So I came across this article in Times of India today. https://m.timesofindia.com/business/india-business/edu-loans-in-india-shrink-25-in-4-yrs/articleshow/69490291.cms
The article is basically a summary of the non-performing assets in the education loan sector of India.
As per the article, the highest portion of NPA is in the sub-4 lakh loan. These are the loans that can be given without any collateral. There can be two reasons why the default rate is the highest in this sector
- Because there is no collateral it can mean that the punishment for not repaying is not there and students don’t take it seriously enough.
- There are not enough jobs.
I think the last one is more likely. I have both ancedotal evidence and some statistics.
The ancedotal evidence comes from my friends who are trying to set up factories in India. Whenever they start the construction, they get a lot of requests from local people for jobs (one of the condition for being allowed to set up a factory is that they employ the local people). But it’s not always possible. They then demand that they get all their raw materials from the local “syndicate” which is just another name for a shop supplying raw materials for construction. These are typically run by local youths who are not employed.
And the statistics comes from the rumors of a report that unemployment is at a 45 year high. Of course, the government never let the report come out to the public (but will they publish the report now?).
The students who take the small loans are typically for courses like B.Ed, nursing or the many courses in technical training institutes. There is a lot of automation happening at the factory level.. Some people can argue that AI is going to take over these jobs, but honestly that wave still hasn’t come and the data is from the last 4 years.
The default rate in the higher loan amount sector is much lower. These are the ones for things like MBA and engineering courses in one of the better institutes. MBA and engineering graduates can still find jobs although the quality of the jobs and the life satisfaction from it is dropping fast.
Not everyone gets into Google or Amazon or Goldman Sachs or Morgan Stanley OR Oracle or Samsung.. There is a sea of smaller IT companies which are trying to compete with the big fishes. The big fishes are going to become bigger because they have the capital resources to invest into things like AI, which helps them grow much more rapidly than the smaller companies. It’s a deadly positive feedback.
In short, the data presented by this article paints a bleak picture of the condition of the youth of our country. And it’s the beginning of a long list of problems that the new government will have to address. Else, our country will be submerged into chaos.