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Universities can set up in India but regulations pose challenge

Foreign institutions can now establish campuses in India but navigating the country’s complex regulatory environment could be a barrier, experts warn. 

University building surrounded by grass.Foreign institutions can develop campuses in India under new regulations. Photo: Unsplash

The University Grants Commission has softened its stance on rankings

India wants to internationalise its higher education system and tackle brain-drain, as set out in the 2020 National Education Policy, while foreign institutions are keen to capitalise on the growing demand from Indian students. 

Indians drove growth in international student numbers in the US in 2022/23, with new data showing a 35% increase year-on-year. In the UK, Indian students overtook Chinese as the biggest group of foreign students granted study visas in 2023.  

Under new regulations released by India’s University Grants Commission, top global institutions can now apply to set up campuses, but there are questions about how this will work in practice.  

“There is no clarity on what the nature of the legal entity of that campus will be,” Satyendra Shrivastava, senior partner at Consortia Legal, said of the regulations. 

“It leads to more questions than providing answers as to how this would work.

“This also looks more like a statement of intent where the final nuts and bolts of how this thing would be achieved is conspicuously absent.”

Most Indian institutions are not-for-profits, in line with Indian laws, but the new regulations for foreign campuses allow for repatriation of funds.

Depending on how they are set up, foreign universities could be subject to the country’s Foreign Exchange Management Act, 1999, and the Foreign Contribution (Regulation) Act, 2010. The nature of the business entity will also determine how much tax they are liable to pay. 

“The regulation has acknowledged that profit is something that universities will require to make it monetarily feasible for them to set up in India, but for that to actually take place, India’s other laws will need to be amended to permit education institutions to set-up ‘for-profit’ entities,” said Jehaan Shroff, senior partner at Consortia Legal. 

“Until that happens – and when that will happen is a question mark – the regulation may not be attractive to foreign universities.” 

“You have to be really cautious about how you’re going to go about it, which means investing time in defining the operating model and understanding the realities of funding the underlying entities,” said Ananya Bhadauria, client development manager at international business expansion organisation Seamless Global. 

“If obtaining FCRA approval is on the critical path for an institution setting up, current reality would suggest this will likely take years to come to fruition, if at all,” she said, adding that institutions will need to be “on the right side of the government from the outset to avoid downstream issues”.

“You have to be really cautious”

In an update, Seamless, part of the Sannam S4 group, wrote that the requirement to obtain approval will be “a major impediment” due to the bureaucracy involved. 

Market entry specialists advised that universities will need to carefully structure their business entities to navigate these hurdles and minimise potential tax implications

Two Australian universities have already established small branch campuses in GIFT City, a special economic zone where normal regulations don’t apply and set up is therefore less complex. But the criteria is more stringent around which universities are eligible and what courses they can offer. 

Despite the complex regulatory environment, insiders believe there is global interest in campuses throughout India. 

“We know certain institutions, especially from the UK, are already actively exploring in India,” said Bhadauria. 

“There’s plenty of appetite, it’s just a matter of time in terms of getting the nuts and bolts right.” 

“We are aware of interest and appetite,” added Amarjit Singh, CEO of the India Business Group, a London-based organisation with teams across India.

“But I think institutions will obviously tread with caution in the sense of taking professional advice, understanding the in-country regulatory landscape systems and structures, because it’s such a new initiative.”

He said there is full assistance and support at the Indian government level and through specialist professional service firms. Singh added that the “ease of doing business” in India for new entrants has been continually improving under the Modi government.

The new regulations allow universities to set their own fees as long as they are “transparent and reasonable”. 

They can also recruit staff from both India and abroad, provided their qualifications are on par with those working at the institution’s main campus. International faculty appointed to teach at the Indian campus must stay in India for at least a semester.

The University Grants Commission has also softened its stance on rankings since it released the initial draft of the regulations, which stated that institutions must feature in the top 500 of global rankings overall or subject-wise to apply. 

The regulator has now added that institutions possessing “outstanding expertise in a particular area, as decided by the Commission from time to time” could also be eligible, suggesting there may be exceptions to the rankings criteria. 

Institutions can enter into a joint venture with Indian higher educational institutions or companies, making room for private players to work with foreign universities in India.

Qualifications offered at branch campuses will be recognised in India, but online learning remains off the table meaning some institutions may be forced to restructure their courses. 

“The regulations have been quite a long way in the making,” said Singh. “It’s a game changer for India’s education sector because it will enable Indian students to access the world’s best courses on campuses at home.” 

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