Budget 2019: Edtech Startups Demand GST Be Cut From 18% To 5%

Ever since Independence, education, employment, and agriculture have been the sectors posing the maximum challenges for all of India, irrespective of which government has been in power. However, things have become worse in the last few years, especially as far as education is concerned. Neither the Modi government’s budget allocation nor its policy initiatives have tried to address the problems of the ailing education sector in the country.

Of course, Skill India was a grand initiative that aimed to provide job-oriented educational training in the country. However, it miserably failed to achieve its goal. SS Mantha, former chairman of the All India Council for Technical Education( AICTE), and Ashok Thakur, former education secretary, Ministry of Human Resource Development, wrote in a column in The Indian Express:

Remember the fanfare and optimism over the launch of Skill India in July 2015, and the roadmap for skilling 400 Mn people by 2022 (World Youth Skills day)? Today, Skill India looks like a patient, who, after having their treatment diagnosed as successful, has relapsed into a condition worse than before and is on their last leg.

Not only education-related initiatives, but the government of the day has also failed to reduce the gap between its Budget allocation and spending.

According to the Economic Survey 2018, in 2012-13, education expenditure was 3.1% of the GDP. It fell to 2.8% in 2014-15 and registered a further drop to 2.4% in 2015-16. In 2016-2017, it was 2.6%, not exactly a surge to write home about.

Anil Nagar, founder and CEO of edtech startup Adda247, said, “In 2018, Arun Jaitley had announced a 10% hike in the Budget as compared to the previous year. However, the allocations for education saw a marginal increase of 3.84%, from approximately INR 81,869 Cr ($11.5 Bn) to INR 85,010 Cr ($11.95 Bn). In fact, the government’s spending on education has declined sharply over the last two decades. While the budget expenditure on education in other growing economics is rising, the scenario is quite the opposite in India.”

Interestingly, of around 75% of the educational spending that states do themselves, it’s the northeastern states like Manipur, Meghalaya, Assam and Bihar which lead educational spending (in terms of their budget percentage) among all the states.

With over 39,000 startups in the country, India ranks third in global tech innovation leadership, behind only the US and China. Thus, at a time when Indian startups are leading the technology race across the world, there appears to be a huge dearth of minds to support the continuation and momentum of the innovation.

And, therefore, to keep up the innovation and the momentum of the Indian startup ecosystem, edtech startups are demanding that the finance minister take a different approach to education.

Besides the primary education under Sarva Siksha Abhiyan, edtech startups want the government to pay equal attention to the digital education and reskilling India to fulfil the employability demand.

Here are the other demands edtech startups have from Union Budget 2019.

Reskill India To Improve Employability

There is a huge gap in the courses being taught at Indian universities and institutes and job requirements on the ground.

An IIT Kanpur professor told Inc42, “Blockchain and data science are the most sought skills in jobs today. However, over 99% of the Indian universities and conventional institutes don’t have blockchain in their curriculum. Even if some do, it is limited to the elementary education which leads students nowhere. Similar is the case with data science. Although there is increased awareness, the educational curriculum in our universities at large does not fulfil the job demands.”

Clearly, there is a pressing need to help the Indian youth unlearn and re-skill, in accordance with job demands. Ishan Gupta, MD of edtech startup Udacity India, seconded this view. Citing E&Y, according to which, a very large proportion of the Indian workforce —  over 40% — will need re-skilling in the next few years by 2022, Gupta said reskilling has become a necessity for people to hold gainful employment in the face of the automation revolution.

“We see an important opportunity here — India is poised with promising demographics at a time of great change in the economy and job market. The best part is that the youth is already realising the need to prepare for the jobs of tomorrow. I hope the Budget focuses on creating a conducive environment for constant upskilling and reskilling,” he said.

Kamal Dutta, MD of another elearning platform Skillsoft India feels that the Budget 2019 should keep up the digital revolution that took off in 2018. He said, “India will find itself in a position to fulfil existing tech-centric job roles such as those in data-engineering, information security, cybersecurity, Blockchain and more. As more professionals delve into upskilling with respect to new technologies, corporate learning will definitely see a significant uptick. We believe that Budget 2019 will be conducive to setting up corporate learning systems within all workplaces and promote nation-wide skill enhancement among employees.”

Reduce GST Rate 

Let’s accept the fact that conventional educational infrastructure — meaning mainstream classroom education — is not alone capable of meeting today’s changing requirements. There is an increasing number of students who want to learn via e-learning, video tutorials, and e-gaming.

While certified conventional education has been kept out of the ambit of GST, e-books are levied a 5% GST. “Moreover, 18% GST is levied on video tutorials and live courses, putting India’s edtech industry in a challenging situation. The government should definitely focus on promoting the e-learning/digital learning space (in Budget 2019),” said Nagar.

