Impact of financial resources on higher education choice in India

With the world’s second largest population and sustained economic growth, India is set to rank as the most influential emerging economy over the coming decades. Rising household incomes and demand for knowledge economy workers has fuelled a rapid expansion of HE; between 2013 and 2020 India added a whopping 14 million HE enrolments. To put that in context, with 9 million students in total, Brazil has the world’s fourth largest HE system.

While growing demand for HE in India is widely acknowledged, little research has been conducted on how students’ socio-economic backgrounds determine which public, private and international options are available to them. To start a process to address this knowledge gap, the British Council commissioned a survey of over 2,700 currently enrolled HE students, spread across India’s six regions. The survey results throw up some interesting findings for HE policy makers and practitioners alike.

The data show that tuition fees in India are low by international standards, making HE access a realistic prospect for students with relatively limited financial means. Across all India, median annual tuition fees fall within the INR 50,001 to 80,000 (GBP 500 to 800) range and only 2% of students are paying more than INR 200,000 (GBP 2,000) per year. Some variation in tuition fees is apparent at regional level, with students in the West and East regions reporting slightly higher fees.

Figure 1: Annual tuition fee ranges for HE students, all India, rupees.

Apart from the relatively poor Northeast region, a broadly consistent income distribution was reported across the five other regions of India, with a median household income of INR 75,001 to 105,000 (GBP 750 to 1,050) per month reported. It may have been expected that students from the relatively wealthy South and West regions would have reported the highest incomes. Our use of socio-economic quotas (based on asset ownership and education level of household’s chief wage earner) as part of the survey sampling method may have been a contributory factor to this lack of variation.

Much of the access to poorer and more rural segments of society is provided via the private for-profit sector, but further research is required to unpack this broad category of institutions. A sub-set of for-profit institutions charge high fees and clearly cater to a different demographic. Our study has not explored the teaching quality or labour market outcomes associated with various HE choices, for which there is likely to be wide variation both within and across the public and private sectors.

Students from relatively wealthy households are quite evenly distributed across institution type (public, private non-profit, and private for-profit) but are concentrated in relatively high tuition fee courses.

Engineering & Technology - which includes Computer Engineering - was the most popular subject area overall, followed by Education (especially among the mid-tier socio-economic class), and Business & Admin. This contrasts with Indian students in the UK, for whom Business & Admin is by far the most popular subject choice, followed by Engineering & Technology, and Social Sciences. 

Family size does not appear to have a bearing on HE selection based on the survey data. The fertility rate in India has fallen sharply in recent years, standing at 2.2 children in 2018.

By far the most important sources of funding for HE study is ‘support from family’, followed by ‘loan from an official financial institution’. The latter especially so for students attending public institutions and for students from higher income households. India replaced its government-backed education loans system in the 1990’s with the current system of commercial bank-driven loans. Public sector banks account for about 90 per cent of all education loans in India and charge a lower, subsidised, rate of interest to students.

Figure 2: Main higher education funding sources, all India.

‘Loan from an official financial institution’ and ‘grants or scholarships’ are less significant sources of funding in the Northeast and East regions. Addressing these funding gaps presents key challenge for policy makers in these two regions. In the absence of a government funded student loan system, our survey finds that access to loans for lower socio-economic groups is constrained. The research raises questions as to why scholarships appear to be less available in certain parts of the country, and why public institutions appear to be catering to a relatively high socio-economic student profile. It is also puzzling as to why a larger proportion of students from a lower socio-economic background are studying at postgraduate level.

There is evidence of significant unrealised interest in study abroad, though our survey only briefly examined this. And student mobility within India appears extensive, with one in five students travelling outside their home state for HE study. In six states, over half of students travelled out-of-state for HE study, three of these states being in the North region.

With demand for HE set to soar as India’s economy develops and household incomes rise, private providers - including foreign providers - will play an increasingly important role in addressing demand and producing graduates with the right mix of hard and soft skills. While India’s National Education Policy 2020 has signalled an opening up to foreign universities, the low tuition fee environment raises questions about prospects for foreign providers to operate sustainably in the market, given the cost of developing and delivering TNE programmes.

The British Council report ‘Impact of financial resources on HE choice in India’ is due for release on 29^th October 2021. The main findings of the research will be presented via webinar, including a panel discussion and Q&A with policy makers and HE practitioners from the UK and India. Register via the following link to attend the online event taking place on Friday 29^th October at 10.00 – 11.30 (UK time).   

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