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This piece explores the changes in the Indian education sector and how UK institutions can take advantage of the opportunities while navigating the complex legal structures.
India is at a critical juncture today. On the one hand it is a fast growing economy, waiting to take its position as a global force. On the other hand, India faces the Government-set challenge of training 550 million people by 2022 with skills relevant to the demands of a modern economy. It is truly a mammoth task, one that the current funding models may not be able to accomplish without participation from private and foreign partners.
Education structure
The education sector in India can be broadly classified into three segments:
· K-12 (kindergarten plus 12 years of schooling): The average child will enter kindergarten at three years old, complete 2 years and then 12 years of schooling before he/she is ready for higher education.
· HEIs (Higher Education Institutions): The HEIs provide undergraduate, graduate and vocational level university education.
· NFIs (Non-Formal Institutions): NFIs include preschools (18 months to three years), multimedia training schools and colleges and vocational training.
The K-12 and HEI segments can further be broadly subdivided into the public and private spheres, with the former receiving Government grants and the latter being funded privately. There is a significant shortfall in the supply of public education which is fast being filled by private education institutions. Although 100 percent foreign direct investment through the automatic route is permitted in the education sector, the present legal structure in India does not allow granting of degrees by foreign educational institutions, thereby restricting independent operations by foreign players.
Changes ahead
There is recognition within the Indian Government that the demand-supply gap in the education sector has to be bridged through opening up participation from international players. The Government has therefore introduced several important bills in the Parliament relating to accreditation, foreign universities, educational tribunals and unfair practices to completely restructure the legal and regulatory environment of higher education. However, political opposition has stalled the legislative progress of some of these measures.
Joint venture potential
That said the current legal and regulatory framework does provide opportunities for joint ventures between foreign educational institutes and Indian institutions in the K-12, HEI and NFI segments. The NFI segment is particularly ripe for foreign investment and strategic alliances, as it operates outside the regulatory constraints on foreign investment.
Careful planning, research and due diligence exercises are required to establish the basic foundations of the joint venture. The parties' respective contributions and rights, governance protocols, budgets, deadlock and dispute resolution mechanisms, exit routes, termination and other fundamental elements will need to be understood at the outset of the venture. Listed companies are subject to a number of additional requirements which must be considered, such as class tests and other rules which affect options and exit provisions in joint venture agreements.
Pitfalls and structuring
The Indian education sector is closely guarded by the Government and the judiciary has given it a very loosely defined "not for profit" tag. Accordingly, investments need to be carefully structured so that they cannot be construed as profiteering from students. Early stage tax and regulatory advice is a must so that such pitfalls can be worked through in a manner which befits the way investments can be made.
http://www.theinformationdaily.com/2012/11/21/indian-education-sector-opportunities-for-uk-providers
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