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
Mr. Pralhad Jadhav
Master of Library &
Information Science (NET Qualified)
Senior Manager @ Knowledge
Repository
Khaitan & Co
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