Union Budget 2020 - Implications for India's Higher education sector & Higher education Institutions

The Finance Minister of India Ms Nirmala Sitharaman presented the first Union Budget of the decade 2020 whilst the country is in a phase of a slowdown in its economic development. As the country faces high unemployment and rising inflation, the budget was presented woven around three themes—Aspirational India, Inclusive Economic Development, and Building a Caring Humane and Compassionate Society.

Education was one of the three focus areas under the Aspirational India theme. The key strategic announcements for Education include:

  Union Budget 2020 - The Key Strategic announcements for Higher education sector

EMPLOYABILITY

  • About 150 HEIs to start apprenticeship embedded degree/diploma courses by March’21
  • Proposal for new graduate engineers to intern with urban local bodies across the country for a period of a year

FINANCING

  • Measures to enable External Commercial Borrowings (ECB) and promote Foreign Direct Investment (FDI) in the education sector for a larger inflow of funds to build capacity and talent in the sector. This opens the sector for overseas capital investments

INCLUSION

  • Proposal to allow institutions ranked within the top 100 National Institutional Ranking Framework (NIRF) to start a degree level full-fledged online education programme aimed at HE inclusion—promoting wider access to the unserved and under-served sections of society.

INTERNATIONALISATION

  • Under ‘Study in India’ initiative, Ind-SAT proposed to be held in Asian and African countries. It shall be used for benchmarking foreign candidates who receive scholarships for studying in Indian HEIs.

SKILLING

  • A National Police University and a National Forensic Science University are being proposed in the domain of policing science, forensic science, cyber-forensics, etc.
  • Proposal for Ministries of Health and Skill Development to jointly design special bridge courses with professional bodies to bring in equivalence for Indian teachers, nurses, paramedical staff and care-givers. As the attempt is to address the overseas requirement for these professionals and the skill gaps therein, the language requirements of various countries will be kept in mind while designing the (special training packages) courses.
  • Proposal to attach a medical college to an existing district hospital in Public-Private Partnership (PPP) model. Viability Gap Funding will be given to states that fully allow the facilities of the hospital to the medical college and provide land at a subsidised cost.
  • National Board of Examination will impart PG medical qualifications towards enhanced specialism; Diploma and fellow of National Board (DNB/FNB). The Government will, therefore encourage large hospitals with sufficient capacity to offer resident doctors DNB/FNB courses under the National Board of Examinations.

POLICY

  • The new National Education Policy is due to be confirmed and announced in the near future
  • A National Recruitment Agency (NRA) is proposed to be set up as an independent, professional, specialist organisation for the recruitment of Non-Gazetted posts via a computer-based online Common Eligibility Test. A test-center in every district, particularly in the Aspirational Districts would be set Up

TAXATION

  • A 5% tax collection at source (TCS) is proposed on remittance exceeding ₹700,000 (~$10,000 | ~£7,500) in a year under RBI’s Liberalised Remittance Scheme (LRS). In the case of the non-availability of PAN or Aadhaar, the rate is 10%. Under RBI’s LRS, Indian residents can send up to $250,000 (~₹18 million) overseas every year for specified purposes such as studying, medical treatment and emigration. The government has put the onus on the banks to collect this TCS.

Union Budget 2020 - Key takeaways for the Higher education Sector

Implications for higher education and overseas HEI

  • The fund allocation for education could be better (>5%) as India needs to spend more on the sector to improve the skill level of its manpower. So, the shortfall in public spending for the education sector will need to be covered by the private and overseas investors
  • The option of ECBs and FDIs for the sector was key to deepen the capital pool of HEIs to build the sought academic and research capacity. It will likely open doors for overseas HEIs to participate in India’s HEI capacity-building endeavours. Sector privatisation is growing. Expectations are pinned on the new National Education Policy that is in the offing to know whether global schools and colleges will be allowed to open campuses in India or simply foreign capital getting invested in Indian private institutions. The government needs to look at attracting more domestic investments (public and private) and talent.
  • The attempt to address skilling and employability gaps is observed in the apprentice and internship opportunities as it strives to harness the talent pool of the country.
  • The Ind-SAT proposal could boost quality intake for the Study in India programme from neighbouring countries, which has been an issue for institutions.
  • The introduction of the degree-level full-fledged online education programme is a significant step towards boosting online education and digitalisation of the Indian education system. Clarity is needed on the earlier imposed jurisdiction restrictions on deemed universities for online programmes. No tax-exemptions for players, corporate or education institutions in the ed-tech and skill-tech sectors is disappointing.
  • Foreign HEIs could explore partnership opportunities with professional bodies on the special training packages to co-design in a tripartite pact with the corresponding Health and Skill Development Ministries.
  • Provisions for setting up of medical colleges with district hospitals by government funding could turnaround the medical science education. District hospitals will be incentivised to attach to medical colleges though it’s partially in existence already. However, there is scepticism on the possible framework for its implementation.
  • Reportedly, there is a view that the proposed TCS is not an additional tax, but like any other TDS/TCS. The credit of the TCS shall be allowed to the remitter against their tax liability in respect of their other taxable income if any. If the remitter does not have any taxable income, the amount of TCS shall be refunded to them after they file their income tax return. In case a transfer is made from an individual’s bank account in India to their bank account in a foreign country, then the individual will be able to able to claim credit for the TCS at the time of filing tax returns.

According to RBI data, outflows in LRS increased from $1.09 billion in FY15 to $11.34 billion in FY19. Overseas education ($3.5 billion) was second to international travel ($4.8 billion) in FY19. Application of TCS might reduce this outflow as it increases paperwork and costs for students (and their parents). However, the anticipated impact will be known when the presented Budget is approved in April. The likelihood of exemptions while framing the rules remains. Accordingly, Sannam S4 will express its view in April for its clients’ consideration.  

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