India is the second most populated country in the world, and has the world's largest population in the age cohort 5-24 years at 580 million. This represents a huge market for the education sector - India has over 250 million school going students. As per industry analysis by IBEF, India’s education market could be worth US$225 billion by FY 2024-25.
India was ranked 48th out of 112 countries on the English Proficiency Index in 2021. Its English-speaking population also enables the smooth delivery of educational products, including online programs. The government allows 100 percent foreign direct investment (FDI) in the education sector. Regulatory reforms in the works include plans to establish an overarching regulatory body for higher education - the Higher Education Commission of India (HECI) - which was proposed in the National Education Policy 2020.
Now the Indian government wants to "invite capital from everywhere" to support the country's need for quality education infrastructure and skilling resources for over 255 million youth in the 15-25 age group. Only 110 million youth out of that cohort are currently in educational institutions.
India also wants to improve its gross enrolment ration (GER) from 27 percent to 50 percent by 2030. Speaking to the media in August, the Union Education & Skill Development Minister Dharmendra Pradhan said that the government will be releasing new guidelines to facilitate the entry of foreign players in the education sector.
...we need to augment the existing strength, capacity and infrastructure in the education system. How do we do that? We must invite capital from everywhere. We must also ensure that market forces don't overpower the institutions and there is no commercialisation. So, anyone is welcome to our system with one expectation - that it should not be exploited. - Union Education & Skill Development Minister Dharmendra Pradhan
Growth drivers for India's education market
Increased telecom penetration coupled with internet accessibility at very low prices has resulted in a massive surge of online business opportunities.
With 451 million monthly active Internet users as on March 31, 2019, India is only second to China in the number of internet users. Internet penetration stood at 36 percent in early 2019, and is expected to increase to 829 million users by 2021. Further internet penetration in rural and urban areas will provide increased opportunities for expansion and growth even to traditional brick and mortar sectors of the economy.
Smartphone users are expected to reach the 859 million mark by 2022 from 468 million in 2017, an increase of 84 percent. Good quality affordable smartphones and the expansion of mobile / data connectivity services are driving mobile penetration in India.
These developments present a huge opportunity to take education online in India. Some of the reasons why, include:
- The deteriorating quality of school education in all but the top rung, expensive private schools. Local online education start-ups like BYJU’s and Unacademy have mushroomed across India to fill this void by offering innovative, interesting, interactive, and fun-based learning modules to school-going children to supplement and reinforce their learning. BYJU’s and Unacademy are both headquartered in Bengaluru and include prominent investors such as Sequoia and General Atlantic.
Many online programs are often taught by professionals and industry veterans. Such programs have greater acceptability due to the practical insights offered, and the ability to bridge the gap between theory and practice.
- Acute shortage of seats in universities for undergraduate courses. India has long established the concept of Open and Distance Learning (ODL) and includes universities such as Indira Gandhi National Open University (IGNOU), Delhi, Dr. B.R. Ambedkar Open University (BRAOU), Hyderabad, Nalanda Open University (NOU), Patna, among others. This model was dependent upon the guidance and supervision of teachers in brick and mortar colleges although teachers and students were not required to be present at the same place or time. One peculiar downside of the model thus was that students taking ODL courses were never considered to be on par with those who actually attended regular classes. Today, instruction through online classes have raised the quality of education provided in these spaces by promoting a level of engagement similar to that found in traditional classrooms.
- Very few students in India can afford to go abroad for higher education. International universities, seeing the huge demand and acknowledging the resource gap, have begun collaborating with Indian universities to offer courses at affordable prices. With the liberalization of India’s foreign investment policy, it won’t be long before foreign universities independently set up presence in the country and offer both physical and online courses.
How India is making investment opportunities more accessible
India is now the second largest market for e-learning after the US, and was forecast to hit the US$1.96 billion mark in market value with 9.5 million users by 2021. As e-learning continues to grow more popular, India’s own education technology (Edtech) sector is expected by industry analysts to become a US$30 billion industry over the next decade.
