With China’s edutech industry facing major restrictions through the “Double Reduction Policy”, India has an opportunity to emerge as a global edutech hub.
The edutech sector is rapidly growing in India, attracting global investments and partnerships. India’s coexistence of public and private sectors in education, coupled with its historical leadership in developing content and IT/ITeS strength, positions it to become a leader in edutech. By focusing on inclusive growth through public-private partnerships, India can offer affordable and accessible quality education, not just for its citizens but also for learners worldwide.
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With large and young populations, India and China have been looked upon as two key edutech markets in the Asia-Pacific region. The edutech sector is a major sector under the private tutoring industry in both countries, which supplemented and co-existed with public education. However, in July 2021 China imposed major restrictions on its private tutoring industry through the “Opinions on Further Reducing the Burden of Homework and Off-campus Training for Students in Compulsory Education” (2021) policy, commonly known as the “Double Reduction Policy”, which offers an opportunity for India to attract private investment, partnership, collaboration with the government to supplement public initiatives to become a global edutech hub.
Focusing on China, the country had one of the largest edutech industries in the world, until 2020. This sector grew rapidly from USD 46.4 billion in 2017 to USD 61.1 billion in 2020, with a compound annual growth rate (CAGR) of 9.6 percent. In 2020, China received a record investment of USD10 billion in edutech, which was the highest global investment in the industry. However, this growth came to a grinding halt in 2021 through the “Double Reduction Policy”, which imposed severe restrictions on private tutoring, including a ban on foreign investment and Initial Public Offerings (IPOs), offering classes during holiday breaks, limiting the subjects in which tutoring can be offered and forcing private tutoring companies to transition to a nonprofit model and formally register as non-profits.
The “Double Reduction Policy” (2021) was primarily formulated to prevent the assignment of excessive amounts of homework to students in compulsory education, decrease off-campus tutoring and facilitate after-school services. The government identified excessive schoolwork and the financial burden on parents to pay for additional education expenses as one of the many reasons for the decline in China’s population growth and fertility rate. There is also a perception that this may have also enhanced social inequality.
An official household survey shows that education costs have been taking up a greater share of household spending, rising from 7.5 percent of the nationwide total in 2013 to 9.5 percent in 2019. This may have disincentivized individuals from having more children as they are unwilling to bear the expenses of raising a child. Therefore, the government has attempted to alleviate the financial pressure of paying for off-campus tutoring by imposing restrictions on the private education sector, severely limiting its ability to expand and cater to mainstream education.
Provincial-level governments have also been taking measures to effectively implement this policy. For example, a study by Wang, Lou, and Yang (2022) found that all provincial-level governments in China issued relevant guiding principles on price standards, causing the average fee to drop by more than 40 percent.
Since now the edutech companies in China are not allowed to do tutoring, which accounts for over 50 percent of their revenue, there is a restriction on fundraising and they have been forced to convert into non-profits, many of them are facing huge losses and are in the verge of exiting the business. For example, in 2022, the edutech company, New Oriental Education & Technology Group Inc. reported a USD 876 million loss while TAL Education Group reported a loss of USD 99 million after the implementation of the “Double Reduction Policy” in July 2021. While the Chinese market accounted for 63 percent of edutech funding in 2020, that dropped to less than 13 percent in 2021. By contrast, in India, edutech funding has grown from USD 0.2 billion five years ago to USD 3.8 billion and 18 percent of global investments in 2021.
Unlike China, in India, historically, public and private sectors coexisted to promote education and the private sector plays a key role in supplementing government efforts in education, through traditional routes and edutech. Many global edutech companies and Indian companies have already invested in this sector in India and many more companies like Udacity Inc, Coursera Inc, and 2U, Inc.(edX), from the USA, are exploring the Indian market. This provides an opportunity for India to attract global investments, R&D, technology and innovation in edutech, which is likely to create more jobs, better learning outcomes and employability.
A competitive market with innovative models to cater to the underserved through public-private partnerships will help to make quality education affordable and accessible not only for Indians, but India can develop as a global hub, providing quality education in other countries. Building on the foundation of India’s historical leadership in developing education content, a large pull of qualified English-speaking teachers, and its strength in IT/ITeS services, India can become a global leader in edutech.
Indian private players have recognized this opportunity. For example, Indian edutech company, Byjus acquired USA-based edutech companies Osmo in 2019 and Epic in 2022. In 2021, the Indian edutech, upGrad acquired Australian Global Study Partners (GSP). Thus, the change in the Chinese edutech industry can be viewed as a major opportunity for the Indian industry to attract new investments and expand into new markets. However, to reap the benefits and become a global edutech hub, it is important for India not to repeat the policy-led mistakes of China and look at a more public-private partnership model for inclusive growth and for enhancing the socio-economic contribution of edutech.
Dr Arpita Mukherjee is a Professor at ICRIER. She has several years of experience in policy-oriented research, working closely with the Government of India and policymakers in the EU, US, ASEAN and in East Asian countries. She has conducted studies for international organizations such as ADB, ADBI, ASEAN Secretariat, FCO (UK), Italian Trade Commission, Konrad-Adenauer Stiftung (KAS), OECD, Taipei Economic and Cultural Centre (TECC), UNCTAD and the WTO and Indian industry associations such as NASSCOM, FICCI, IBA, IDSA and EICI. Her research is a key contributor to India’s negotiating strategies in the WTO and bilateral agreements. The views expressed here are her own.
Pranavi Khaitan is an intern at ICRIER.
