Headline

Industry structure

Published On

Nov 30, 2011

Abstract
The education sector in India is on the concurrent list of the constitution, and hence, is regulated by both the centre and the state. Although the Indian government has been investing in promoting literacy and education, their efforts remain largely focused on elementary schooling (schooling upto class VIII). Due to the demand-supply gap in the sector, private sector participation has been increasing across all stages of education.

Key Issues
- What is the structure of the education sector in India across stages? - What are the various business models being adopted by the private sector? -

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Introduction
Education is a concurrent item in the Indian constitution - and thus is regulated by both the Centre and respective state governments. This leads to over regulation, especially in the higher education segment, which have a multitude of governing bodies. Multiple regulations have also created disparities in the number of institutions, infrastructure and quality of education across different states. Of these, the "not for profit" diktat is a major factor constraining investments in the education sector. This rule has also resulted in the emergence of various business models and exploitation of legal loopholes to evade this regulation. Although the government has been investing in promoting literacy and education, its efforts remain largely focused on elementary schooling. Secondary and higher education have not yet been accorded priority as it is necessary to first create adequate infrastructure and provide incentives to universalise elementary education. The government has been running a number of schemes to promote elementary education, many of which have been successful. However, the government needs to ramp up its efforts to set up more higher education institutions, which continues to remain low in number despite increasing private sector participation.

Structure and review of education

K-12 education
K-12 education comprises the different levels of schooling (kindergarten to Std. XII) in India. Pre-primary schooling begins at 4-6 years of age for a child; who completes junior college (Std XII- higher secondary education), at age 17-18.

Structure of K-12 education

Schools in India are affiliated to different boards (curricula). The boards develop the curriculum and conduct exams for various schools across the country. Government schools follow either the central or state curriculum, while private schools are free to choose their curriculum. Aided private schools, however, have to follow the state curriculum.

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Last-mile delivery of education is carried out either by Central or state government institutions, or by institutions owned and managed by societies, non-profit companies, and trusts. The organisation structure of K-12 institutions based on ownership has been depicted in the chart below.

Ownership structure - K-12 education

Kendriya Vidyalayas (KVs) - The Kendriya Vidyalaya Sangathan is an autonomous organisation under the Ministry of Human Resource Development. As of 2009-10, about 978 Kendriya Vidyalayas schooled over 10 lakh students across the country. These schools were primarily set up to educate the wards of central government employees on transfers, including Defence and Paramilitary personnel, by providing a common programme of education. All KVs are affiliated to the Central Board of Secondary Education (CBSE), Delhi. Navodaya Vidyalayas - The Navodaya Vidyalayas Samiti is an autonomous organisation under the Ministry of Human Resource Development. In 2009-10, there were 573 Jawahar Navodaya Vidyalayas in the country, with a combined strength of over 180,000 students. These schools were set up to provide free quality education to talented rural children. Students are selected on the basis of a merit test called the Jawahar Navodaya Vidyalaya Selection Test. These schools coach from Class VI onwards till Class XII and also enable lateral entry in Class IX and XI. Sainik Schools - Sainik Schools, which were established as a joint venture between respective states and the Centre in 1961, are governed by the Sainik Schools Society under the Ministry of Defence. They were established with the primary objective of bringing public school education within the reach of the common man and groom individuals for the National Defence Academy. In 2008-09, there were close to 25 Sainik Schools, which are affiliated to the CBSE. State run schools - Each state government operates schools in their respective cities, towns and villages to provide education to those children who cannot afford to enroll in private schools. These are mostly affiliated to the State Boards. A majority of them are run jointly by the state and central governments in conjunction with the local bodies. 3 of 20

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Private schools - Private schools are set up by private trusts, societies or companies established under Section 25 of the Companies Act and cater to middle and upper middle class population. These schools are affiliated to either the respective State Board, the CBSE or ICSE. Of late, private schools are also offering international curricula like the IB and IGCSE. While private schools exist in considerable number, government-managed schools still outnumber them owing to the significance attached to primary education/ literacy by the government in the past few decades . However, in the case of higher education, government ownership reduces, as can be seen below:

Structure of school education by management (2008-09)

Source: MHRD

Penetration of education among different age groups is higher in case of primary education and reduces at higher levels due to the large number of dropouts. Over the last few decades, the gross enrollment ratio (GER) has been improving across K-12 enrollments due to the government's efforts to spread elementary education. Although dropouts remain high, especially in the secondary & higher secondary classes, the percentage of dropouts has been declining over the past many decades. GER in elementary education rose steadily from 32 per cent in 1950-51 to 100.3 per cent in 2007-08.

