manages the operations of the school
and gets management fees in turn. Several existing schools also give away management
contracts to other private players.
Figure 9 K-12 Education Management structure

Figure 10 MAJOR K-12 PLAYERS

 Figure 11 REVENUE EXPENDITURE MODEL OF K12

PORTERS ANALYSIS FOR K-12

RTE to lead to defocusing on K-12 by private players
The RTE Act requires that for elementary education (standard I-VIII), private schools offer
25% of the seats free to weaker sections and disadvantaged groups. The government would
reimburse private schools for this. It is estimated that such reimbursements to be 3600 per
student per year. Our estimates suggest that such reimbursement would be considerably
revenue decretive for the private schools. Moreover, the Act puts severe teaching and non-
teaching infrastructure requirements on private schools, failing which they would face steep
penalties and even compulsory closure. Incidentally, for similar transgressions, public
schools would not face any specific and time-bound penalty. Such measures are likely to
deter fresh private investment in the segment. Even the existing players are likely to switch
from the asset heavy to the asset-light model. Further regulation in tuition fees in a few
states (Tamil Nadu and Maharashtra) will only add to the problems of private players.

Higher education:
Capital expenditure heavy:

Higher education, especially technical education, has been attracting large private
investment since 2005. Private opportunity in technical education is USD 7 billion in 2012
and is set to grow to USD 12 billion by 2015. General (non-technical) higher education
offers private education opportunity of USD 1.5 billion in 2012 and this is set to grow to
an estimated USD 2 billion by 2015. Legislative measures to strengthen accreditation,
guard against malpractices and set up an academic depository are likely to help the stronger
incumbents. Eminent foreign education providers are unlikely to make a large entry in the
segment as long as the non-profit tag remains attached to formal education. This should
also contain competition and further help the incumbents.

Universities in India
13 5 3
1 68 42

143
310

127

Central University State Public University

Deemed University State Private University
Central Open University State Open University
Institution of National Importance Institutions under State Legislature Act
Others

Figure 12 Universities in India:

 HIGHER EDUCATION SIZE ($BILLION)
Higher Education ($billion)

50 46.2
45
40
35 31.47
30
25 22.4
20
20
15
10
5
0
2008 2009 2012 2014

Figure 13 Higher Education Industry Growth

Percentage Enrollments in different Disciplines in

Post Graduation (2013-2014)
0.61
Agriculture & Allied
10.69 8.04 Commerce

9.34 IT & Computer

Engineering & Technology

20.58 6.34 Foreign Language

Home Science
4.83
Indian Language
0.21
8.78 Law
8.75
Management

0.76 Medical Science

16.92
4.17 Science

Figure 14 Percentage Enrolments in Post-Graduation in Different Disciplines

PORTERS FIVE FORCES ANALYSIS

Strong opportunity in technical education

The total spend in this segment is around USD 9 billion per year for general (non-
technical) higher education and USD 10 billion per year for technical / professional
education. Within this, opportunities for private education providers for general higher
education are around USD 1.5 billion and around USD 7 billion for technical / professional
education.

Type of business models – distance vs. class room

The classroom-based higher education model is capex-heavy, as it has various
infrastructure and staff requirements. Distance education is asset light and has a wider
reach, with local partners operating as selling agents as well as conducting examinations.
The model carries the maximum weightage of all the factors in hand, and contribute to the
maximum value of education in class vs distance study.

DISTRIBUTION OF WORKFORCE IN
HIGHER EDUCATION
Teaching Staff Non Teaching Staff
3.5

2.5

1.5

0.5

0
2013 2017 2022

Figure 15 Distribution of Workforce in Higher Education

Table 5 Features of classroom vs. distant learning model in higher education

Table 6 MAJOR PLAYERS IN HIGHER EDUCATION

Tutorials / Test preparations: An urban phenomenon
This is the most unregulated and unorganized segment of the Indian education sector. It is
estimated that the yearly revenue size of the industry at USD 4.5 billion in 2012 and at USD 8
billion by 2015. The unregulated nature of the industry has attracted much PE/VC funding.
Integrated classroom coaching, the dominant part of the industry, currently accounting for over
80% of the segment, is faced with numerous challenges. While ICT-based coaching is likely
to prosper at the cost of integrated classroom coaching, the process is likely to reduce the
overall pricing power of the segment.

