Education Sector

Summary

1.0 The macro story

Education as the flagship sector

A strong and productive Australia-India education relationship should be seen as the flagship of the bilateral relationship. The Australian Government has four key roles to play in realising this vision.

First, it should seek to expand the Indian student base beyond those who come to Australia for an education and stay to add skills to our economy. This cohort should be augmented with an increase in Indian students who value an Australian education for its high quality and who will return to India to lift its human capital, and also create bridges between our societies. Second, the Government should deepen the research and innovation relationship. Third, it should position Australia as the foreign provider of choice for India's technical and vocational education and training (TVET) system. Fourth, it should create platforms to enable collaboration on the online delivery of education in India.

Boosting our education links with India is also a hedging strategy against an over reliance on the Chinese market, which accounts for roughly 30 per cent of our education exports. China is investing heavily in its domestic education institutions, is moving up the quality curve quickly and has adopted aggressive targets as a provider of international education. China will remain the largest source of international students in Australia for the foreseeable future but there will be less need in the future for Chinese students to seek an Australian education.

1.1 The scale and key structural drivers of the sector

Indian demand

The increasing willingness of Indian parents to pay for their children's education, strong demographic tailwinds and the changing nature of the economy and employment, will drive demand for quality education and training.

Rising incomes have created a willingness and ability among large swathes of Indian families to pay for a quality overseas education for their children

• a recent HSBC report found the number of Indian parents wanting their children to study abroad had jumped from 47 per cent in 2016 to 62 per cent in 2017 ²⁹
• other surveys have found that over 70 per cent of Indian parents were willing to take on debt to fund education, higher than the global average of 60 per cent.³⁰

India's demographic profile will also be a key driver of demand

• India's tertiary-age (18–22) population is the largest in the world and is projected to peak at 126 million in 2026 before stabilising at 118 million by 2035
• Indian enrolment in higher education (27 per cent) lags far behind peers like China (43 per cent) and Brazil (51 per cent)
• by 2030, India aims to lift the enrolment rate to 50 per cent, which would mean that one in four graduates in the world would be a product of the Indian higher education system.

India created additional capacity for over 40 million students in the last two decades, but requires a further 200,000 secondary schools, 35,000 colleges and 700 universities to meet growing demand.³¹

India's growth model will not mimic the East Asian experience of the 1970s, 80s and 90s

• manufacturing as a proportion of GDP is likely to remain lower in India than its East Asian peers
• which means India's workers will not have access to the same proportion of unskilled and lightly skilled export-oriented manufacturing jobs.

The expected increase in the urbanisation^xi of India's population and formalisation of India's labour market will likely lead India's growing economy to create the bulk of its new domestic jobs in services and capital-intensive manufacturing

• without plentiful low-skilled manufacturing jobs, India will need to equip its population with high quality education and training so that new entrants into the labour market have the required skills
• services will also be an important source of jobs for Indians wishing to seek opportunities in international markets.

Indian Government estimates suggest an additional 120 million skilled workers will be required by 2022, fuelling demand for vocational training

• only 2 per cent of India's workforce has received any skills training
• India has an estimated 7 million people a year enrolled in vocational training³² (compared to 90 million in China and 11 million in the United States³³)
• surveys of employers find that half of new hires and graduates are not adequately prepared for their job
• poor assessment and certification systems make it difficult for employers to distinguish the quality of institutions and graduates.

Indian supply

Despite much effort and some improvements over the past decade, India's education sector suffers from limited international collaborations, low focus on research, outdated curricula and a lack of job-relevant courses

• this is reflected in global university rankings, where India has no entrant in the top 100
  • in contrast, six of Australia's 39 universities are ranked in the top 100 ³⁴
• an inadequate emphasis on curriculum design limits the industry relevance of some courses
• cultural attitudes and remnants of the caste system also constrain efforts to skill more young Indians in vocational trades, as some young Indians maintain a traditional outlook that may constrain their willingness to undertake manual or physical labour.

Public spending on education in India remains low, both in absolute terms and as a proportion of government expenditure, even compared with other emerging economies

• measures are needed to improve the effectiveness of spending, including better incentivising teachers and more efficiently allocating higher education funding.

