The role of the private sector in Indian higher education has increased significantly over the last decade, with majority of students currently enrolled in private institutions. It is a key to harness India's demographic dividend in education. This role will only increase considering the substantial investments required in the sector. The higher education system in India has exhibited impressive growth over the last decade to become third largest in the world and is likely to surpass the U.S. in the next five years and China in the next 15 years to become the largest system of higher education in the world.

The size of the private sector is about twice that of the public sector in terms of the number of institutions and student enrolments. India has over 31,000 institutions of higher learning, among the highest in the world. Central universities comprise seven percent of the total, state universities 46 percent and state private universities comprise 16 percent; deemed universities, 21 percent; Institutes of National Importance, about nine percent of the total. Overall, the number of institutions in the country has grown at the rate of 11 percent. Rapid growth of institutions, mostly private, has allowed students in dire need of qualifications to pay the requisite sum of money and attempt to acquire them.

Earlier, private sector participation in higher education has been in highly specialized areas such as engineering, management and medicine. However, the government's inability to invest heavily in higher education to take care of growing needs has left the field wide open to the participation of private players in this arena. Most private institutions do not receive aid from the government, whereas 52 percent of the grants of the University Grants Commission (UGC) go to central universities, catering to less than one lakh students.

There is a significant rise in the number of private universities in India. Around more than 60 percent of higher education institutions are private institutions in which nearly 60 percent of the students are enrolled. The private institutes provide under one umbrella all the undergraduate courses, specialized courses such as engineering, management, journalism, law, and art and design, among others. Currently To encourage greater private sector participation in higher education, the government has simplified the regulatory framework, while focusing on quality of higher education.