The Indian Education sector is amongst the largest in the world, with an extensive network of more than 14 lakh schools with over 20 crore students enrolled and more than 850 universities and 40,000 higher education institutes. The overall market size of different segments from the education sector are set to grow with a compounded annual growth rate of 11% to 20% over next three years, says a research report by the rating agency CARE Ratings.
It says, "The long term outlook of education sector in India is favourable as key drivers include, higher enrolment as well as efforts to ensure lower drop-out rates in schools along with, factors such as greater proportion of population in the school going age, growing middle class population with increasing income levels, increasing private spend on education, even as challenges relating to access to and participation in education, quality of education imparted, sectoral efficiency, governance and management, and financial commitment to education development also continue to persist."
According to the ratings agency, the market size of the pre-school segment is estimated at Rs13,000 crore in FY2017 and is expected to grow at a CAGR of over 20% over the next three years to reach Rs22,500 crore.
The K-12 market (schooling from Kindergarten to 12th grade covering primary and secondary education) is estimated at Rs16.65 lakh crore in FY2017 and is expected to grow at a CAGR of over 13% over the next three years to reach Rs24 lakh crore. Market size of higher education segment in India stood at around Rs22.30 lakh crore in FY2017 and is expected to grow at a CAGR of over 11% over the next three years to reach Rs31 lakh crore. Market size of the Indian coaching classes segment stood at around Rs21.70 lakh crore in FY2017 and is expected to grow at a CAGR of over 13% over the next three years to reach Rs31.50 lakh crore.
The Indian government would be releasing during mid-2018, final draft of the New Education Policy, which is expected to address changing dynamics in the education industry. Education sector in India is a mix of government-operated and privately operated educational institutions and allied education products and services providers. India has a significant young population, which calls for a robust education sector to harness potential for human capital. The sector is highly influenced by various government schemes and policies launched primarily to improve the quality of education and the planned expenditure through several schemes.
The education sector in India has witnessed a paradigm shift in recent times. Once operated primarily as a philanthropic or a nation building activity, it has since transformed into a 'sector in its own right. So far, basic primary education and certain specific institutions for higher education, like the Indian Institutes of Technology (IITs) and the Indian Institutes of Management (IIMs) have been the prominent parts of the Indian education sector. However, due to an increase in competition coupled with the increasing need to provide quality education and generate positive learning outcomes, the Indian education sector is slowly but steadily moving on the reforms track, CARE Ratings say.
"Of late," it says, "the Indian education sector has witnessed increased penetration by corporates in the K-12 as well as in the higher education institutes space. With the schools being not for profit, corporates have adopted a two-tier structure, wherein trust is created to run the school or higher education institute. The corporates are using a mix of franchisee and owned schools to scale up their K12 operations."
The entry of corporates and the growing number of institutes under an umbrella brand has revolutionised the concept of K-12 in India, the ratings agency says. "With schools being required to run on 'not for profit' motive, the corporates have adopted a two-tier structure, wherein a trust is created to run the school with the company's subsidiary or management company being the primary revenue earner for the services rendered to the school such as consulting, and teacher training. Corporates have adopted a mix of franchisee and owned schools model to scale up their operations," it adds.
As per the Right to Education (RTE) Act, the private preschools providing elementary education are required to admit 25% of the students from the weaker sections and disadvantaged groups and provide them free education. Moreover, the RTE also mandates closure of private schools if they fail to meet the stipulated teaching and physical infrastructure requirements. However, public schools are exempted from such penal provision. Such regulatory measures deter private investment in the segment. Hence, K-12 segment remains dominated by public sector schools in India, with government schools accounting for 76.2% of the total number of schools in India. However, the share of private schools has been increasing due to the growing awareness about importance of quality education and enhanced affordability, the report says.
Government v/s Private schools
With the Government's focus on providing the primary and secondary education across the nation, the total number of government schools in India grew at a CAGR of 1.2%, from 10 lakh during FY2008 to 11.2 lakh during FY2017. The government schools accounted for 76.2% of the total K-12 schools in India during FY2017. With the increasing shift towards private schools in the country, the total no of private schools in the country grew at a CAGR of 4.1%, from 2.4 lakh during FY2008 to 3.5 lakh during FY2017. Also, the share of private schools in the total no of K-12 schools in India grew from 19.6% during FY2008 to 23.8% during FY2017 due to the growing awareness about the importance of quality education and enhanced affordability, the research note says.
