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Impact of Union Budget 2011 on Education Sector

The budget can have a positive impact on the employment generation potential of education, health care, real estate and housing, infrastructure development, logistics, telecom and the manufacturing sectors.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. 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. 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.

Blended growth rate in Indian education services firms is seen at 21% this year, according to Thomson Reuters 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 along with the expected long-term growth rate.

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.

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 along with 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.