FM: FDI Welcome to Improve Higher Education Sector

The Government of India is planning to ease rules on foreign investments in the education sector and keep the regulated area open to encourage foreign direct investment (FDI) and External Commercial Borrowings (ECBs) in education. The government is in the process of framing rules that can bring together international investors and universities that are keen to develop to great heights.

Foreign investors may invest a portion of their income in India instead of sowing all their earnings into Indian operations. This is a crucial restriction as flagged by academics and experts. It acts as a disincentive to foreign investment in education. Entities, such as UK-India Business Council and US India Business Council are eager for a more liberal education sector in India.

The existing educational institutions are expected to see greater fund flow from foreign investors and quality overseas education players who show interest in trying their hands in the country. The budget amendments made on ECBs and FDIs has the potential to transform the education sector for good. 

As per the Finance Minister Nirmala Sitharaman, the move to open up the education sector helps to deliver higher quality education. Currently, the education system of the country needs higher funds inflow to attract talented teachers, to innovate, and to build better laboratories. Previously, FDI in the education sector was allowed; but it largely remained confined to the unregulated education technology space.

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India is spending 3.1% of its GDP on education and needs to upscale it. Giving a boost to ECB and FDI can enhance the expenditure to cater to the sector that requires immediate attention to bring about improvements. New-age institutions as well as liberal arts universities to benefit from this move in terms of finance infusion and foreign university collaborations. 

More funds are expected from countries such as the US and Japan. Some European institutions might be the first ones to step into the academic space through centres of excellence and independent degrees.

The rules to govern such investments will be framed such that they benefit the institutional collaborations and can still take back a part of their investment from here. 

Nisha Desai Biswal, President of the US-India Business Council, stated that it is essential to open up the Indian education sector as the country is an extremely attractive market for university partnerships, education, and investment. She expressed that India has so much room to expand higher education. 

On the other hand, Kevin McCole, Managing Director of UK-India Business Council, mentioned that the people are waiting for the formal announcement of provisions framed regarding FDI in the higher education sector. They make decisions based on how the rule turns out, he said.

For any clarifications/feedback on the topic, please contact the writer at apoorva.n@cleartax.in