Technology will be important in delivering scalable solutions to India's university and vocational needs.

India will also need to turn to foreign education and training providers to bridge the gap between demand and supply.

Australia's competitive advantage

India is already Australia's second biggest education market and Australia is the second most popular destination for Indian students after the United States

• Australia's competitive advantage resides in our capacity to provide a high quality tertiary education taught in English, with attractive work and migration options for Indian students, alongside a world-class vocational system
• if Australia maintains its growth in international students and can recapture its share of Indian students from its 2009–10 peak, direct revenue from Australian education exports to India could exceed $12 billion by 2035.^xii

1.2 How the sector will likely evolve out to 2035

India is unlikely in the medium term to loosen restrictions that prevent foreign universities operating standalone campuses in India

• even if regulations are eventually relaxed, foreign universities face a historical reluctance from Indian parents to pay large sums of money for their child's education in India
  • tuition at public universities and colleges in India is virtually free
  • undergraduate study at elite Indian Institutes of Technology (IITs) costs roughly $4,000 per annum.

In contrast to the university sector, vocational education is relatively less regulated

• foreign companies are already allowed to establish for-profit enterprises in India to provide training, assessment services and content.

The gradual formalisation of the Indian workforce out to 2035 will increase standards for skilled labour and stimulate demand for quality vocational training

• for example, Indian Government departments may soon require mandatory certification for employees – the Skill Development and Entrepreneurship Ministry wants to make skill certification mandatory for public sector jobs by 2020.^xiii

As simple and repeatable tasks become automated, the skills required for employment will shift, increasing demand for quality vocational training

• existing workers and new entrants alike will need to upskill more regularly throughout their career.

Technology will increasingly change the way education services are delivered and consumed in India over this period

• despite reluctance to accept higher education courses that incorporate online teaching, India has become the second largest market for e-learning after the United States, currently worth USD2 billion and expected to reach USD5.7 billion by 2020³¹
• traditional education suppliers will be forced to compete with low-cost online and virtual options, from both Indian and international players.

Within 10 years, digital learning content could entirely replace printed books

• mobile education applications like Byju, which helps hundreds of thousands of Indian K–12 students study for competitive exams, are on the verge of billion dollar valuations^xiv
• augmented, blended and virtual learning environments are being taken up by some Indian schools.

2.0 Opportunities for partnership

2.1 Export opportunities

Higher Education (Migration Plus)

Australia offers a high quality student experience in a safe, multilingual and multicultural society with a temperate climate

• the 2017 International Student Survey, which sought views of international students from all countries, ranked Australia: the most welcoming country for international students; the 'safest' country for international students; and the country offering the 'best lifestyle' for international students
• the familiarity that comes with a growing diaspora community provides an additional boost to prospective Indian students.

Work rights associated with student visas are welcomed by Indian students³⁵, even though Australian regulations do not guarantee international graduates post-study work rights

• changes made in 2013, including the lifting of restrictions on the kind of work graduates can do, mean post-study work rights in Australia compare favourably with those in other major host countries
  • graduates who apply for and obtain a Temporary Graduate visa can now work in any role for which an employer is willing to hire them.

For as long as Australia maintains a large immigration program, Australia's interests are served by attracting Indian students whose primary goal is migration, thereby adding to our skills base

• there is considerable capacity, particularly outside the east coast, to cater to more Indian students
  • Indian student numbers are growing at a slower rate and off a lower base than students from China.

That said, we need to ensure we are attracting the science, technology, engineering, mathematics and medicine (STEMM) talent that will drive Australia's future growth

• the most popular field of study for Indian students is management and commerce (45.6 per cent of university enrolments and 45.4 per cent of vocational education and training [VET] enrolments).

Indian higher education students overwhelmingly choose to pursue their Australian education through a Masters by coursework degree (70 per cent)

• pathways should be expanded for Indian undergraduate, postgraduate and doctoral students who target Australian universities for specific, world leading qualifications, and then return to India to continue their career.

Attracting the best international students helps to maintain the quality of Australia's higher education system

• it also builds links with the next generation of Indian leaders in business, government and academia.