Trend of GER in school education

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Source: MHRD

The steady fall in dropout rates suggests that the government's efforts to reduce the same, through schemes like the mid-day meal scheme have been partially successful. Dropout rates for elementary education declined from 73 per cent in 1980-81 to 42 per cent in 2008-09. However, a reduction in dropout rates does not imply that the child is properly educated, as in many parts of the country, children attend schools only to get free meals or other incentives, and do not attend the remaining classes.

Historic trend in school drop-out rates

Source: MHRD

There are over 1.31 million schools in India, which educate 237.5 million students across primary to higher secondary levels. Both the number of schools in the country and enrollments increased at a CAGR of 3 per cent from 1997-98 to 2008-09. 5 of 20

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Number of schools

Source: MHRD

The Indian pupil-teacher ratio (PTR) at 1 teacher for every 34 students at the primary school level is substantially high as compared to the world average of 21, and the developing countries average of 27.

Pupil-teacher ratio in India - K-12

Source: MHRD

Many state-funded schools in India, especially those in the rural areas, lack even basic infrastructural facilities. Though the enrollment ratio is based on the figures provided by local bodies, in practice, many schools operate with much lower number of

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students. The quality of education in remote village schools, especially for primary education, is quite dismal.

State-wise no. of institutions and enrolment at K-12

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As the statistics reveal, despite legislative actions to increase access to education and massive public expenditure through social welfare schemes, the government has not been able to entirely achieve its objective of universalising quality elementary education. The private sector has stepped in to fill this gap, as indicated by the change in ownership composition of schools over the last few decades. The share of private unaided schools increased from a mere 1.6 per cent in 1973-74 to 13.8 per cent in 2008-09. Conversely, the share of government-owned (both central and state government) schools dropped from 93.3 per cent in 1973-74 to 80.5 per cent in 2008-09.

Trends in composition of school managements

Source: MHRD

However, private participation in the education sector has not been restricted to setting up schools, which is an unattractive proposition for entrepreneurs given its non-profit nature. Instead, private businesses have realised opportunities in other areas like coaching classes, providing educational infrastructure to schools, etc.

Higher education
While 12 years of schooling is mandatory for entry into any graduate-level programme, diploma programmes offered by polytechnic colleges and other institutions grant entry at both post grade 10 and post grade 12 levels. The structure of higher education in terms of stage-wise progression is depicted below.

Higher education - Progression structure

Higher education is usually completed between 18-23 years of age. There are four principal levels of qualification within the higher 9 of 20

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education system in India: Diploma courses: These are available at the undergraduate and postgraduate level. At the undergraduate level, the duration varies from 1-3 years; postgraduate diplomas are normally awarded after 2 years of study. Bachelors/Undergraduate degrees: These require 3 years of education (after Std XII). In some places, there are honours and special courses available, which need not be of longer duration but involve intensive study. Bachelor degrees in professional fields such as agriculture, dentistry, engineering, pharmacy, technology and veterinary medicine generally take 4 years. For architecture and medicine, it takes 5 years and 5.5 years, respectively. Other bachelor degrees, for example, in education, journalism and library sciences, are treated as second degrees . A bachelor's degree in Law can be attained either as an integrated 5-year degree course or as a 3-year course as a second degree. Master's degree programmes and professional programmes: These programmes are normally spread over 2 years. It could be coursework without a thesis or it could be based on research alone. For some postgraduate programmes in the area of engineering and technology, admission is done on the basis of a Graduate Aptitude Test in Engineering (GATE). Professional programmes like Chartered Accountancy are another alternative at the post-undergraduate level to post-graduate programmes. Pre-doctoral/Doctoral programmes: These are undertaken after completion of the Master's degree and may lead to M.Phil or a Ph.D. These programmes could either be completely research-based or can include course work as well. Ph.D. is awarded 2 years after an M.Phil. or 3 years after Master's Degree. Students are expected to write a thesis based on original research in order to obtain the doctorate. The organisation structure of higher education institutions based on ownership has been depicted in the chart below.