 Easy : The coaching industry has evolved over the years based on the requirements of the
students. The current size of the industry segment is about USD 4.5 billion, with a CAGR
of 20%. The entire segment is catered to by private players. The coaching industry is mainly
an urban phenomenon – coaching in urban areas accounts for nearly 75% of the overall
coaching market. This caters to parents/students who are looking for extra help outside
school/college in order to improve their marks. It is by far the most unorganized and
unregulated segment in the entire education chain. Most coaching institutes start on a low-
scale, with teaching students next door, primarily at the residence of the student/teacher.
Business gains momentum when the same teacher is also a part of a school/college and is
promoted chiefly by word of mouth. The unit-level operating matrix for coaching institutes
is very attractive, as fees are generally received at the beginning of the classes. Investment
is required to scale up to full-fledged classes/new branches. However, once the same
reaches optimum level (generally in 2-3 years) it runs at an EBITDA of 40-45% and helps
fund other branches.
The RTE Act prohibits schoolteachers from offering private coaching. While similar
provisions prevailed in certain states in the past, such practices continue. Whether the RTE
norms effectively curb the practice of private coaching by schoolteachers remains to be
seen.

Scaling up is an issue : Coaching generally has a personal touch, as it starts with small
private/group tuitions. Classes grow in size because of one or two star teachers who generally
were at the launch. Post that, finding appropriate teachers to scale up is difficult. Moreover,
once the new teachers gain a name, it becomes even more difficult to retain them. There is
always a fear of star teachers leaving to start their own set-up or being poached by competitors.
This is the biggest roadblock to scaling up. In order to overcome employee-related issues, big
players are using strategies such as dividing one subject among 4-5 teachers. This reduces the
importance of star teachers. Further, the introduction of online classes/usage of VSAT / Internet
widens the reach and at the same time reduces the dependence on a few select teachers.

 From classroom to online coaching: There are 4 types of test preparation institutes
in India. These comprise:

1) Integrated classroom programs,

2) technology aided – virtual class,

3) portal-based learning, and

 4) distance learning.

With the growing IT usage in India, virtual class and portal-based teaching are attracting.
The coaching industry is mainly an urban phenomenon – coaching in urban areas accounts
for nearly 75% of the overall coaching market. The dominant classroom model is facing
challenges from ICT-based coaching more students than ever before.

I. Integrated classroom: Personalized counselling is the key driver in this area of test
preparation. It caters to students' requirements and career needs on an individual level.
Key market players in this segment are FIITJEE, TIME, IMS, Career Point, etc

II. Technology-aided – virtual class: Virtual classes replicate a real classroom with the help
of VSAT/VPN / broad-band via tie-ups with technology partners. Here students interact
with instructors online using audio and video-conferencing facilities. Through this
delivery platform, instructors deliver lectures at multiple locations simultaneously. This
helps minimize time and cost in terms of resource deployment. It also helps reach those
locations where setting up a full-fledged center may not be viable due to (1) non-
availability of resources (most importantly, competent teachers), or (2) lower number of
enrollments than the minimum required for profitable functioning. Everonn is the largest
player in this segment. Other players in this segment include Career Point and Edu comp.

III. Portal-based services: Such portals bring together applicants, students, alumni and
teachers on a social network. Very little initial investment is required in this model. The
services provided through such forums include discussion forums, ranking of schools
and colleges, application forms of institutes, entrance test preparation material, SMS
alerts, e-books and news, views and developments. Such forums generate revenues in
various forms, including banner advertisements on the portal, paid newsletters, paid
direct mail advertorials and sale of admission/ examination forms for specific
institutions. Of late, video-based teaching also takes place on such portals. Edserv, Edu
comp and Info Edge are some of the important players in this segment.

