The New Education Policy 2020 (“NEP”), which was approved by the Union Cabinet on July 29, 2020, has paved the way for foreign universities to set up campuses in India. The NEP states that the world’s top 100 universities will be “facilitated” to operate in the country through a new legislative framework. It remains to be seen in what shape and form this new law will be implemented. Under the Indian Constitution, education is a state subject, with certain specific exemptions for the central government with respect to certain named institutions of higher learning and institutions for scientific or technical education financed by the Government of India wholly or in part and declared by Parliament by law to be institutions of national importance. The central government also has the power to co-ordinate and determine standards in institutions for higher education or research and scientific and technical institutions.

Currently, India’s Foreign Direct Investment Policy (“FDI Policy”) allows 100% foreign direct investment in the education sector and in construction development projects involving educational institutions. However, various central and state laws require educational institutions to be set up as not-for-profit entities, which could be a society registered under the Societies Registration Act, 1860 or a public charitable trust under the public trust act of the relevant state, or a not-for-profit company registered under Section 8 of the Companies Act, 2013. Under the FDI Policy, foreign investment in societies and trusts is prohibited under the automatic route, unless it is an investment vehicle regulated by SEBI. Any foreign investment in a not-for-profit company registered under Section 8 of the Companies Act, 2013 would require specific central government approval since it would attract the provisions of the Foreign Contribution (Regulation) Act, 2010. Therefore, foreign universities have not set up shop in India until now.

Ten years ago, the Foreign Educational Institutions (Regulation of Entry and Operations) Bill, 2010, (“FEIB 2010”) had proposed the entry of foreign universities. The FEIB 2010 was never passed and with the dissolution of the 15th Lok Sabha, it eventually lapsed. The FEIB 2010 had required foreign educational institutions permitted to operate in India to maintain a corpus fund of a minimum of Rs 50 crore.

Please find a copy of the NEP here.

This update has been contributed by Vinod Joseph (Partner) and Protiti Basu (Associate).