Budget 2020: Sourcing via FDI, ECB could boost research infra in education

FM has allocated Rs 99,300 cr for education sector in FY21 and Rs 3,000 cr for skill development

Finance minister Nirmala Sitharaman's announcement on steps like enabling sourcing funds via foreign direct investment (FDI) and external commercial borrowings (ECBs) in education could boost research infrastructure across institutes, say experts.

"It is felt that our education system needs greater inflow of finance to attract talented teachers, innovate and build better labs. Therefore, steps would be taken to enable sourcing External Commercial Borrowings and FDI so as to able to deliver higher quality education," Sitharaman said in her budget speech on Saturday. She proposed to provide about Rs 99,300 crore for education sector in 2020-21 and about Rs 3,000 crore for skill development.

The finance minister's other major announcements for the sector included an announcement over national education policy (NEP) to be made soon apart from proposal for starting degree-level full-fledged online education programmes.

"In order to provide quality education to students of deprived section of the society as well as those who do not have access to higher education, it is proposed to start degree level full-fledged online education programme. This shall be offered only by institutions who are ranked within top 100 in the National Institutional Ranking framework. Initially, only a few such institutions would be asked to offer such programmes. India should be a preferred destination for higher education. Hence, under its “Study in India” programme, Ind-SAT is proposed to be held in Asian and African countries. It shall be used for benchmarking foreign candidates who receive scholarships for studying in Indian higher education centres," Sitharaman said in her budget speech.

While many are yet to read the fine print, announcements in the budget speech for the education sector seem to have met some expectations by industry and academia. Experts believe the move on ECBs and FDI could pave way for more foreign capital that could ease funding issues for higher education institutes.

Allowed in 2016, FDI in higher education had failed to kick off due to conditions attached with the announcement which had made it detrimental to foreign investments, said Rajan Saxena – Vice Chancellor, SVKM’s deemed university NMIMS.

"We will have to wait until the time rules are framed by respective ministries of human resources, finance and commerce. Overall the changes are likely to be incremental in nature rather than a big push to education especially since Finance Minister had mentioned of need to respond to aspirational India. I expected a significant change in education infrastructure, regulations and financial outlay for higher education given the New Education Policy which is likely to be announced soon," Saxena added.

However, according to Federation of Indian Chambers of Commerce and Industry (FICCI) assistant secretary general and education consultant Shobha Ghosh, the ECB and FDI announcement could fill the investment gap in the sector, though it must allow both public and private institutions for alternate funds for research, scholarships and infrastructure development. "Each university needs to develop centres of excellence and will need substantive investment," said Ghosh.

On the other hand, Akhil Shahani, Managing Director, The Shahani Group believes the move would now allow trusts to raise funds through the route, which could result in relaxation in Foreign Contribution (Regulation) Act (FCRA). "This would make foreign investment in education broad based. Again, easing FCRA requirements for trusts would be needed for ECBs. Foreign capital is much needed as there is a lot of investment required for education. Foreign debt can be at a lower interest rate and easier terms than debt from cash strapped Indian banks," said Shahani of the Shahani Group which runs the Thadomal Shahani Centre for Management and Thadomal Shahani Centre for Media & Communication, apart from online learning app 'Ask.Careers'.

The Indian Institutes of Management (IIMs), however, are not worried even as full details on the policy is awaited, said Debashis Chatterjee, Director, IIM Kozhikode. "We need to wait for the full details of this policy to see whether it would mean global schools and colleges opening campuses in India or simply foreign capital getting invested in Indian private institutions".

On the other hand, edtech firms including test prep and online learning platforms have welcomed the government's proposal for promoting online education. "The budget announced that certain examinations will be moved online. Technology is the future of education and the more we can do to get our students to study online, the stronger our education system will be. However, we need more clear and concrete steps that could upgrade our education system significantly. A lot more thinking and fast execution is needed to make education advanced and personalised." said Zishaan Hayath, CEO & Co-Founder, Toppr.

"Online education is the way forward if we have to provide affordable, accessible and quality education in the country. Apart from that, the proposed Common Eligibility Test for recruitment to non-gazetted govt posts will result in saving a lot of time and effort of aspirants. And of exam conducting bodies because students prepare for a multitude of exams every year; with each government body having a different selection procedure and requiring separate preparations. However, it remains to be seen what steps the government will take to ensure this," said Shobhit Bhatnagar, CEO & Co-Founder, GradeUp

Commenting on the online degree programme announcement by the finance minister, Saxena said that the move could possibly held improve general enrollment ratio (GER) provided there were no restrictions imposed by MHRD/UGC or any other regulatory body.

"The only yardstick for permission has to be the NIRF rank and institution accreditation. Today there are no rules and the UGC does not look at online education favourably. Jurisdiction issues should be resolved once and for all. Institutions should be allowed to reach out to the national market and those that are categorized as Category –I or II should also be allowed to access foreign markets where demand for Indian Education, especially among Indian Diaspora is high," Saxena added.

While online programs had been one of the demands made by FICCI to the government, Ghosh said that clarity will be sought regarding jurisdiction restrictions earlier imposed on deemed universities for online programs. "There are some restrictions with regards to deemed universities outside the jurisdiction and the whole purpose was defeated. So this move is welcome. We need to find out whether other jurisdictional restrictions have been removed or not," Ghosh said while adding that the Ind-SAT proposal could boost quality intake from neighbouring countries which otherwise had been an issue for institutions so far.