IV. Distance learning: Coaching institutes are well known for the simplified content that
they provide and the mock tests that they conduct. Many students opt to take only the
content and the test, either because this is a cheaper option compared to the classroom
based tutorials or because they prefer self-learning. This mode also helps reach
geographies where full-fledged classes are not present. The distance-learning arm of any
class is the most profitable, as it does not involve investing in infrastructure or teachers;
content once ready does not involve much cost. The major cost involved is of marketing
and setting up partners. IGNOU was one of the first Government Distance learning
institute. FITJEE, Career Point, Brilliant, Bansal and Resonance are some of the key
players in this segment. Since it is not regulated and can be run for profit, a large number
of deals take place in this segment.

 Challenges before the coaching industry: Integrated classroom coaching is

currently the largest component of the coaching industry, accounting for over 80% of the
overall revenue for the segment. This model is, however, facing two serious challenges.
First, this segment is facing problems of accessing adequate number of competent
instructors. The well-known instructors, on the other hand, create problems of high
attrition. Second, ICT-enabled coaching (mainly virtual class and portal-based teaching)
is more cost efficient and scalable than the integrated classroom coaching model. Yet,
 ICT-enabled services are being commoditized (inter alia, due to low capital investment
requirement), thus impinging on the pricing power of the coaching industry.

Strict implementation of the RTE norm debarring schoolteachers from offering private classes
or coaching would, on the one hand, increase the market size for the coaching industry and on
the other hand aggravate the shortage of skilled instructors. Once again, these factors would be
detrimental for the integrated classroom coaching model and beneficial for the ICT-based
coaching model. It is estimated that the share of integrated classroom coaching in the overall
revenue of the coaching industry to fall (from over 80% currently) to less than 70% in the next
5 years.

Market Size($ Million)

20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
2008 2013 2018

Higher Education Preparatory

Figure 16 Market size for Coaching for Higher Education Preparation:

Test preparation industry has grown out of few attractiveness of a selected few careers like
engineering, medicine, civil services and business management. Nearly 4 lakh students
took the IIT-Joint Entrance Examination (for the four year engineering course offered by
the Indian Institutes of Technology, IITs) last year, and another 230000 took the IIM
Common Admission Test for MBAs (2 year MBA programme at the Indian Institutes
of Management, IIMs). India’s test preparation market, or test prep, is the most visible
poster child of private participation in education. The attractiveness of a selected few
careers engineering, medicine, civil services and business management has ensured
disproportionate spending by India's middle class on test prep. It is estimated that this
market to be worth more than US$1.7bn, based on an approximate annual 2.1 million
students taking one of the professional entrance tests. About 1.6 million of these, or
75%, pay for some form of test preparation.

The opportunities in the underlying Ventures:

• Engineering test preparation

 • UPSC (Indian Civil Service) test preparation
• MBA test preparation
• Medical test preparation
• GRE/ GMAT/ SAT test preparation

Vocational training

To fulfil India’s growing need for skilled manpower across sectors and narrow the existing
gap between the demand and supply of skills, the Government of India targets imparting
nine or ten technical skills, including retail and hospitality, to 500 million citizens over the
next 10 years.

India has always faced serious challenges in producing sufficient skilled technicians. The
strong economic growth over the last decade and the consequent increase in demand for
such skills has further increased the demand for such skill providers. The key problem in
the area of vocational training is that the aspirants for such training lack the finance to
undertake such courses. The organized financial system also generally does not extend such
funding due to the high transaction cost for such small loans and the lack of bankable
collateral. Currently, prospective employers are coming forward to sponsor such courses,
often through in-house training facilities, backed by job guarantees at the end of the
training. As the scale of such training increases, this sector is likely to see rapid growth.

Teacher training is another developing segment in the Indian Education Industry.

