India invites investment from its ex-pats

India's cash-strapped higher education sector is opening up to foreign investment, but opportunities to invest will initially be restricted to Indian nationals domiciled overseas.

A cabinet committee has cleared a $1 billion project by a consortium of US-based Indians to set up "top class" institutions in India on the lines of the Indian institutes of technology.

The education ministry has been asked to prepare guidelines for fees and curriculum issues.

The state-funded institutes of technology have reached saturation point and, with government spending on higher education on the decline in real terms, they are not in a position to expand without compromising on standards.

Every year hundreds of candidates are turned away because of lack of capacity. The proposed project is expected to fill the gap between demand and supply that foreign universities are cashing in on to market their courses. There is concern that a number of allegedly substandard foreign universities are diverting bright students from the recognised state institutions.

There is also a move to allow the private sector to set up science and technology colleges but the government wants powers to regulate them to ensure that they are not driven purely by commercial considerations.