Almost all edtech startups today — from leading edtech companies like BYJU’s and Embibe to other smaller ones — deal with either ebooks or video tutorials or both.

He added that while the government has launched many digital learning initiatives like Swayam, Diksha, etc, there still exists a gap due to factors such as lack of ownership and talent shortage. Therefore, it’s necessary that the government involves edtech entrepreneurs in the policy-making process, providing them with the support and guidance to flourish, opined Nagar.

Promote PPP In Digital Education Infrastructure

In a country with over a billion minds, one solution simply can’t be a solution for all. In such a scenario, the right to access to education should not be implemented as access to literacy, but it must encompass one’s access to every medium of education such as online and offline/classroom for everyone.

Rural India is still mostly unaware of the power that digital education can bring into their lives. Forget students, even teachers are largely unaware of the medium.  Beas Dev Ralhan, CEO and founder of edtech startup NextEducation said, “For the digital education, it is also important to ensure that internet access provided to rural areas is functional so that students from those parts can use it for effective self-learning.”

Explaining that India is expected to have 735 Mn internet users by 2021, Rohit Sethi, Director, ESS Global-Study Abroad Consultant, said this poses a significant opportunity for edtech to penetrate the lives of millions of students both in urban and rural areas. “But there is a need to reduce the cost of education further,” he said.

In this Budget, he expects collaboration opportunities between public and private sector institutions in India through the introduction of policies for expansion of infrastructure, funds availability, private investments, easily accessible quality education. “This will bring thousands of aspirant students from abroad to Indian institutes,” he added.

Hard Fact: Our Govts Have Failed Our Education System

Long ago, in 1966, the Kothari Education Commission had recommended allocation of 6% of the GDP on education. However, this was never implemented. Instead, spending on education, as mentioned earlier, kept decreasing over the last many years.

The first Prime Minister of India, Jawahar Lal Nehru, who is also said to be the father of modern Indian education — he laid the foundations of leading institutes such as the IITs, IIMs, AIIMS-Delhi, NIDs, and more — once said, “Only through right education can a better order of society be built up.”

The governments, after Nehru’s era, tried to ride on the popularity of IIT Bombay, IIM Ahmedabad and AIIMS by opening more IITs and AIIMS.

However, most of the subsequent governments misread the need for educational reforms and the priorities of their times. And, it is not the building / premise that made the IITs and IIMs great; but, the teachers from across the world who led the research works which conjugated into the best of learning ecosystem.

In the top eight IITs, over 2,200 sanctioned posts of faculty members are vacant for several years in a row. IIT Kharagpur has 46% posts vacant, IIT Roorkee – 42%, IIT Kanpur-37%, IIT Delhi-29%, IIT Madras – 28%, IIT Bombay – 27% and IIT Guwahati has 25% posts vacant, according to the HRD ministry data.

According to Ralhan, there is a dearth of 11 lakhs adequately qualified teachers in the K–12 segments. Even though the government is trying to tackle the situation with initiatives such as Teacher Professional Development courses on the digital platform Diksha, this issue also needs prioritizing in the upcoming budget.

The Modi government, which launched the Skill India and Digital India programmes, definitely understood the need of the hour. However, according to Sharada Prasad Committee report, the National Skill Development Council (NSDC), through its partners, only managed to skill around 600,000 youth till September 1, 2017, and could place only 72,858 trained youth, exhibiting a placement rate of around 12%. Under PMKYV 1, the placement rate stood at 18%.

The Skill India aim is to train 400 Mn people by 2022.

Considering that Skill India is nowhere near its target and with the rate of unemployment being the highest in the last 20 years, much more needs to be done as far as the digital education is concerned.

At a time when digital education needs to be incentivised, imposing 18% GST is clearly not a good idea to kickstart an edtech revolution.

Rohit Manglik, CEO, EduGorilla summed it up, “The upcoming Interim Budget needs to address some important components of the education sector. Undoubtedly, lowering the GST rates from an existing 18% to the expected 5% will make education affordable to students.”

The Budget also needs to take initiatives such as allocating a bigger spend for education and ensuring proper teacher training programmes along with higher pay and administrative incentives. Incentives need to be provided to encourage research in all disciplines and to augment the technical capacity of central educational institutions like the NCERT, NUEPA, IGNOU, and many more. “Further, a comprehensive scheme on the lines of Ayushman Bharat can be a great start to improve the quality of education,” said Manglik.

He is right. India needs a grand plan with almost 10% of the GDP to be allocated for education only, as this would enable the government to improve things on all fronts — digital education, the Skill India programme — as well as provide tax exemptions and incentives for edtech startups. The grand plan for education should envision building an alternate educational infrastructure, the digital way.