The country’s education market potential

With double digit economic growth demanding a sustained supply of knowledge workers, India has emerged as one of the world’s largest consumer of education services with a target population of more than 445 million (between age group of 5-24 years), which is expected to increase to approximately 486 million by 2025, far exceeding the combined target population in China (354 million) and the US (91 million) in the same year. With public and private spending on education services in India aggregating approximately $100 billion per annum, and private spending on education having grown at a CAGR of 10.38% since 1994 at constant prices (double the 5.11% CAGR for total private consumption spending during the same period at constant prices), the Indian education sector is on its way to become the next “flavour” of the season for private equity (PE) investors.

While government spending on education remains comparable to other developing nations (approximately 4% of GDP), structural inefficiencies and lack of focus on primary education have resulted in a low adult literacy rate of approximately 67% and a low retention rate in schools of approximately 73%. While India is rated amongst the highest in terms of GDP per capita spending per pupil on tertiary education (beating developed economies like United Kingdom, United States and Japan), it is ranked in the lower spectrum for GDP per capita spending per pupil on primary education, as per UNESCO statistics for 2006.