Recently, in June 2022, Noida-based Edtech platform PhysicsWallah, also known as PW, became the seventh Edtech to enter the unicorn club, having raised US$100 million in a Series A funding round from Westbridge and GSV Ventures. Other unicorns in the Edtech sector are Byju’s, Eruditus, Unacademy, Lead, Upgrad, and Vedantu.
The Indian government has undertaken several measures to improve the quality of education in the country and make secondary and higher education accessible to a larger proportion of its population. The steps taken are:
- Encouraging public private partnership (PPP): In August 2019, the Maharashtra International Education Board (MIEB) signed a collaboration agreement with Google to advance EdTech vision in India. This includes utilizing Google tools and technologies like Google Classroom and G Suite for Education to facilitate online learning for students and teachers.
- Allowing 100 percent FDI under automatic route: From April 2000 to December 2019, India’s education sector received FDI worth US$3 billion.
- New Education Policy 2020: Drafted in 2019, it aims to increase the focus on early childhood care, reforming examination system, improving teacher training, and restructuring the education regulatory framework.
- External Commercial Borrowings (ECBs): Proposal to allow ECBs to fund projects being set up to promote education in India.
Other notable government steps to promote online education in India are as follows:
- Usage of Information and Communication Technology (ICT) in education curriculum to improve the effectiveness and delivery of education. 805 master trainers/ key resource personnel across India were oriented on ICT curriculum for students and teachers by 2018.
- e-pathshala has been developed by the NCERT (National Council for Educational Research and Training) to promote and disseminate educational e-resources. Till December 2018, 3,444 audios and videos, 698 e-books (e-pubs) and 504 flip books were made available on the online portal and mobile app.
- National Repository of Open Educational Resources (NROER) initiative to collate comprehensive resources across all stages of teacher and student education. Till December 2018, 13,635 files – including 401 collections, 2,722 documents, 565 interactive, 1,664 audios, 2,581 images and 6,105 videos were made available on the portal.
- The ‘Study Webs of Active Learning for Young Aspiring Minds’ (SWAYAM) is a portal for online courses with classes ranging from high school (grades 9 to 12), to undergraduate and post-graduate levels. The National Institute of Open Schooling (NIOS) is providing 44 online courses at the SWAYAM portal to promote education through e-learning methods.
- National Digital Library of India (NDL) is an online repository of learning resources with more than 15.3 million digital books available online.
Rise of online education businesses
The above factors show that India is an ideal destination to invest in the online education business. India has a huge market and has a well-established and cost-effective software industry that can support the implementation of EdTech business ideas, from the novel to traditional learning segments.
According to Statista estimates, the Indian Edtech industry is valued at US$2.8 billion and expected to reach US$10.4 billion by 2025. There are about 9,043 EdTech startups in India.
The digital learning market in India is categorized into following segments: K-12, test preparation, online certification, skill development, and enterprise solution. The major growth drivers of these segments include a large addressable market, convenience, price advantage, as well as pandemic-led disruptions, aided with ever evolving technology capabilities.
More platforms are now innovating to provide tailored products for their target audience, by offering value-added courses like group discussions, live projects, career counselling sessions, and internships etc. besides regular courses. Additionally, more advanced features like personalized dashboards, accurate performance tracking, and skill mapping are also offered to users by premium institutions in order to gain traction.
Technology is being leveraged to provide an immersive learning experience to users through improved interfaces to ensure better knowledge acquisition. Trends like simulation of concepts, level advancement badges, and incentive-based learning are driving user engagement on Edtech platforms like BYJU's and Cuemath.
During the pandemic, India was among the leading markets for global venture capital funding in education, following China and the United States. According to data from analytics firm Tracxn, between January and August 2021, Edtech players attracted a whopping US$3.81 billion in funding.
