Union Budget 2011: Big boost for education sector

Budget 2011: Education on a high on allocation boost
BSE | NSE 01/03/11
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India plans to raise its expenditure in the education sector by about a quarter to Rs 520.6 billion (USD 11.50 billion) in the next financial year, Finance Minister Pranab Mukherjee said on Monday in his budget speech, reinforcing the country's push to create a skilled workforce to keep up with fast-paced growth.
"Over 70% of Indians will be of working age in 2025. In this context, universalising access to secondary education, increasing the percentage of our scholars in higher education and providing skill training is necessary," Mukherjee said.
Education companies cheered the announcement and stocks of Aptech Ltd, Everonn Education, Edserv Softsystems, NIIT Ltd rose 3 to 5% in intra-day trade immediately after the announcement.
"It will definitely help India to build a skilled workforce which will sustain industrial growth in years to come," said Pramod Maheshwari, Chief Executive of Career Point Infosystems, a Rajasthan-based tutorial services provider.
India's $86 billion education sector is increasingly joined by private players in its rapid expansion, while increased government spending and fresh interest from foreigners and large funds who are pumping in money in services, technology and infrastructure play the catalyst.
"In India only about 5% of students have access to any vocational training as compared to about 60% in developed countries so the gap is very big and the government is also trying to fill it by ensuring students who graduate have the necssary skills which helps them get employment," said Ninad Karpe, chief executive and managing director, Aptech.
Increased allocation for schools is likely to boost business opportunities for IT-education companies in terms of information and communication technologies, and public-private partnership in K-12 and vocational segments, mainly for Educomp, Everonn and NIIT Ltd, Angel Broking said in a post-budget note.
"I think government should come up with a framework to allow the private sector to participate in these kinds of initiatives. As a company we are already focussing on skill development and we see this as an opportunity to contribute significantly in government initiatives," Career Point's Maheshwari said.
Blended growth rate in Indian education services firms is seen at 21% this year, according to ThomsonReuters StarMine smart estimates, outstripping the 18% growth forecast in the information technology sector.
Blended growth rate is the average of expected growth in earnings per share from last year to this year and from this year to next year alongwith the expected long-term growth rate.

Cash bonanza
The government will also infuse as much as Rs 2 billion each in Indian Institute of Technology, Kharagpur, the nation's premium engineering institute, and Maulana Azad Education Foundation, apart from other grants to various institutions.
The National Skill Development Council (NSDC) is on course to create 15 crore skilled workforce two years ahead of 2022, the stipulated target year, he said.
"It has already sanctioned 26 projects with a total funding of Rs 658 crore. These projects alone are expected to create more than 4 crore skilled workforce over the next ten years," Mukherjee said.
One of the prime challenges for India's surging growth is severe skills shortage -- spanning all levels, from management to frontline operations, and all sectors, from IT to fast food-- , which alongwith inadequate infrastructure and poor governance could mar the India story.
The government will also invest as much as Rs 210 billion in Sarva Shiksha Abhiyan, its elementary education programme.
"Our participation in the government schemes is already there...our orderbook is definitely going to increase because of increased outlay in overall education and focus in these areas," said S Giridharan, Chief Executive Officer of Edserv.
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