According to CARE Ratings, proportion of students enrolled with the government school stands highest at each level compared to the private schools, both aided and unaided, due to better reach of government schools to far flung areas of the country. Next to the government schools, the enrolment at private unaided schools have also been catching up especially in the metros and tier - I and II cities due to availability of better infrastructure facilities. The Net Enrolment Ratio (NER) of the Indian children in K-12 segment still remains lower than other developed nations of the world, which has resulted in a higher illiteracy rate in the country, it added.
Higher Education (HE) contributes to the national development by imparting specialised knowledge and skills. The segment targets about 13% of the Indian population in the age group of 18-23 years. There are three levels of qualification within the higher education segment in the country - graduation level, post-graduation level and doctoral degree.
All the colleges offering these courses need to be affiliated to a university, under purview of the central regulatory body - University Grants Commission (UGC). There are also individual bodies such as All India Council for Technical Education (AICTE), and Medical Council of India (MCI) responsible for the regulation, coordination and development of higher education in India. The higher education institutions in India are required to be run under a not-for-profit trust or society.
The Education loan scheme was introduced in 2001 by banks for facilitating higher education especially for the poor and meritorious students. Rising cost of education, preference for education in private institutions, which is 1.5 to 2 times expensive when compared to government institutions, easy availability of education loans in India is also one of the drivers of growth in enrolments in higher education segment. Education loans grew at a CAGR of 13% to Rs69,700 crore in FY2018 from Rs20,500 crore in FY2008, CARE Ratings says.
However, the report says, one of the key challenges has been the delinquencies in education loans, reflecting a harsh market scenario. The noon-performing assets (NPA) was 5.7% in FY2015, which rose to 7.3% in the following fiscal and further to 7.67% in FY2017.
With the growing student base across the country and the evolution of new courses, curriculum and competitive exams, the Indian Coaching classes segment has grown significantly. The private coaching classes segment provides training for almost all subjects, classes and area of study including school and college level, civil services exams as well as entrance exams for professional courses. Coaching classes also train students for international entrance tests and language proficiency exams.
The Indian Coaching market has always been characterised by the existence of numerous players, primarily, city specific or course specific, leading to a fragmented market. However, with the advent of organised players with high funding capacity the dynamics of the coaching class industry with respect to the classroom size or strength of students in a batch, and use of technology in education has undergone a drastic change.
According to the 71st Survey conducted by the NSSO nearly 26% of the total number of students in the country took private coaching and tuitions with 36% belonging to secondary and higher secondary classes while 20% were graduation students.
Drivers for Growth
CARE Ratings feel that over the coming years, education sector in India is set to grow at much higher space. It says, "Rising income of households and demand for quality education coupled with a large young population and low gross enrolment ratios offer tremendous growth opportunities in the sector. Meanwhile, Government initiatives to modernise the sector have also gained ground with private players and entrepreneurs undertaking investments to increase their share of the growing market. In addition to this, increased penetration of mobile telephony over the last few years has facilitated anytime, anywhere learning through e-learning and m-learning modules. All these factors augur well for the industry, which holds immense potential for further expansion and development."
Here are segment wise growth drivers as mentioned by the ratings agency...
Rising income levels
Increasing number of working women
Increasing awareness about importance of preschool education
Consistent shift towards private schools in India, due to growing awareness of importance of quality education and enhanced affordability
Government schemes: Sarva Shiksha Abhiyan and Mid-Day Meal scheme
Increasing number of enrolments
Large no. of courses offered and higher fees
Increasing willingness to spend on quality education
Growth of services sector
More women-oriented courses
Increasing awareness of education as a driver of prosperity
Coaching classes and vocational institutes
Higher competition for professional and vocational courses
Private schools rapidly adopting technology based teaching solutions
The government’s increased focus on providing computer literacy in schools through various programs
"Though India has made significant progress in terms of enhancing access to and participation in all levels of education, the overall picture of education development in the country is mixed and there are many persisting concerns and challenges relating to access to and participation in education, quality of the education imparted, equity in education, system efficiency, governance and management, research and development, and financial commitment to education development," the ratings agency concludes.