Growth opportunities and challenges in India's education market in the post-pandemic period
As per a UNESCO report, over 91 percent of the world’s student population was affected by the pandemic. Educational institutions across India temporarily closed to contain the spread of the pandemic, impacting more than 320 million learners in India. Such unexpected and prolonged closures over the last three years compelled schools, colleges, and coaching (tutorial) centers to explore alternative methods of keeping the learning going and completing courses on time, despite the challenges and disruptions.
Institutions now use online platforms like Zoom, Microsoft Teams, Skype, WhatsApp, etc. to provide live and recorded classes to the students.
However, infrastructure challenges remain due to variations in internet connectivity and availability of devices – smartphones, tablets, laptops, and computers – in many parts of the country. In such cases, teachers put in extra efforts during the lockdown period, such as sending scanned copies of texts over email or sending short recorded videos over WhatsApp to address specific doubts. This ensured smaller sized files were sent to students saving on data pack costs and addressing connectivity concerns. Yet, educators knew they had to supplement these sessions, if possible, with additional classes and tutorial sessions once schools reopened.
Consequently, it is not surprising that in the post-pandemic period, the online learning model is increasingly being supported by offline centers with the emergence of a hybrid model - now wholeheartedly embraced by Edtech firms. Byju's Aakash, UpGrad, Vedantu, PhysicsWalla, 99+mytuitions app, Utkarsh Classes are among several Edtech players that are setting up brick-and-mortar centers.
This trend towards a hybrid proposition comes as students no longer feel constrained by mobility restrictions to stick to e-learning and seek in-person teaching and a classroom atmosphere.
Funding for the Edtech sector has also declined - reducing by 50 percent in Q2 2022 calendar year, necessitating fresh business strategies by Edtech players.
Foreign companies and universities intending to explore the Indian market have multiple options if they wish to set up here – as an unincorporated entity (branch office or liaison office) or an incorporated entity (wholly owned subsidiary or limited liability partnership). The federal regulatory body All India Council for Technical Education (AICTE) has no regulatory framework for online degree and diploma courses.
While certifications are not recognized by the government, degree and diploma courses are recognized by the University Grants Commission (UGC), which is a statutory body under the federal Ministry of Human Resource Development, and is charged with coordination, determination and maintenance of standards of higher education.
A foreign entity willing to offer UGC-recognized degree or diploma courses online must be a Higher Education Institution (HEI). An HEI is an institution deemed to be a university covered under the UGC Act, 1956, which imparts higher education or research by means of conducting regular classes or through open and distance learning systems or through an online education system.
The following criteria must be met by HEIs to gain approval to offer online education:
- The online portal must be verified and approved by the expert committee of the UGC.
- The online content should have a minimum four quadrant 'approach' – video lectures, e-content, self-assessment, and a discussion forum.
- Only non-technical courses can be offered online, that is, courses in the fields of engineering, law, medicine, dental, pharmacy, nursing, architecture, physiotherapy, applied arts cannot be offered through online medium.
Higher Educational Institutions offering online education must:
- Be at least five years old;
- Have a minimum score of 3.26 on a 4-point scale by the National Assessment and Accreditation Council; and
- Be in the Top-100 in the National Institutional Ranking Framework for at least two years.
Since the COVID-19 crisis, education instruction and study patterns have drastically changed in the country. The lockdowns accelerated the adoption of the online learning model, which was already on its way to becoming a booming market in India.
More users - educators and students - are getting familiar with online platforms and digital format education resources. In the post-pandemic world, online tools will enhance key gaps in imparting classroom instruction, facilitate personalized tutorial services, besides all manner of upskilling programs.
The sudden transition to e-learning between 2020-2021, however, exposed various pain points in the internet and education infrastructure – which offer scope for business opportunities in the sector.
What now appears par for the course is that more and more users will turn to digital alternatives to supplement or meet their education needs. And, India, with its vast consumer base and technology capital is well poised to become a global education investment hub. What remains is for regulators to catch up with market needs - and present signaling from the government indicates that this might soon come to be.
This article was originally published in May 2020. It was last updated August 3, 2022.