However there is a mismatch between the quality of Australian institutions and Indian perceptions of their quality and prestige

• Indian students and parents place Australian universities on a rung below universities in the United States and United Kingdom
• like Indian students, hundreds of thousands of Chinese attend university in the United States and United Kingdom
  • but unlike India, 52 per cent of Chinese students who choose to study in Australia do so at a Group of Eight university, compared to less than 10 per cent of Indian students.

Changing long-standing perceptions about the quality of Australian higher education in India will require new approaches and take time

• this opportunity is enhanced in the short term by political developments in the United States and United Kingdom, which have a negative effect on Indian perceptions of these markets.

These perceptions can also be improved by having Australian students undertake exchange programs and internships in India

• the New Colombo Plan, in conjunction with Endeavour Scholarships and Fellowships, play a vital role in this area by connecting young Australians with Indian universities and businesses
  • in particular, Australian students completing internships in India with Indian companies help raise awareness among Indian managers of the quality and value of Australian education
• likewise, the formation in 2017 of the Australia India Institute's New Generation Network fosters early-career researchers in Australia to conduct policy relevant research on India.

Online and Distance Education

Online education will play an important role in India's education future, particularly in reaching students in rural and regional areas who may have previously lacked access to the same opportunity as their peers in urban centres

• once Australian providers have developed strong brand recognition – perhaps through the provision of massive open online courses (MOOCs) – delivery of fee-for-service courses can follow.

By 2025 India is projected to have 850 million online users, many of whom will have moved from lower-generation network connectivity (2G) to higher-generation (3G, 4G and 5G)

• half of India's internet users will be rural (up from 17 per cent) and 40 per cent will be women
• currently only 20 per cent of Indians enrolled in MOOCs are women, suggesting latent potential but also challenges in reaching more women through online delivery.

As a result of rising digital connectivity, users of online education in India are expected to reach 9.6 million by 2021, up from 1.6 million in 2016

• this includes vocational training, secondary school tutoring and exam preparation, and university courses and degrees delivered online

Australia has world-leading distance education platforms which offer flexible study options that are scalable and can reach isolated students

• our competitive advantage in online education is enhanced by Australia's favourable time zone compared to competitors in the United States and Canada
  • Western Australia, for example, is only two hours ahead of India.

There is also opportunity for Australian digital educational providers to partner with India's large multinational conglomerates to pilot new education technology, using Australian content, and scaled up in India as a pathway to global markets.

Curriculum development

India's education quality challenge is widespread.

At the tertiary level, 91 per cent of accredited colleges are rated average or below average by India's National Assessment and Accreditation Council; at the primary school level, only 37 per cent of Year 4 students can read at Year 2 level.

Australian providers can contribute to the work that India is doing to lift standards by packaging courses, curricula and school programs to Australian/international standards, and where relevant benchmarking to Indian requirements and occupation standards.

Courses could also be developed to consider requirements for other international markets, especially the Gulf states

• for example, the Australian Council for Educational Research (ACER) worked with India's National Council of Education and Training (NCERT) to design, implement and report a new National Achievement Survey for students in Year 10.

2.2 Collaboration

Technical Vocational Education and Training

There are immense opportunities for Australian vocational providers in India, where Australia's TVET system is held in high regard for the global employability of its skills training.

These opportunities will occur across three distinct parts of India's TVET system: working with the Indian Government; partnering with Indian training providers to offer courses for both onshore and offshore employment; and working directly with large Indian corporates to meet their skills needs.

Australia's strength in vocational training is aligned with the Skill India campaign, a flagship reform effort of the Modi Government, which originally announced its plan to upskill 400 million workers by 2022, although formal targets have since been abandoned

• quality trainers and assessors are the cornerstone of a modern, industry-relevant vocational education system, and demand for high quality vocational trainers and assessors will grow as demand for Indian skill levels rise
• Australian TVET providers can help India develop a large pool of qualified trainers and assessors capable of imparting industry relevant skills and knowledge.

