How India's brain drain and foreign students dip led to $6 billion deficit

The rising trend of Indian students studying abroad and the declining number of foreign students in India have contributed to a significant $6 billion deficit in the country's current account balance

The growing demand among Indian students for education at foreign universities, coupled with the declining intake of foreign students by Indian universities, has gradually but steadily created a $6 billion hole in India’s current account balance.

An analysis of the balance of payments (BoP) data shows education-related travel by Indians more than doubled in 10 years—from $2.46 billion in FY15 to $6.3 billion in FY24. The rise in the income level of the Indian middle class and better employment opportunities with higher wages outside India are often cited as reasons behind such a trend.

However, travel to India by foreigners for education purposes has more than halved from $519 million in FY15 to $247 million in FY24. From FY16 to FY22, there has been a consistent trend of declining expenditure by foreigners on education in India. Although in the last two financial years of FY23 and FY24, the forex revenue accruing from education-related travel into India has increased after reaching the lowest of $109 million in FY22 when the second COVID wave wreaked havoc, the forex revenue is still way below the 2014-15 level.

Notably, foreigner’s spending on education in India started declining sharply before the pandemic began. This can be corroborated by the fact that foreign spending in FY18 was $479 million, which fell to $186 million in FY19.

One of the major focus areas of the National Education Policy (NEP) 2020 has been the internationalisation of education, and to facilitate that, the government has taken many steps. The University Grants Commission (UGC) has issued regulations on academic collaborations between Indian and foreign higher education institutes (HEIs), offering dual and/or joint degrees. 

Notably, the UGC had also brought about guidelines regarding the establishment of the Office for International Affairs in HEIs to serve as a single point of contact for facilitating foreign students. Highly ranked foreign universities have also been allowed to set up their campuses inside India so that domestic students can avail of the internationally relevant and quality curriculum without going outside India.

To foster the growth of foreign students studying in Indian universities, the government had also introduced the ‘Study In India’ scheme in 2018 with the aim of having 2 lakh foreign students studying in India by 2023. Moreover, the government has regularly offered scholarships and fee waivers for meritorious foreign students and has facilitated regular student exchange programs by signing Memorandums of Understanding (MoUs) with friendly countries to promote a conducive environment for global learning.

UGC, through its notification in 2022, had also allowed HEIs to create up to 25 per cent seats for international students, over and above their total sanctioned enrolment for undergraduate and postgraduate programs. 

Notwithstanding the COVID pandemic, which led to a global lockdown-like situation with negligible movement of people across countries, the above-mentioned steps haven’t had much impact as implied by the inflow of foreign students to India, which has seen tepid growth and has even declined in recent years.

As per the All India Survey on Higher Education (AISHE) Final Reports released by the Ministry of Education, enrolment of foreign students in different courses in higher educational institutions of India has increased by only 16.68 per cent, from 42,293 foreign students in FY15 to 49,348 foreign students in the pre-pandemic year of FY20. 

The AISHE reports show foreign students' intake declined to 48,035 in FY21 and further to 46,878 in FY22 as the pandemic hit the Indian economy. Subsequent AISHE reports have not been released by the Ministry of Education.

Students from 170 countries studied in India as per the FY22 AISHE Report. Most of India’s education exports are directed to South Asian and African countries. Nepal sends the largest contingent of students, and its share has gone up from 21 per cent in 2014-15 to 28 per cent in the total foreign students enrolled in India in 2021-22.

However, the share of Afghanistan, Bhutan, Malaysia, Sudan, and Nigeria has plummeted since 2014-15, albeit Afghanistan and Bhutan’s shares are 6.72 per cent and 3.33 per cent, respectively, in 2021-22, making them the 2nd and 6th largest countries sending their students to India. Interestingly, the USA has the 3rd largest share of foreign students in India at 6.17 per cent, followed closely by Bangladesh (5.55 per cent) and the UAE (4.87 per cent) in 2021-22.

Biswajit Dhar, a retired professor at Jawaharlal Nehru University, opined that India’s higher education sector had been in a crisis due to a lack of adequate funding for a long time, and India’s unique selling point of being a provider of quality education at an affordable cost has taken a hit in recent times. 

“This has happened because the cost of quality education has gone up in India since the quality of education provided by the government-run HEIs has plummeted while private universities, owing to more focus on privatisation by the government, have cropped up in India, which charge exorbitant fees to provide quality education,” he said.

Dhar said this is one of the reasons why foreign students from low-income countries in South Asia and Africa, which account for the maximum share of foreign students coming to India to study, are looking for alternate countries that can help provide them with affordable and quality education. “I am not at all surprised that India has been unable to maintain the kind of market presence that it enjoyed in the past,” he added.