However, this segment is yet in an initial stage of development. The teacher training
market, despite the obvious lack of trained teachers in India, is only about USD 15
million annually. This is due to low spending propensity among school management.
With the average private school teacher's base pay being Rs 10,000-12,000 per
month, management are unwilling to pay more than Rs 1,000 for teacher training
per head. In public schools, 97% of government budgetary outlay for education has
been going into salaries, leaving little surplus for activities such as teacher training.

When the Economy is growing at about 9%, the country has started experiencing a much
larger gap between the demand for skilled labour and the supply of it. It was on an
unprecedented scale. Initially, there were very few opportunities for skilled labour. But
today the 34 opportunities are multiplying beyond limit. The role of agriculture in the
national Economy in terms of its contribution to GDP is declining fast, being growing at
3.6 per cent and the contribution of the industry, particularly the services sector, is
increasing, at a rate of 10.3 %. Now, as the role of services sector is predominant, the
question of shortage of skilled labour, therefore, arises. That is why with a sense of urgency,
the government has initiated the national skill development mission, which the Prime
Minister announced. The Planning Commission and the ministry of labour have been doing
intensive exercise as to how this mission could be brought into existence and the skill deficit
could be mitigated.

Till now the larger avenues for development of skills were made available by the
government mainly through ITIs and ICTs. Despite all possible efforts and initiatives by
the central government to promote spread of higher education in India, the percentage of
 its GDP pending on higher education in the last couple of years has remained stagnant at
around 0.37% against 1.41%, 1.07% and 0.50% of US, UK and China respectively.
(Assocham) In the new mission, a prominent role is being assigned to the corporate sector
precisely because the corporate houses, people in the services sector and industry have first-
hand information as to where the jobs are likely to emerge and where there is a skill deficit.
The private sector will be involved in every stage of the mission, particularly, in designing
the process and supplying the faculty. It is proposed to set up 50 skill development centres
in the country. The thrust will be both in the manufacturing and services sectors. Some of
these centres will be owned and managed by the state with academic and intellectual inputs
from the private sector. Second, the state and the private sector will co-own the centres but
the larger say in the management like running and designing will be with the private sector.
The third will be exclusively with the private sector. This 3-tier model was never
implemented in India The private sector's involvement is important because resources of
the state are limited and there are competing wants. The earlier initiatives for skill
development failed to achieve much as the private sector had not come forward sufficiently
to upgrade and enhance the skill component till they started to feel the scarcity.

 NSDC to narrow demand-supply gap in manpower:

National Skill Development Corporation (NSDC) which was set up with a mindset of
promote national skill development mission which aimed to fulfill India’s growing
demand for skilled manpower across various sectors of society and narrow the existing
gap between the demand and the supply of skills in trained forces. The Finance Minister
announced the formation of union of the NSDC in their Budget speech of 2009-10. The
NSDC has a public-private ownership, in which 49% is owned by the Finance Ministry
and the remaining of 51% is held by industry bodies such as bodies like CII, NASSCOM,
FICCI and Assocham. The Government of India is targeting to impart skills to as much
as 500 million individual citizens over the next 15 years’ time period. NSDC was set up
with the mere objective of achieving 40% of the target, or 150m trained people, by 2022.
NSDC enters into a JCV with leading players for 14-15 years. The private partners
provide equity and NSDC provides loans at a concessional 70% rate with an in tax
working day for the initial period of 2-6 years. Training is in 11 technical skill-sets
including retailers and hospitality table and desk for organizing various events. The course
fee for technical courses ranges from `4,000 to `25,000.

MAJOR PRIVATE PLAYERS IN EDUCATION INDUSTRY

Career Point
Founded in 1993 by Pramod Maheshwari, Career Point provides coaching services to high
school students for various competitive entrance exams, including IIT-JEE, AIEEE and All
India Pre-Medical Test. The tutorial sessions are provided through classroom programs
conducted via a network of company-owned and franchised centres. The company has over
250 faculty members (excluding those from franchisees) comprising graduates in engineering
and science. Over the time it has built up content of over 11,000 pages of text and 12,500
minutes of video lectures for various tutorial services. For the students who are not able to
attend regular classroom programs, it offers distant-learning programs consists of
correspondence and test courses, appropriately designed to provide effective education to
students in a simple and transparent manner. The Career Point recently made a foray into the
sector of Education Consultancy and Management Services (ECMS), catering to K-12 and
higher education. In addition, to address a larger base of potential students, it has introduced a
technology driven education delivery platform for content through ‘TechEdge-Class’.

