Kota, Rajasthan: It’s not the coaching schools alone that are hurting because of a government proposal to switch to a single entrance test for engineering schools. From hostel operators and caterers who feed out-of-town students to owners of video game parlours and rickshawallahs, everyone in Kota is feeling the pain.

According to students and test-prep companies, around 100,000 students come to Kota—a town of 1.5 million people—every year from across India to enrol in coaching schools. The test-prep industry generates 2,000 crore every year, providing a livelihood to not just those who run the coaching centres, but every product and service industry.

PhotograpLearning curve: Giant advertisements featuring teachers at a mall. Photograph: Pradeep Gaur/MintGaur/Mint

“If coaching centres are getting affected, then you cannot expect the allied economy to stay healthy," says Pramod Maheshwari, chief executive of Career Point coaching school.

Sachin Jha, a businessman who has written a book on the town’s famous Bansal Classes and Kota, says the contribution of the test-prep industry to the local economy can’t be understated.

For example, hostels within a 5km radius from the hub of the coaching centres charge not less than 4,000 for a bed per month— comparable to the cost in a metropolis such as Delhi. Many hostel rooms today are empty.

Kota has seen a real estate boom and the town’s infrastructure has been growing on the back of coaching schools. The town’s first mall has come up and two more are being built. Hostels in Kota’s Rajiv Gandhi Nagar have been delivering their owners a return of 24% a year, said Jha, who graduated from IIT-Delhi in 1994.

“If for any reason, the coaching industry slumps, then it will have an impact on everything," he said.