Technical vocational education and training for jobs both in the Indian market and in third countries will need to be delivered in India through a partnership model

• Australian providers need to spend time to understand the labour market requirements and not produce a high-end training product that may unnecessarily increase the cost and time commitment of workers
• Australian providers will need to be selective in deciding which partners to take on and should develop courses across two tiers that differentiate between employers in India and employers in third countries
  • accreditation requirements for the Indian domestic labour market may be lower than the requirements of employers in third countries, such as the Gulf states, where qualifications will need to be developed to international standards
  • Australian providers should adjust their products to reflect this reality, which would allow them to reduce their costs and become more price competitive in the Indian market, without diluting the value of Australian qualifications in the sector.

Employers and employees in India's private sector both recognise the need to upskill and invest in training

• 88 per cent of India's top 50 companies invest in skill development³⁶
• a survey of over 5,000 job seekers and employers found nearly two-thirds of graduates aged 18–34 felt underprepared in their first job³⁷
• many Indian companies would prefer tailored courses focused on being 'job ready' rather than longer, more generic accreditation programs
  • Australian providers can respond to this need by including fast-tracked courses for professionals that recognise existing experience.

Joint programs and twinning

Opportunities for Australian universities to establish their brand in India for the foreseeable future will continue to be through joint partnerships and twinning programs of the sort pioneered by Deakin University and Monash University.

Even if India loosens regulations on foreign universities, Australian universities may find it more difficult to successfully establish a standalone physical presence in the Indian higher education market compared to recent expansion into Southeast Asia

• our universities may need to adjust their business models to adjust to the price sensitivities of the Indian consumer and constraints on faculty availability and research capability.

PhD and research collaboration

India is determined to lift both the quantity and quality of PhD students its universities generate

• this is partly a matter of pride for India, which currently does not have any universities in the top 200 of world rankings, but it also wants its graduates to be recognised as being job-ready at home and abroad.³⁴

The Indian higher education system on its own does not have the capacity to expand the annual cohort of PhD graduates to meet demand

• in relative terms, India produces a tenth of the number of PhD students that Australia does^xv
• in the critical field of STEMM, which has historically drawn considerable numbers of Indian students, India graduates less than a third of the number of PhDs compared to the United States.

Although the proportion of Indian PhD students who go overseas for their doctoral training has decreased, competition for limited places in PhD programs at India's top universities forces a significant number of talented students to look for opportunities overseas

• however, Australia attracts relatively few PhD students from India
  • the ratio of Indian PhD to Indian undergraduate enrolments is lower than the ratio at United States universities
  • Australia also attracts significantly more Chinese PhD students than we do from India.

Attracting high quality students in advanced courses helps build our reputation as a premium education destination, establishes important people to people links, improves the visibility of Australia's academic expertise, and can be a precursor for a more established partnership between universities.

Research collaboration is a pathway to commercialisation and technological advancement; twinning programs; student exchanges; and the establishment of a pipeline from undergraduate to postgraduate and doctoral studies

• the effect works in reverse too – student exchanges, particularly at the higher degree research level, are a pathway to research collaboration.

While collaborative research between Australian and Indian researchers has increased significantly in the last two decades, and is up 40 per cent since 2015, there is considerable scope for further improvement

• India consistently ranks outside the top 15 countries for Australian collaborative research projects funded by the Australian Research Council.

3.0 Constraints and challenges

3.1 The policy and regulatory environment

Slow pace of reform

Government reforms in the university sector will continue to be slow and difficult

• particularly in the online education sector, where Indian regulators hold outdated views on curriculum delivery and are reluctant to acknowledge or accredit higher education courses that include an online component.

While Central Government ministries have a mandate from the Prime Minister to prioritise reform in the sector, and are working on online learning regulations, bureaucratic capacity constraints and underfunding mean it is unlikely to see transformational reform in the next 15 years.

Australian qualification recognition in India

Foreign qualifications must be formally recognised by the Association of Indian Universities (AIU) for the purposes of further study and for some employment opportunities in India, including the public service

• the AIU will not recognise degrees that include a pathway course (such as a diploma or foundation course) or any degree wholly or partially taught online or through distance study
• these restrictions are applied uniformly to foreign countries
• the restrictions which most affect Australia include a lack of recognition of: three-year bachelor degrees, higher education qualifications obtained through a TVET pathway and master's degrees of less than two years.

Australia would benefit from having its qualifications 'validated' and the resulting fillip to the perceived quality of its qualifications, while India would gain from the qualifications that alumni bring home if those qualifications were recognised without impediment.