Ownership structure - Higher education

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Universities (central and state) - A university is an institution of higher education and research which grants academic degrees in a variety of subjects. A university provides both undergraduate education and postgraduate education. In India, universities can either be established by an Act of Parliament or by State legislatures. Those established by an Act of Parliament are the central universities and the ones set up by the State legislatures are state universities. As of 2006-07, there were 20 central and 229 state universities. Deemed universities - The Central government, on the recommendation of the University Grants Commission (UGC), declares an educational institution as a Deemed University after certain standards are met, through gazette notifications. A Deemed University status enables educational institutes to design their own syllabus and course work. They also get the autonomy to set their own guidelines regarding admission and fees. Some of the Deemed Universities are also allowed to grant degrees on their own name. In early 2010, the government de-recognised about 44 deemed universities having 119,363 students at the undergraduate and post-graduate levels. In addition, there are 2,124 students pursuing research at MPhil and PhD levels and another estimated 74,808 students pursuing distance education programmes. As many as 41 of the 44 deemed universities have several constituent institutions under them, which would further swell the number of affected students. As of 2006-07, there were 109 deemed universities in India. In addition to the Centre, state governments also have the right to confer deemed university status by recommending the same to the UGC or through a legislation. Institutes of National Importance - These institutes have been defined as one that plays a pivotal role in developing highly skilled personnel within the specified region of the country/state. Only a chosen few institutes make it to this coveted list and are usually supported by the Government of India or even international institutes to develop centres of excellence in research, academics, and other such elite streams of education. The current list of 13 institutions with INI status is as follows: 11 of 20

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Indian Institutes of Technology (IITs) (11) National Institutes of Technology (NITs) (19) Indian Institutes of Management (IIMs) (13) National Institute of Fashion Technology (NIFT) (13) Indian Institute of Science (IISc), Bangalore Indian Statistical Institute, (3) All India Institute of Medical Sciences, New Delhi Post Graduate Institute of Medical Education and Research, Chandigarh Jawaharlal Institute of Postgraduate Medical Education & Research, Puducherry Sanjay Gandhi Post Graduate Institute of Medical Sciences, Lucknow National Institute of Pharmaceutical Educational and Research (NIPER) (5) Dakshin Bharat Hindi Prachar Sabha, Chennai Sree Chitra Tirunal Institute for Medical Sciences and Technology, Thiruvananthapuram Rajiv Gandhi Institute of Petroleum Technology, Rai Barelli Open Universities - Open universities provide distance education to people who are unable to pursue regular courses. Distance education is provided on academic, technical and professional subjects. These universities offer undergraduate, post graduate and doctoral programme. They also offer diploma and certificate level courses. There are 14 Open universities in India at present as follows and have educational centres in various states of India: Indira Gandhi National Open University Dr. B R Ambedkar Open University, Hyderabad Karnataka State Open University Nalanda Open University Netaji Subhas Open University Kota Open University Madhya Pradesh Bhoj Open University Tamil Nadu open University Yashwant Rao Chavan Open University Dr. Babasaheb Ambedkar Open University, Ahmedabad Pt. Sunderlal Sharma Open University, Chattisgarh U P Rajarshi Tandon Open University, Allahabad Uttaranchal Open University, Nainital KK Handique State Open University, Guwahati Other autonomous institutions - In addition to the above mentioned institutions, there are also other institutes of higher learning which enjoy autonomy; for example, the Indian Institute of Advanced Study, Shimla. Colleges - Colleges are established either by the Central/state governments or by private bodies or trusts and are mostly affiliated to some university, though there are a few independent institutions too. Colleges can be classified under four broad categories based on kind of courses offered (professional/vocational), their ownership status (private/government) and their relationship with the university (affiliated/university owned).

Types of colleges
University colleges - These colleges are managed by the university and are generally situated in the university campus. 12 of 20

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Government colleges - Government colleges are managed by state governments. As in the case of other colleges, the university to which these colleges are affiliated, conducts their examination and lays down the courses of studies and awards the degrees. Professional colleges - Professional colleges usually function in the disciplines of medicine, engineering and management. They are sponsored and managed either by the government or by private players. Privately-managed affiliated colleges - Most of these colleges are founded by privately owned trusts or societies. But these institutes are also governed by the rules and regulations of the university they are affiliated to. Though initially started up as a private initiative, the state government also funds some of these colleges. Privately-managed unaffiliated colleges - These institutions are typically set up by corporates and bank on their reputation to gain credibility with the student as well as employer community.

Vocational education
Vocational education at the certificate level is offered by over 1,500 institutions in the country in the areas of agriculture, business, commerce, health and para-medicals, home science and humanities in addition to engineering trades.

Distance education
In India, there are 66 distance education institutions, functioning in 60 universities, besides 14 National Open Universities that offer distance education programmes. the Indira Gandhi National Open University (IGNOU), New Delhi, is one of the largest open universities in the world and caters to about 1 million students globally.

Growth in higher education

The system of higher education in India has grown impressively since independence. The number of institutions imparting higher education increased from 516 in 1947-48 to 27,729 in 2008-09, while total enrollments rose from 0.2 million in 1948 to 18.6 million in 2008-09.

