"We don’t need no education", sang the band Pink Floyd way back in the 70’s in the famous super-hit album, "The Wall". While this may sound all right for idealistic rebels, it certainly does not apply to the current Indian scenario.
India’s GDP has grown at a compounded rate (CAGR) of around 8.5% over FY2003-08, growing at over 8% in four of the five fiscals. GDP growth in FY2007 accelerated and came in at an impressive 9.6%. Even for FY2008, India logged in GDP growth of 9%, commendable by any standards. This makes it a hat-trick for India’s GDP, which has now recorded in excess of 9% GDP growth in each of the last three fiscals.
A robust performance by the Services Sector, which has been clocking strong double-digit growth rates over the past few years, has been primarily responsible for the high GDP growth rates recorded. The Manufacturing Sector has also grown at a decent rate in excess of 6-7% annually. This fantastic growth rate has been achieved due to the humongous talent pool available in India, which is a subset of its entire population. The biggest asset of any country is its people. India has a population if 108cr, the second-largest in the world. However, India’s literacy rate is just 61% and it ranks a disappointing 172nd in the world on this front. Thus, there is a short supply of educated manpower in India. In fact, there is a huge requirement of talent in the fields of Hospitality, IT Services, Retail, Financial Services and Aviation, to name a few. We believe India will have to significantly gear up its educational infrastructure to meet this demand.
Education is primarily handled by the government through its school infrastructure and large Union Budget outlays. The Indian Government targets to guarantee elementary education to every child between the age of 6 and 14 years and for this purpose, it expects to increase access to education as well as improve the quality of education being provided. It has been laying greater emphasis on the quality of education imparted in the country since the Eleventh Five-Year Plan. The quality of education has assumed importance in light of the poor academic achievement by the students. We believe poor academic performance by students and lack of proper training in soft skills would reduce their employability post passing out of the education system.
In line with this, to improve access to and taking care of the quality aspect of education, the government has introduced programs like the Sarva Shiksha Abhiyan (SSA), Mid-day meal schemes and Kasturba Gandhi Balika Vidyalayas. These schemes stress on the following:
Increase the number of schools to provide access to a larger population,
- Improve infrastructure of existing and new schools by building more classrooms and
- Increase enrolment rates and reduce dropout rates, z Reduce gender inequality,
- Recruit more teachers and train them to impart education more effectively, and z Improve the content and quality of education.
The government is also looking at the private sector in its quest to further improve the quality of education through Public-Private Partnership (PPP). The government targets to provide IT-based education to a majority of India’s student population through its PPP initiative. Private companies
are working on providing infrastructure in the form of computer labs and content at government schools apart from training teachers to use their content and infrastructure. Training is also being provided to the teachers to enhance their education imparting capabilities.
Employability of manpower also depends a lot on soft skills like communication skills, IT skills, computer proficiency and so on. This requirement is currently satisfied, to a large extent, by private mentoring institutions and industries themselves by providing short and medium-term courses and induction trainings. However, there needs to be a more intimate linkage between academia and industry to solve this problem. Private companies like Everonn and NIIT are competing for a piece of this business through their innovative products. As per NASSCOM, going ahead, there will be a requirement for 2.3mn IT professionals by 2010 and a shortage of 5,00,000 personnel required. It is the quality of personnel that needs to be focused on rather than the absolute numbers. This reflects the strong growth potential that the IT Training Industry has and its ever-increasing relevance for the IT Sector.
A large part of a student’s time is spent at post-school mentoring institutions, as large class sizes in private schools hamper teachers from giving individual attention to students. This consumes a lot of time, effort and money. Companies like Educomp and Everonn have introduced innovative products to get a slice of this market. These products enjoy a distinct advantage over the current ones on account of being available 24/7 and the student not being required to travel to the location where the classes are held. On the flip side, most of these products require broadband connectivity, the availability of which is very poor in India. The total number of broadband subscribers stood at a mere 4.01mn at the end of April 2008, implying penetration of a fairly pathetic 0.35%. Hence, for these products to gain greater acceptability, India’s broadband penetration will have to improve substantially.
India has approximately 50,000 private schools, present generally in urban clusters. These schools share a sizable load of educating the Indian student population and satisfy the demand for quality of education and infrastructure by the Indian middle and elite class. To provide quality education, these schools are on always on the look-out for better content, which is also provided by the afore-mentioned education companies.
The Union Budget 2008-09 has chalked out a higher allocation for the Education System, up 20% to Rs34,400cr during FY2009. The allocation is expected to continue to increase in the foreseeable future as well. The government is also intent on improving the levels and quality of education in India. As for India’s middle class households, we believe this segment of society would continue to spend a large part of its income to fund the education (with an eye on quality) of its children. Overall, we believe Budget allocations and high spending by the Indian middle class on education are expected to fuel growth of private education companies in India.