Incremental change has occurred regarding qualification recognition

• intensive courses that count units of study rather than length of time have been recognised, allowing, for example, degrees undertaken on a trimester basis to be counted
  • but this stops well short of what Australia would like to see.

Indian Foreign Providers Bill

The most recent Foreign Universities Bill was introduced in 2010 but faced significant opposition and lapsed in 2014. Previous bills floundered in 1995 and 2005

• the 2010 Bill would have allowed foreign institutions to establish campuses in India
• support for the Bill has been stymied by the many vested interests, including Indian politicians and local business owners, who have a business stake in Indian universities and do not want to see foreign competition enter the market.

In 2015, Prime Minister Modi commissioned a report by NITI Aayog which found that allowing foreign universities into India could help meet the demand for higher education in India, increase competition and improve standards of higher education

• opportunities could be made available to 'reputed' institutions or 'institutions of excellence' – understood to be top 200 global universities – to operate in India.

Even if these mooted changes to the Bill do take place, government monitoring and regulation of the fees which foreign providers charge may deter Australian providers from establishing a presence in India.

Changes to visa settings

International students from most major source countries, including India, consistently identify post-study work rights as an important factor that influences their choice of where to study. This is particularly relevant for graduate students

• changes to our visa settings are closely followed in India
• reforms to our visa processes currently under consideration would have a beneficial effect on the speed and simplicity of visa processing
• any changes in the opposite direction have the potential to affect the broader bilateral relationship.

3.2 Skills, infrastructure and other constraints

Reputation

Despite Australia's strong international reputation in the education sector and a high quality education 'system' as a whole, Indian students perceive Australian education to lack gravitas

• this is partly explained by history – when India's nascent professional middle class first studied abroad in the 1970s and 1980s they tended to go to the United States or United Kingdom
• Australia also has fewer very highly ranked institutions (only one university in the top 40) and lacks an education powerhouse brand such as Harvard, MIT or Oxford.

Australia's education reputation can also be affected by the significant variability in the quality of education agents in India

• Indian students, over half of whom will use an agent at some stage, can find it difficult to discern the credibility of the many international universities competing for their attention, and often rely on unregulated agents to navigate the complex process for studying at a foreign institution
  • students still prefer human contact with their agents although the use of virtual advice is increasing
  • unscrupulous agents representing Australian private institutions can do great harm to Australia's education reputation
• initiatives to improve transparency of agent performance are an important response
  • including Australia's Department of Education and Training's 'Education Agents Data Project', which gives registered education providers access to reports about the education agents they engage to recruit overseas students
• significant disintermediation of the agents market in India will likely occur within the next five years
  • this will affect the smaller end of the agent market disproportionately, thereby addressing some of the concerns around agent quality.

Diaspora concentration in Victoria and New South Wales

Australian universities outside Victoria and New South Wales report difficulties in attracting Indian students.

The presence of large diaspora communities on the east coast produces a network effect

• as the diaspora in those states grows, word of mouth and the presence of family, friends and familiar communities increases the desirability for Indians to choose to study there.

Australian universities are perceived to lack close connections to business

Employability is a major consideration for Indian students when choosing university options.

Many Indian students perceive Australian universities to lack close connections to industry, especially compared to competitor countries like Canada that have highly evolved cooperation projects for students to gain business experience as part of their coursework

• Indian students in Australia feel they miss out on practical opportunities that would enhance their job prospects
• Australian businesses are wary of engaging with international students because they may not understand relevant visa settings.

This also causes Australian businesses to miss out on a significant talent pool of international students due to a lack of exposure, even though visa arrangements allow international students to work while they study.

Limited doctoral funding

Compared to the United States and United Kingdom, Australian universities offer limited funding for doctoral research, lowering demand for Australian education at postgraduate level

• we have a comparative lack of scholarships and an inability to match the suite of United States price points
• the prevalence of United States scholarships means less than 10 per cent of Indian PhD students pay the sticker price for their degree.

Misalignment of business model for Australian vocational providers

The high volume, low cost model needed for India does not stack up economically for most Australian providers, who operate on a low volume, high cost structure

• providing a quality product is central to Australia's competitive position in vocational training
• Australian providers are wary of diluting the quality of Australian qualifications to meet the cost needs of Indian consumers.

