Indian EdTech Beyond The First Phase: A Booster Shot For Long Term Growth.

18 May 2021

Part one of this blog-series[1] discussed how factors like Covid-19 pandemic and introduction of the National Education Policy 2020 (“NEP”) enabled expansion of the educational technology (“EdTech”) sector and how it has grown by leaps and bounds in less than a year. Considering the demographics of our country and the deep-rooted conventional educational culture, this blog seeks to look at the key challenges and opportunities for the EdTech sector.

Key Challenges

In the Indian context, the progress of the EdTech sector is likely to face challenges in the areas mentioned below:

Digital Divide

According to the report on education by National Sample Survey, in India, only 8% of all households with members in the age group of five to twenty-four years have access to both computer and internet, while only 24% of all Indians own a smartphone. The same report suggests that in urban areas, 23.4% and 42% households have computers and internet facilities respectively, however, when it comes to rural areas, these numbers drop down to 4.4% and 14.9% respectively.[2] While the economically weaker sections have already started investing in smartphones and/or laptops for online classes, the same is usually a shared device used by the entire family making it difficult for students to get uninterrupted access to laptop/smartphone for a continuous period of 5-6 hours. This problem is even more in families with more than one child. Further, the cost of 4G data plan required for online streaming of classes acts as an additional financial burden for the parents from economically weaker section. Furthermore, while in urban areas, 32.4% people know how to operate computers and 37.1% people know how to use the internet, these numbers drastically fall to a mere 9.9% and 13% respectively, in rural areas.[3]

While it will be true to say that the EdTech penetration is ever-increasing in urban India due to higher digital literacy, it will take a while for rural India to bridge this digital divide.

Access to uninterrupted electricity

The lack of uninterrupted access to electricity in India is another massive challenge to the growth of the EdTech sector. As per a recent survey by Smart Power India, 35% of households in rural India on an average received less than 12 hours of electricity daily, while 37% received electricity for 12 to 18 hours daily and only 28% received for more than 18 hours daily.[4] Given the fact that access to online learning is greatly dependent on a stable electricity connection, the uncertain supply of electricity acts as a deterrent to continued access of online education.

Resumption of physical classrooms post pandemic

We have all seen tremendous acceleration of digital adoption in the education sector in FY 2019-2020 on account of the lockdown and shutting down of schools and colleges. Once the pandemic wanes and physical schools reopen, EdTech platforms that are imparting online education are likely to see a decline in traffic as students will start diverting their time to physical classrooms and other offline activities.

Overcrowding in EdTech

There are around 4,530 EdTech start-ups in India out of which 435 were founded between 2019 and 2020.[5] However, most of these start-ups are clones of existing ones and offer similar products. Additionally, even the start-ups that are offering significantly different products are finding it difficult to sustain, as the EdTech giants are easily replicating their offerings at scale.

Other factors

The other factors that add to existing barriers in the penetration of online education in India include: lack of access to a separate room for attending classes or taking online tests; lack of steady internet connectivity throughout the day; burden of sharing household work and in some case even attempting to earn extra income for their families.

Opportunities

While the above-mentioned challenges may lead to a short-term blip in the growth of EdTech sector, in the medium to long term, it is expected to continue to grow at a steady pace. This is because of change in the mindset of parents towards online education and increased acceptance of the idea of blended learning (i.e. combination of online and offline learning). Some of the key opportunities for growth in EdTech sector going forward are:

Huge market for education in India

Education in India is a huge market with USD 117 billion spent alone in the financial year (“FY”) 2019-2020 and which is further expected to grow to USD 225 billion by FY 2024-2025. Out of this USD 117 billion, (i) USD 49 billion was spent on school education, 66% of which was spent on primary education, 27% on secondary education and 7% on pre-primary education; (ii) USD 42 billion was spent on supplementary education that primarily comprised test preparation and private coaching; and (iii) the balance USD 26 billion was spent on higher education, vocational education and corporate training.[6] With increased acceptance of EdTech learning among students, expansion of this market in the coming years is certain.

Investment opportunities in different educational segments

In 2020 a major portion (nearly 90%) of total funding in EdTech sector was targeted towards K-12 and test preparation segment, dominated by such giants as Byju’s, Unacademy, Vedantu etc., while other segments such as B2B, non-academic skills and vocational training, continuous learning were in their nascent stage of funding and are likely to be the centre of investor interest in 2021.[7]

Learning in vernacular

In India around 65% of internet users are comfortable using the internet in vernacular languages. The NEP too has given increased emphasis on education in regional languages. This creates opportunities for EdTech companies to offer products and services in vernacular languages.

Digitization in Educational institutions (B2B)

Since imposition of the lockdown last year, there has been a surge in demand among educational institutions for platforms providing automation and enterprise resource planning (ERP) solutions for administrative operations, attendance, fee collection and other tasks. EduMarshal, an EdTech platform providing ERP solutions saw a month-on-month growth of 250% since lockdown,[8] and it is likely that going forward providing these ERP solutions to large educational institutions will also be a big market for EdTech companies.

Digital learning enablement (B2B)

Due to onset of the pandemic and introduction of NEP, there is a huge surge in collaboration between EdTech companies and education institutions like schools, colleges and private coaching institutions for helping educational institutions to take their classes online. This includes landmark acquisition of Aakash Educational Services Limited, a private coaching institute for engineering and medical entrance exams, by Byju’s. The trend of private coaching classes in Tier I and Tier II cities, offering their services online is on the rise and is likely to stay that way in the medium-to-long term.

Education with employment and continuous learning

In the last year, around 63% professionals increased their time spenton online learning to enhance their skills or to reskill themselves to stay relevant.[9] With the situation of pandemic getting worse in 2021, professionals are likely to continue with their approach to remain competitive. This has increased demand of EdTech platforms like UpGrad, Eruditus etc. that provide courses to professionals for upskilling and reskilling.

Augmented Reality (AR) and Virtual Reality (VR) in Education

The global education market for AR and VR-based immersive learning is expected to grow to USD 19 billion by 2023.[10] Further, the government is also planning to set up India’s first AR and VR-based skill training centre at IIT Varanasi.[11] This will open new avenues for EdTech companies offering products in AR/VR space.

Online STEM learning

The increased importance of critical thinking and problem-solving skills for jobs and NEP’s emphasis on introducing coding to students from class 6 onwards, has increased demand of EdTech companies in this space.

Conclusion

The large and diverse diaspora of India coupled with its infrastructural challenges definitely pose a challenge to the development and growth of the Indian EdTech eco-system. However, this pandemic and the ensuing lockdown has changed the mindset of students and parents towards online education in the long term. Yes, of course! there maybe momentary blips due to re-opening of physical classrooms or commencement of other offline activities, but the positive impact and reach of EdTech in both urban and rural population is here to stay. With added emphasis on online education in the NEP, the advancement of technology (multimedia/VR/AR interfaces, etc) in education and steady growth in internet penetration in India, the confidence and interest of the Indian population towards EdTech is only slated for a rise – Upwards and onwards is the only way for the EdTech sector in the long term!