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Is it possible to invest in more quality in education?

According to the IMD list, India has not been successful in terms of investment in education as a percentage of GDP. According to the rank list by IMD, it ranked among the bottom five countries in the world in this aspect.

By Reetika Bose Feature Writer

India has the third largest education system globally, after China and the US, with one million schools and 20,000 institutes for higher education. The common man's dream of making a better life for himself has made him focus more and more on education. Due to rising income level in India, middle class is focusing more on providing quality education to their children.

The Indian education sector sees a combined expenditure of more than $ 100 billion annually. Yet, it receives a surprisingly small percentage of impact investments. Unitus Capital’s India Impact Equity Investment Report 2013 estimates that equity investments made in education account for less than 3 per cent of share value among other investments.

Importance of Private Investment in Education sector

Education sector in India is finding it increasingly difficult to cope with the rising market demands and competition from global educational institutions due to low investments. It has become very imperative to have increased private investment to improve the infrastructure. The sector offers opportunities to increase capital because education still lacks good-quality infrastructure in the country and investors have the opportunity to build it. So, it is very beneficial to invest in Indian education sector for the private players.

Private Equity Investors have already started investing in educational projects due to increasing demand trend. India’s private banking giant HDFC (Housing Development Finance Corporation Limited) has confirmed that Private Equity investment have seen a tremendous growth since year 2005. HDFC has announced strategic plans to enter the education sector in India and approved an investment of 100 crores.

For investments like this, a lot many opportunities should be initiated by the government to maintain a strong pole in the Education sector globally.

Initiatives taken by the government for the infrastructural development of education sector are:

  • Rise in budget allocation for education sector by 17% i.e. Rs 150 crore for establishing new IITs and IIMs in India.
  • A proposal was proposed for setting up 6000 schools at block level as model schools in the 12th Five Year Plan.
  • Fund of Rs 1000 crore has also been allocated to National Skill development Fund as an initiative.
  • Provide incentives to private sector for creation of infrastructure for higher education
  • The government initiated measures to establish four regional centers of Indian Institute of Mass Communication (IIMC) to promote excellence in journalism.
  • The Budget provisions earmarked for education of girl children should be enhanced from Rs 1,265 to Rs 3,000 in 2012-13.
  • The allocation of Rs.636215 crore to UGC (University Grants Commission) which involves the finances for deemed and central universities across India.
  • Survey by apex industry body, ASSOCHAM, predicts an investment of Rs. 4,500 crore over next three years
  • To increase the IT spending from an estimated $356 million in 2008 to $704 million by 2012, reflecting in a Compounded Annual Growth Rate (CAGR) of 19 percent during 2007-2012

Where the Challenge lies?

An alternative view of investments in education is that they should be higher where the problems are greatest: that would mean greater effort to tackle inadequate education and more money for programs for children who are lagging behind.

  • Research shows that inadequate education is a problem for the whole of society—even the elites—and that everyone benefits from minimizing the number of low-educated people.
  • Education remains one of the most important duties of any government: it is a public responsibility to provide access to high quality education for everyone. Therefore, public investments need to ensure a good educational infrastructure for lifelong learning. But can private organizations, companies and nonprofit organizations provide additional supply.
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