Figure 17 Revenue Break-up

Educomp

Educomp Solutions Limited, incorporated in 1994, is a diversified education solution provider

and one of the biggest education private companies in India. Educomp Solutions reaches out
to over 26,000 schools and 16 million learners across the globe. It has over 27 offices around
the world including an office in Canada, 21 in India, 2 in Singapore, one in Sri Lanka, and 2 in
the United States. Further, the company operates via its different subsidiaries (such as
AuthorGEN, Threebrix E-Services, Learning.com, AsknLearn Pvt Ltd, Singapore) and through
its associates including Savvica, Canada. The company intends to reach out to more than 18
million educators through their products, services and solutions, and targets to be amongst the
top five education companies worldwide, by the end of 2016.

Figure 18 Revenue Break-up

NIIT
Founded in 1981 to help the nascent IT industry to address its human resource challenges,
NIIT, a leading global talent development corporation, offers education solutions to
individuals, enterprises and institutions across 42 countries. It offers learning solutions in IT,
business and knowledge process outsourcing, banking and finance, executive management
education, communication and professional skills.
A leading global talent-development company, NIIT helped in building up the skilled
manpower for the global industry. Incorporated in 1981 to help the growing IT industry address
its human resource challenges, it has grown to be one of the world’s largest talent-development
corporation, and offers learning solutions to individuals, enterprises and institutions across 40
countries. Its training solutions in IT, executive management education, and communication
and professional life skills reach 6 million educators every year.

Figure 19 Revenue Break-up

Tree House Education & Accessories
Tree House operates the highest number (235) of preschool that are self-operated under its
‘Tree House’ brand, which is spread in 35 cities around India (predominantly covering major
parts in Maharashtra, Gujarat, Karnataka, Rajasthan and many of small areas Andhra Pradesh).
It runs 148 such chains, the rest are run as franchisees, which serves over 6,000 students,
primarily ranging between 2 to 6 years old. Tree House operates the highest number (235) of
preschool that are self-operated under its ‘Tree House’ brand, which is spread in 35 cities
around India (predominantly covering major parts in Maharashtra, Gujarat, Karnataka,
Rajasthan and many of small areas Andhra Pradesh). It runs 148 such chains, the rest are run
as franchisees, which serves over 6,000 students, primarily ranging between 2 to 6 years old.
The chain provides the best of knowledge of supply and operation services.

