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Wednesday, November 12, 2003

Trade in Education - Where does India stand?

Hello everyone, I'm delighted to join this blog. A bit about me can be found here. Education has been one of my main interests over the years and I will try and highlight issues relating to Education, starting with my first post below.

Education exports is a booming business around the world.

According to the Open Doors 2003 report released by the Institute of International Education (IIE),

international students contribute nearly $12 billion dollars to the U.S. economy in money spent on tuition, living expenses, and related costs. Nearly 75% of all international student funding comes from personal and family sources or other sources outside of the United States. Department of Commerce data describe U.S. higher education as the country's fifth largest service sector export.

This led me to a quick back of the envelope calculation. According to the IIE's country fact sheet on India, the percentage of Indians among all foreign students entering the US over the past 4 years was 12.7% (2002-03), 11.5% (2001-02), 9.9% (2000-01) and 8.2% (1999-00), which averages to 10.6% over the past 4 years.

So of the $12 billion contributed by all foreign students in USA (I'm assuming this is an annual number), Indians contributed roughly $1.27 billion (10.6%). Of this, about 75% (which works out to $950 million or Rs. 4,280 crores) would have been contributed from personal/family sources or other sources outside the US. So the annual education exports from USA to India is about US$ 950 million?

For perspective, the figures of US exports to India for calendar Year 2002 (figures for 2001 are in brackets) show

US merchandise exports to India = $ 4.1 billion ($3.8 billion)
USA services exports to India = $ 3.1 billion ($2.8 billion)
Total USA exports to India = $ 7.2 billion ($6.6 billion)

Is the back of the envelope calculation in the ballpark or am I missing something here? Is Education one of the main services exported by the US to India?

Australia does in fact earn more from exporting education than any single primary commodity. IDP Australia (an independent not-for-profit organisation owned by 38 of 39 Australia's universities and representing all education sectors) reports,

Australia's eighth largest export sector, international education was worth $4.2 billion to Australia in 2002 (presume all figures are in AUS$). There are approximately 1.8 million international students around the world - and Australia is their third most popular choice, after the USA and UK.

More than 188,000 international students studied at Australian institutions in 2002, with more than 100,000 at campuses onshore. Foreign students comprise about one in five of the 850,000 degree-seekers enrolled in Australia's 38 universities.

Australia now earns more from foreign students than it gets from exporting wool, or any other single primary commodity. And that income could expand ten-fold over the next two decades to $40 billion a year. On average, every international student spends around $9,000 on goods and services each year they're in Australia. Latest statistics on international student expenditure, from a survey by Australian Education International, show that students spend more than $118m on entertainment, $100m on overseas travel, $ 77m on clothing and footwear, $ 59m on daily transport, $ 53m on household goods and, $ 41m on car costs.

Estimates of education exports from UK are in the region of around 8 billion pounds a year ($13.3 billion).

How can India get into this game?

IIT is a reputed and established Indian brand and we should certainly be looking to leverage our investment in the IITs over the past 50 years and look at exporting IIT education. There is apparently already a proposal under active consideration by the Government of India to set up IITs abroad. This would call for sizeable investment (don't know if the government has decided to invest) and involve other logistical issues as well. The easier step would be to start out by marketing the existing IITs in India (as education destinations) to foreign students and gain some traction in the export market. We could look at setting up more IITs within India as well as outside as the export demand grows.

On a slightly different note, given that demand for IIT education far exceeds supply right here in the Indian home market, the IITs would do well to leverage their brand and expand supply starting in the Indian market. An earlier post of mine looks at possibilities.

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