Competition in online education

Competition from domestic local low-cost providers will hinder the rate of adoption of online distance education from international suppliers.

Existing brick and mortar education companies with a strong understanding of local conditions are able to quickly and efficiently scale up their online presence

• for example, EduComp – the largest education company in India – runs over 200 pre-schools, 94 test preparation centres, 50 K–12 schools, six colleges and one higher education campus
  • it also has an online user base of 5.5 million customers.

4.0 Where to focus

Australian education providers should focus on Indian states with high literacy rates, a demonstrated commitment by the state to spending money on education, and states with good English language skills. The states highlighted below reflect a judgement on both current demand and future demand. Despite being among the poorer Indian states, Chhattisgarh and Himachal Pradesh fit the latter category because state spending on education is far above the national average. While literacy rates and the proportion of state budgets directed at education are not the determining factors, they point to the size and sophistication of the education markets in these states into the future.

4.1 The Centre and the states

Expansion and reform of the higher education system will be driven by the states.

Higher education in India is witnessing a rapid move towards greater state autonomy

• responsibility for higher education budgets and governance is being devolved from Central to state governments, where state institutions and their affiliated colleges account for 97 per cent of higher education enrolment in India.

Within states, school and tertiary education providers should focus on high income urban clusters such as Ahmedabad, Chandigarh, Chennai, New Delhi and Mumbai

• these will provide a customer base of students who demand and are willing to pay for an international education.

For deepening research links, Australian universities should connect with Indian counterparts that are serious about increasing their global rankings, have good governance structures and faculties that align with Australian expertise

• up and coming private universities are most prospective in this regard
• leading Indian public universities are sometimes seen to be hard to deal with
• utilising the Indian academic diaspora in Australia to navigate some of the complexities of the Indian research system might help [see Chapter 18: The Role of the Diaspora].

For vocational providers, the choice of sector will drive decisions on which states to target

• for example, skilling in health care could be focused on Kerala and Karnataka, given their history of exporting health care personnel and the presence of a developed health care market respectively
• hospitality providers could consider Kolkata in West Bengal because of its status as a hospitality training hub for students from the north-east, who comprise a substantial proportion of the Indian hospitality industry nationwide.

4.2 Key states

Kerala

• Literacy rate: 94 per cent – highest in India
• Education spend as proportion of state budget: 15.3 per cent

Skill development has good potential given Kerala's demand for skilled labour exports as well as the state's practical approaches, including the Additional Skills Acquisition Programme, Kerala Academy for Skills Excellence and Asian Development Bank-funded Community Skills Parks.

Tamil Nadu

• Literacy rate: 80 per cent – one of the few large states in India with a literacy rate above 80 per cent
• Education spend: 14.7 per cent
• Highest Gross Enrolment Ratio of Indian states: 44.3 per cent

There are 83 active Memorandum of Understandings (MoU) between Australian Universities and educational Institutions in Tamil Nadu. Tamil Nadu was one of the early states to open its higher education sector for private participation.

Maharashtra

• Literacy rate: 82 per cent
• Education spend: 18.2 per cent – one of the highest spend rates on education in India

Maharashtra had the highest number of students trained by National Skill Development Corporation partners in 2015–16.

Chhattisgarh

• Literacy rate: 70 per cent
• Education spend: 19.7 per cent

Despite literacy rates slightly below the national average, Chhattisgarh stands out for spending nearly 20 per cent of its state budget on education.

Himachal Pradesh

• Literacy rate: 83 per cent
• Education spend: 19.1 per cent

Himachal Pradesh's recent performance on educational outcomes is exceptional by north Indian standards. In 2015–16, there were 993 schools per 100,000 people in the state compared to the national average of 475. The average student-classroom ratio for upper primary school (11–12 years old) in Himachal Pradesh was 10 compared to the national average of 17.

Much of this is as a result of government investment in public service delivery, enabled by the greater fiscal space that the state has enjoyed from its special category status (this status entitles states to greater assistance from the federal government). These investments culminated in a 15–30 per cent increase in the learning outcomes of primary students in 2016–17.