Why India’s Education Market Should Excite Foreign Investors

Posted by Written by Sunny Makhija Reading Time: 9 minutes

India is the second most populated country in the world, home to nearly 1.35 billion people.

It also happens to be a young country with half of its population under the age of 25, representing a huge potential market for the education sector.

As per a report by Technopak, India’s education market was valued at US$100 billion in 2016, and is expected to almost double to US$180 billion by the end of 2020.

India’s education market: Key growth drivers

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 is forecast to hit the US$1.96 billion mark in market value with 9.5 million users by 2021.

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. In July 2019, the EdTech company BYJU’s raised US$150 million in funding led by the Qatar Investment Authority (QIA).
  • New education policy: 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.

Understanding the revenue model for 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.

Here we profile two leading companies in India’s online education sector.


Established in 2011 by Byju Ravindran, BYJU’s is one of the country’s few unicorn online education companies heavily investing in its technology infrastructure to expand across India and the world. In March 2019, it became the world’s most valued EdTech company at US$5.4 billion.

BYJU’s operates on a freemium model, where a limited amount of content is offered for free and the rest of its features are available at a price or by paying a premium. With its engaging content, BYJU’s has been able to retain a substantial number of its users from year to year. Till May 2019, BYJU’s had more than 35 million registered users and an overall renewal rate of 85 percent. It had over 2.4 million paid subscribers – up from 1.26 million in June 2018. BYJU’s posted a net profit of US$2.8 million on revenue of US$188.8 million for the FY 2018-19.


Another online education company in India, Unacademy works on a similar freemium model. It was founded in 2015 by Gaurav Munjal, Hemesh Singh, and Roman Saini. It runs more than 1,500 live classes daily and more than 1 million recorded sessions.

Revenue dilemma – how to monetize?

Back in May 2016, Gaurav Munjal of Unacademy explained that some of the probable ways in which his EdTech start-up could earn revenue, apart from YouTube ads, was by taking a share of the contributions made to educators, include personalized sessions with the educators, and a subscription or a freemium model.

Another popular way to monetize such platforms would be to broadcast ads during play time, similar to what YouTube and Facebook does.

Evidently, there is money to be made and several start-ups have jumped onto the online education bandwagon in the past 12-18 months. Depending on the firm’s size, scale of operations, and business plan, an appropriate revenue model can be adopted. For reference, it may prove valuable to initially use an already established video steaming platform like YouTube to host lectures. Once the firm has established its brand name and a user base in the market, then a more complex freemium model can be adopted.

Growth opportunities amid the coronavirus outbreak

The coronavirus outbreak has accelerated the expansion of online education around the world. As per a recent report by UNESCO, over 91 percent of the world’s student population has been affected by the outbreak. Educational institutions across India have temporarily closed to contain the spread of the pandemic, impacting more than 320 million learners in India.

The unexpected and prolonged closure is compelling 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 are using 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, such as sending scanned copies of texts over email or sending short recorded videos over WhatsApp to address specific doubts. This ensures smaller sized files are sent to students saving on data pack costs and addressing connectivity concerns. Also, teachers plan to hold additional classes and tutorial sessions once schools reopen, in order to supplement the online sessions.

Kota, Rajasthan is the hub of competitive entrance exam coaching centers in India. The lockdown has compelled these centers to start running online classes for engineering and medical school aspirants. Career Point, one such institute for competitive examination preparations, has just launched its ‘eCareerPoint’ app to offer online courses on medical, engineering, and other entrance examinations.

Vocational training institutes, which offer diploma courses to plumbers, electricians, toolmakers, machine operators, beauticians etc., have traditionally relied on hands-on-training in classrooms, are now designing online courses. Where practical physical training is necessary, these institutes are collaborating with industry and service providers to offer internship arrangements to provide well-rounded exposure to the aspiring students.

The Directorate of Vocational Education and Training (DVET), seeing the impact of COVID-19, has directed the Vocational Training Institutes in Maharashtra to give two hours-worth of online classes to students to minimize the disruption in their training during lockdown. DVET has requested faculty members to come up with interactive and innovative ways to teach such courses online. Even Patliputra University (PPU), Patna (Bihar state) has started running online courses for students of vocational courses.

Leading multinational technology companies like TCS, Microsoft, and Google are offering a number of tools to ensure continuity of classes amid lockdown period:

  • TCS is offering free access to its virtual learning platform, TCS iON Digital Glass Room;
  • Many schools in India are moving to Microsoft Teams, a unified collaboration and communication tool from Microsoft to ensure continuity of classes; and
  • Google Meet, a video conferencing tool from Google, has made its premium features available for free till September 30.

Significant surge in user base

As a consequence of the lockdown, online education companies in India are witnessing a surge in the number of users who wish to continue learning from their homes.

BYJU’s has observed a 60 percent growth in the number of new users after announcing that it would be making its classes free. Higher grade students are using the platform to revise their concepts while younger age students are using the app to learn new concepts in an interactive and fun way.

Unacademy is providing 20,000 live classes, free of cost, on its platform to ensure continuity of learning. They have also opened up their platform for institutions to conduct their classes online – free of cost, without any limitation of hours, or limits to the number of classes. In the month of March, it witnessed its growth triple – in terms of the number of users watching its free live classes (with 30 million minutes of watch time recorded every day).  

Various education technology companies in India, such as Classplus and Extramarks, are building innovative solutions during the COVID-19 pandemic using cloud technologies to better engage the users.

India’s regulatory regime

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.

In its Budget 2020, the federal government announced major reforms for education and skill development sector with allocation of US$13.17 billion and US$398 million, respectively. The key policy measures are:

  • Proposed – degree-level, full-fledged, online education program to be offered by institutes ranked in the top 100 by the National Institutional Ranking Framework.
  • Proposed – steps to be taken to leverage external commercial borrowings and foreign direct investment in education sector. Foreign investors may be allowed to repatriate a portion of their income instead of requiring them to plough back all their earnings into their Indian operations.
  • Finance Act, 2020 – institutions providing education will be allowed to operate as charitable trusts / societies eligible for 100 percent tax exemption – upon the satisfaction of prescribed conditions. Further, these institutions would be exempt from the levy of Goods and Service Tax. The prescribed tax exemptions (which so far were permanent unless specifically cancelled) for all charitable purposes, including education, will be restricted to five years requiring renewal on expiry of five-year period.

India’s online education market outlook

Amid the COVID-19 crisis, education instruction and study patterns have drastically changed in the country.

The lockdown has accelerated the adoption of the online learning model, which was already on its way to becoming a booming market in India. Virtual classrooms and various online tools are enabling better interaction between teachers and students daily and more users are getting familiar with these platforms.

What would in normal times require an intense amount of advertisement and marketing blitzes or forced reforms – is now, due to the peculiar circumstances triggered by the pandemic, cultivating new norms of behavior and acceptance among students and educators alike. Moreover, the large-scale use of online education media has also exposed pain points – which can be accordingly addressed, creating enough scope and business opportunities in the sector.

What now appears inevitable or 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 an education investment hub.

About Us

India Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Delhi and Mumbai. Readers may write to india@dezshira.com for business support in India.

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