Revenue Break-up

Government Initiatives:
Some of the other important steps taken by the Government of India are:
• The Union budget of FY 2016-17 has made the following provisions for the education sector:
o Atleast,10 public and 10 private educational institutions is to be made as world-class institutes
o Scheme to provide INR 500 crores (USD 73.35 million) to promote entrepreneurship among
Schedule Caste or Scheduled Tribe (SC/ST)
o Digital Repository for all the school leaving certificates and diplomas
o INR 1,000 crores (USD 146.75 million) allocated for higher education financing
o Rs 1,800 crore (USD 250 million) allocated to develop 1500 multiskill development centres
o 62 new Jawahar Navyodaya Vidyalaya (JNV) for providing quality education
o Digital literacy schemes to be promoted to cover additional six crore rural households
o Aimed to skill one crore youth population in the coming 3 years under the Pradhaan Mantri
Kaushal Vikas Yojna
• The Government of India has recently signed a financing agreement with The World Bank
to provide IDA credit of USD 300 million, for the Quality Improvement Project for Madhya
Pradesh Higher Education that aims at improving learners outcomes, especially of
disadvantaged groups in selected Higher Education Institutions to increase the effectiveness of
the higher education system in Madhya Pradesh.
• The Human Resource Development (HRD) Ministry has entered into a merger with private
companies such as Tata Motors Ltd, Tata Consultancy Services Ltd and Hubtown Ltd, to
develop three Indian Institutes of Information Technology (IIITs), through Public-Private
Partnership (PPP) at Nagpur, Ranchi, and Pune.
• Mr Narendra Modi launched the initiative called as Skill India – ‘Kaushal Bharat, Kushal
Bharat’. Under this initiative, the government has set a target of training of more than 40 crores
citizens by 2020 that would enable them to find work opportunities. The initiatives launched
include different programmes like: Pradhan Mantri Kaushal Vikas Yojana , National Policy for
Skill Development and Entrepreneurship 2015, Skill Loan scheme, and National Skill
Development Mission (NSDM).
o Pradhan Mantri Kaushal Vikas Yojana is the flagship program under the Skill India Initiative,
which includes incentivising skill training by providing financial rewards on completion of
training program for the participants. Over the next year 24 lakh citizens are believed to be
benefitted from this scheme.
o National Policy for Skill Development and Entrepreneurship 2015 is India’s first integrated
program that aims at developing the skills and promote entrepreneurship among educators
simultaneously. The mission of this programme is to provide skills to the Indian youth rapidly
with high standards and simultaneously promote entrepreneurship. Consequently, creating
wealth and gainful employment for the citizens.
o Skill Loan Scheme is designed to disburse loans worth Rs 5,000 (USD 75.5) to Rs 150,000
(USD 2,200) to 3.4 million citizens planning to develop their skills in the coming five years.
o The National Skill Development Mission (NSDM) is developed to speed up the
implementation of skill development activities in India by providing robust institutional
framework at the central as well as at the state level.
• The Japan International Cooperation Agency (JICA) will provide training for bureaucrats
from the HRD ministry, experts from school boards and primary school teachers in
Mathematics and Science Subjects to enable them to imbibe the skills to formulate lesson plans
which can stimulate students' learning and thus can contribute to improve the quality of
education.
• The Government of India has designed a Digital Employment Exchange programme that will
enable the industries to find suitable workers and job-seekers to have employment opportunity.
• The Government has also started the National Web Portal for the promotion of National
Apprenticeship Scheme for Graduates, Diplomas and 12th pass-outs vocational certificate
holders.
• India and Australia have signed a Memorandum of Understanding (MoU) to promote the
common interst between the two countries in the areas of higher education and research, such
as technical and professional education, schools, vocational training.
• The National Skill Development Corporation of India (NSDC) under a Public Private
Partnership promoted by the Ministry of Finance, Government of India hase signed a
Memorandum of Understanding with Centre for Research & Industrial Staff Performance to
explore national and international opportunities to strengthen the skill development of people
in India.
Analysis of Elasticity of Indian Education Market:
Per Capita Income Elasticity:
Per Capita (Current) Elasticity has been calculated for Primary, Upper Primary and
Secondary Education Enrolments in graph no.1. Per Capita (Current) Elasticity of Senior
Secondary Enrolments is given in Graph no.2. Per capita (Current) Elasticity of Higher
Education is given in graph no.3.
The percentage of increase in enrolments w.r.t increase in per capita income is higher at
initial years in 1960`s and 1970`s. Slowly it started decreasing in the run up to 2010.

Elasticity of Enrollments in Primary and Upper Primary

Education Enrolments w.r.t Per capita Income
9
8
7
6
Axis Title

5
4
3
2
1
0

Axis Title

Elasticity Elasticity2

Figure 20 Graph 1 : Elasticity of Enrollments in primary, Upper Primary Education w.r.t Per Capita Income(INR) at current
 Elaticity of Senior Secondary Enrollments w.r.t Per capita
income(Current)
0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13(P) 2013-14(P)

Senior Secondary

Figure 21 : Graph.no.2 : Elasticity of Enrollments in Senior Secondary Education w.r.t Per Capita Income(INR) at current

