By Guest Author Shipra Agarwal
Education has long been receiving the major wallet share of the Indian middle class. The education market is generally regarded as the only market towards which Indians are not price-sensitive because it has helped them reach their present standard of living and promises better earnings and prospects for their children.
India’s education sector currently offers an estimated US$40 billion market, with a potential 16% five-year CAGR. This spans the kindergarten through grade 12 (K-12) segment (US$20 billion), private professional colleges (US$7 billion) and tutoring (US$5 billion), vocational training (US$1.4 billion), test preparation (US$1.7 billion), and preschools (US$1 billion).
The most attractive and scalable sectors in this group are test preparation, K-12 and preschools. Parents increasingly prefer private institutions in all domains due to the low quality and poor infrastructure of government-owned and -aided institutions. While just 7% of the more than 1 million schools in India are privately owned, they account for 40% of the country’s 219 million students enrolled.
An increase in GPRS use and the introduction of 3G technology in India should also give a boost to concepts such as e-learning in the country. The e-learning market is currently estimated at US$21.5 million and is projected to grow to US$225 million by 2012. A few companies are also concentrating on management systems for schools and colleges which help maintain attendance records, conduct examinations, and manage timetables, administration, reports, and many other things. The publishing of textbooks and other books for children is a low-growth market because of the high (70%) reusability of these books.
The Indian middle class is expected to expand significantly, from 300 million people today to 583 million people in 2025. By 2025, about three-quarters of India’s urbanites will be part of the middle class, compared with slightly more than one-tenth today. As Indians continue to climb the economic ladder, the composition of their spending will likely change significantly. Spending on education is expected to grow by 11% over the next 20 years, to 9% of the household income. With the growth of the Indian middle class and the increase in its members’ spending power, there is expected to be a major supply-demand gap, which opens up many entrepreneurial opportunities in this sector.
I will be working with Sramana to publish Deal Radar posts that profile some companies in this sector. My work will also include a detailed analysis of the various opportunities in and challenges for the Indian educational market.