Growth in higher education

Source: MHRD and IndiaStat

The number of universities and Institutions of National Importance increased from 27 in 1950-51 to 409 in 2008-09, while 13 of 20

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the number of colleges imparting general (non-technical) higher education rose from 370 to 14,146 during the same period. Since 1991, when economic liberalisation began, professional higher education has recorded greater growth than all other stages of education, growing at a CAGR of 13 per cent over 18 years up to 2009. Increased focus on professional education has resulted in the government setting up additional institutions of national importance. The XIth 5-year Plan proposed to set up seven new IIMs by the end of 2012. These IIMs will come up in the following cities: Ranchi, Rohtak, Jammu and Kashmir, Rajasthan, Chhattisgarh, Uttarakhand and Tamil Nadu. In addition, eight new IITs were established in 2008-09 - Bhubaneswar (Orissa), Gandhinagar (Gujarat), Hyderabad (Andhra Pradesh), Patna (Bihar), Ropar (Punjab), Jodhpur (Rajasthan), Indore (Madhya Pradesh) and Mandi (Himachal Pradesh).

Growth in number of institutions

HE - Higher education * - Includes institutions for Post Matric Courses Source: CRISIL Research

Despite the rapid growth in the number of higher educational institutions offering professional courses, an analysis of branch-wise enrollment in higher education reveals that 79 per cent of students enrolled in the arts, science and commerce streams in 2008-09. However, this is still lower than 1999-2000, when these streams had accounted for close to 90 per cent of enrollments. Thus, the preference of students is increasingly shifting in favour of professional courses.

Stream-wise break-up of enrollment in undergraduate education in 1999-2000

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Note: Medical includes Medicine, Dentistry, Nursing, Pharmacy, AYUSH Source: MHRD

Stream-wise break-up of enrollment in undergraduate education in 2008-09

Note: Medical includes Medicine, Dentistry, Nursing, Pharmacy, AYUSH Source: IndiaStat

Teachers in higher education

The availability of highly qualified teachers is the most important index of quality. The total number of teachers in higher education increased to 5.89 lakh in 2008-09 from 4.7 lakh in 2004-05 . In 2008-09, of the total teaching faculty, 85 per cent (501,000) were 15 of 20

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employed in affiliated colleges and only 15 per cent (88,000) taught in universities. The student-teacher ratio (STR) was about 23 in 2008-09, with similar STR in the University departments and colleges and also in the affiliated colleges. The average enrollment per college was 610 during the same period.

Number of teachers in institutions of higher education in 2008-09

The situation with respect to student teacher ratio as indicated by NAAC shows an uneven distribution among high and low-grade colleges. For example, student teacher ratio in 'A' grade colleges is 20.4, whereas it is as high as 28.5 in all 'C' grade colleges. The student-teacher ratio by permanent teachers is 29.8 in 'A' grade colleges and goes up to 38 in 'B' grade colleges. This clearly indicates shortage of permanent teachers even in high-grade colleges. Over 75 per cent of higher education institutes in India are owned by the private sector. Of these, about 58 per cent are privately-funded, while the balance receive government aid.

Change in ownership composition of higher education institutions

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Source: UGC, Indian Council for Research on International Economic Relations

With the youth realising the significance of education, demand for institutions providing higher education has been growing. However, as public institutions are falling short of demand, private sector participation in this segment has increased dramatically over the years. In key streams such as engineering and medicine, about 86 per cent and 51 per cent institutions, respectively are privately managed. It is estimated that about 90 per cent of the 3,500-4,000 odd business schools are managed by the private sector. The emergence of private institutions differs among states depending upon the state government's participation. Hence, as can be seen below, the share of private institutions in this segment ranges from nearly 100 per cent in some states to 25 per cent in others.

Stream-wise enrollment in higher education

Stage-wise enrollment in Higher Education

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Management structure of medical colleges across states & Total seats offered

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Private sector business models in the education sector

The private sector has identified opportunities across all stages of education, and is operating through a variety of business models: Setting up private educational institutions either aided by the government or self-financed Serving as vendors of educational infrastructure and services to both government and privately-owned institutions. Serving as third-party educational administration companies to real-estate developers who may have a competitive advantage in procuring real estate required for establishing an educational institution but may lack the expertise in operating an educational business. 19 of 20

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Test administration business, which provides infrastructure and manpower required for administering tests primarily catering to the higher education segment. Publishers of books and instructional material such as notes, guides, and work-books, which serve as a supplement to the lessons at schools/colleges.

Business models

Going forward, in addition to the formal education segment, demand for informal education and ancillary segments also present significant growth opportunities. Private players operating either in one or a combination of these segments will grow faster.

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