Elasticity of Higher Education Enrollments w.r.t Per capita

income(Current)
2.5

1.5

0.5

Figure 22 : Graph.no.3 :Elasticity of Enrollments in Higher Education w.r.t Per Capita Income(INR) at current
 • Few globally renowned educational institutions
• Huge demand – estimated 150 mn population in 18-23 age group.
Growing economy with numerous employment opportunities.
• Growing middle class with increasing incomes STRENGTHS
• Large talent pool of educated students
• Importance given to spoken and written English makes us a better fit
in the globalized world.
• EDUSAT – a satellite dedicated for education sector. It has
strengthened the distance education system in India.
• Growth in supporting sectors like the stationeries, educational aids etc

• Shortage of trained faculty to meet the increased demand

• Highly complex and unclear regulatory framework at Central &
State level creating Regional imbalances.
• “Not for profit” tag in formal education
WEAKNESSES • Quality of the students passing higher education need to be
improved to make them employable
• Lack of concentration on the primary education
• Lack of infrastructure to educate the economically backward class
and also inadequate number of universities.
• Less acceptance of distance education in the industry
• More Importance given to Rotting than inquisitive learning
•

• Unsaturated demand for quality global education

• Low GER of 15% in Higher education as compared to 84% in USA
• Sharp decline in dependency ratio predicted in the next 30 years
• India is expected to emerge as a Global hub in education in Asia
Pacific region
OPPORTUNITIES
• Low focus on R&D
• Tutoring jobs are being outsourced from the western countries to
India.
• Use of latest technological aids for education.

•
•

• High time lag in introduction of reforms due to various reasons

• Deterioration in quality of education specially in private sector due to
lack of availability of trained faculty
• Over regulation – Control over course curriculum, entrance tests, fees
THREATS etc
• Excess concentration on English might cause loosing out some of our
local languages in the long run.
• Rising costs of the education
• Brain drain due to the lack of importance for research & development
• Reluctance of educated people to take up the traditional jobs like the
ones in small scale industries.

Figure 23 SWOT ANALYSIS OF INDIAN EDUCATION SECTOR

 Current Non Value
Growth Scalabilty Comment
Size Regulated Creation
Current penetration is low but with
Pre School      increasin urbanisation, this sector will grow.

With the growing awareness regarding

K-12      importance of eductation, the requirement
is bound to increase at high rate.
No. of people of age 15-24 years enrolled in
Higher Education      educational institutes grew from approx. 30
mn (2004-05) to 60 mn (2009-10*).
Popularity and reach of internet increasing.
Multimedia in
Private School
     This will increase the use of multimedia in
schools.
Demand increasing due to increasing
Coaching Classes      competition to get admission into premier
institutes.
Vocational
Demand increasing with growing
Training / Skill      manufacturing sector.
Development
Low growth market (because of reusability
Books      of books)

Figure 24 SUMMARY of DIFFERENT SECTORS OF INDIAN EDUCATION MARKET

Conclusion:
1. Market size of Higher Education is expected to grow from 6000 million dollars in 2008
to 18000 million dollars in 2018.

2. It was found, the money spent on education by Indian households is increasing at a fast
pace.

3. Porter`s Five forces analysis revealed that bargaining power of buyers & threat of
substitutes are low in Education sector.

4. Pupil Teacher ratio is found to be relatively high in Senior secondary and low in Higher
education which needs to be improved.

5. Private players like Edu comp, Career point & NIIT are making a mark in providing
tutorial services for School Education & online coaching for competitive exams.

6. Public Expenditure on education as a percentage of GDP is slightly increasing year on

year from 3.40% 2008-09 to 4.29% in 2012-13.

7. It can be concluded that the Education Sector in India comes under Oligopoly market
Structure.

8. The Pricing strategy followed in Education Sector has been found to be of third degree
of Price discrimination.
References:
1. http://www.aicte-india.org/
2. http://mhrd.gov.in/
3. http://en.unesco.org/
4. https://india.gov.in/topics/education
5. http://www.educomp.com/
6. http://www.niit.com/
7. http://mospi.nic.in/Mospi_New/site/home.aspx