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In her budget speech, finance minister Nirmala Sitharaman said opening up the sector will help ‘deliver higher quality education’. (HT)
In her budget speech, finance minister Nirmala Sitharaman said opening up the sector will help ‘deliver higher quality education’. (HT)

Govt plans to ease rules on foreign investment in education sector

  • Govt may allow foreign education players to repatriate a portion of their income in India instead of requiring them to plough back all their earnings into their Indian operations
  • Centre to frame rules to ease both fund flow to India and institutional collaboration and how a foreign educational player investing in India will be allowed to take back some money they make here

NEW DELHI : India plans to ease rules on foreign investments in education and open up the regulated sector, two government officials said, after the Union budget proposed to encourage foreign direct investment and external commercial borrowings (ECBs) in education. The government will frame rules in this respect, targeting foreign investors and universities keen on India’s capital-starved education sector.

The government may allow foreign education players to repatriate a portion of their income in India instead of requiring them to plough back all their earnings into their Indian operations, a key restriction that academics and experts have flagged for years as a disincentive to foreign investment in education. Industry bodies UK India Business Council and US India Business Council have said that they are eagerly waiting for a more liberal education sector in India.

“India will see more fund flow to existing educational institutions from foreign investors, and quality foreign education players coming and operating in the country will see a leg up . The budget proposal on ECBs and FDI will change the character of the education space," said one of the two officials cited above, both of whom spoke under condition of anonymity.

Finance minister Nirmala Sitharaman said in her budget speech that the step to open up the education sector to ECBs and FDI would help to “deliver higher quality education". “It is felt that our education system needs greater inflow of finance to attract talented teachers, innovate and build better labs," she said. Though FDI in education through the automatic route is already allowed, it has largely remained confined to the unregulated education technology space.

“While India is spending 3.1% of its GDP on education, there is a need to scale this up...the ECB and FDI route will be a great tool to enhance this expenditure to cater to a sector that needs urgent money for bettering its infrastructure. I see new-age institutions, liberal arts universities to benefit from this—both in terms of finance infusion and foreign university collaborations," said Kalpesh Banker, head of education consulting firm Edushine Advisories.

“While we hope to see more fund flow via ECBs from countries like the US and Japan, some top European institutions are expected to be the first movers in the academic space through independent degrees, centres of excellence and departments in existing good universities in India," the second official said.

The official said the Centre will frame rules to ease both fund flow to India and institutional collaboration and how a foreign educational player investing in India will be allowed to take back some money they make here.

Saurya Bhattacharya, partner at law firm Cyril Amarchand Mangaldas said, “For corporate-backed educational institutions, ECBs could be a welcome source of additional funding especially given the familiarity of corporates to this route and foreign lenders. But what remains to be seen is the extent to which the new rules provide flexibility on “eligible borrowers" and “permitted end use" criteria, which is especially relevant since educational institutions often need to deploy significant capital in real estate based infrastructure."

Nisha Desai Biswal, president of the US India Business Council said, “I understand that some legislation is going to be prepared on opening up the education sector. I think that is very important because India is an extremely attractive market for education, for university partnerships and investment. India is again under-served, there is so much room to expand higher education".

Kevin McCole, managing director at UK India Business Council said, “The finance minister in her budget indicated that something will come that will allow FDI in higher education. People will wait to see its formal announcement and then they will start taking decisions."

prashant.n@livemint.com

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