Govt
plans to ease rules on foreign investment in education sector
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.”
Source |
Mint – The Wall Street Journal | 11th February 2020
Regards
Librarian
Rizvi Institute of Management
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