The Indian rupee’s fall: what does – or will – it mean?

The Indian rupee has continued its downward slide this year, and worries about what this may mean to Indian students’ intentions to study abroad are increasing in tandem. At the very least, there are concerns among institutions in the two leading destination countries for Indian students, the US and the UK: the currency website XE.com reported that from mid-May to 10 September, the rupee’s value declined 17.4% against the British pound, 14.5% against the US dollar… compared to only 10% against the Australian dollar. The effect of the rupee’s fall on international education markets has the potential to be massive due to facts such as these:

• Roughly 800,000 Indian students go overseas to study each year and the number of Indian students studying abroad rose a stunning 256% from 2000–2009.
• India’s population of more than 1.2 billion people (over 17% of the global total) makes it the second-most populous country on earth after China; forecasts predict that India will overtake China by 2028.
• India accounted for 11% of all global graduates in 2010 and is expected to overtake the US and produce 12% of the share of graduates by the end of this decade.
• More than half of the Indian population is under the age of 25, and more than 65% is 35 or younger: a demographic make-up with a massive appetite for education.
• Indian students make up the second largest contingent of foreign students in the US (after Chinese) and the UK (and the number of Indian students in the UK had already fallen by 24% in the UK in 2011/12 from 2010/11).
• The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has estimated that overseas Indian students spend the equivalent of about US $15 billion a year on their studies.

As a Reuters article puts it, “Foreign students are prized by US academic institutions, particularly at the undergraduate level, because they often pay full tuition and board rather than counting on financial aid from universities, giving them an economic impact that outweighs their numbers.” Indian students make up such a large proportion of the overall base of foreign students in the US and the UK that a significant drop in their numbers now would be a large blow to the international education sectors in these countries in general.

But, are numbers falling?

Reports about whether or not Indian students are curtailing or changing actual plans to study are uneven, with some US-based organisations claiming increases in Indian applications over 2012. For example, the US consulate in one Indian town says there has been a 47% increase in applications so far in 2013 versus the same time period in 2012. On the other hand, a Wall Street Journal (India) article interviewed Indian students in August who were outright dropping their plans to study abroad due to their currency’s tanking. That there hasn’t been a widespread, drastic, documented drop in Indian students applying to and enrolling in foreign institutions may, in large part, be a function of how fast the rupee’s fall has been: many students applied for study abroad in May, when the rupee hadn’t fallen so drastically against the British pound and US dollar. Having been accepted and secured loans, it seems that most Indian students with study abroad plans carried through on them, though anecdotal reports are full of their financial stress. For example, an Indian computer engineering student at Arizona State University told Reuters he is adjusting his lifestyle to cope: “You avoid buying exotic vegetables, and that one extra beer, for example.” Another student told the paper, “If the rupee continues on this devaluation path, it would get difficult to repay [my loan] within the given time and I might have to take another one.” And Phil Honeywood, executive director of the International Education Association of Australia (IEAA), has noticed Indian students coming to class “often very tired, and fall[ing] asleep in class, because when you look at it they’re often working two or three part time jobs, (sometimes) illegally.” For more examples of how Indian students abroad are coping, see here.

So for current Indian students studying abroad, the rupee’s fall seems to be manifested mostly in students being more frugal, and, if they can, adjusting how they pay their fees (e.g., all at once, staggered, in American/British currency rather than the rupee, borrowing from relatives, etc).

To date at least, they are not being helped by an “Rs 2 million (US $36,500) ceiling on loans for overseas education” for Indian banks. There are reports, however, that the banks are considering extending the period during which students can repay the loans to “spread interest payments over a longer period and reduce the cost.” We will have to wait and see if such a development transpires.

The real effects of the rupee’s fall may be reflected in next year’s numbers

For the moment, many observers are looking ahead to the forthcoming national election in India. It must be held by May 2014 but calls are increasing for an earlier vote to break what has been characterised as a deadlock in the current Parliament, and move forward with new policies that will ease the current economic crisis. The stakes are high as it is Indian students considering study abroad next year whose plans may be most affected. These are the students who – with their parents – will have had more of a chance to absorb the rupee’s fall and what it means to their plans for an overseas education. They may benefit from the rupee’s eventual rebound. If it doesn’t recover, they will have more opportunity than 2013’s group of Indian students to adjust their strategy. In this case, they will have the following options:

• Decide not to pursue education abroad;
• Change their study abroad destination country (for example, Australia’s currency hasn’t appreciated as drastically relative to the rupee as those in the US and UK so has become more affordable as a result);
• Prioritise education institutions that respond to the rupee crisis with grants and scholarships – or at least more flexible payment plans (see here for evidence of the demand for this already);
• Strengthen their application packages to stand a better chance of getting financial assistance (with a corresponding opportunity for good agents);
• Prioritise destination countries with more open work and immigration policies, so they have a way to pay back any loans they take out (Australia did this last year, for example.)

Inherent in all these options are opportunities at the national, association, institution, and agent levels to help Indian students decide on affordable, quality options for an education abroad. Over the long term, Indian students’ demand for education is not going to decrease – demographics alone guarantee that. Much less certain is where they will get this education – and the next few months may witness a changed international playing field for which countries, and institutions, receive the most Indian students – a playing field that might just stay altered for a while.