Is the study abroad dream of Indian students a ‘disease’ or a symptom of a larger crisis? A deep dive into the economic implications, root causes, and way forward

On Saturday, Vice President of India, Jagdeep Dhankhar, compared the rising trend of Indian students pursuing foreign education to a “disease,” cautioning parents about its potential negative effects on their children’s future and the country’s economy. Addressing an event organized by a group of educational institutions in Rajasthan’s Sikar, Dhankhar criticized the growing commercialization of education, which he believes is compromising its quality and affecting India’s long-term development.
“There is a new disease these days—the disease of going abroad.Children want to go to foreign countries to study. Parents lack counseling, but children are keen to go. They weave dreams of a heavenly land. There is no objective evaluation of which institution they are enrolling in, which country they are going to; it is just a mindless pursuit of foreign shores,” Dhankhar remarked.
Coining the term “forex drain,” Dhankhar highlighted the financial burden caused by Indian students studying abroad. He pointed out that in 2024 alone, around 1.3 million students going overseas for higher education drained approximately $6 billion from India’s foreign exchange reserves. He warned that this trend could hurt the country’s economy by widening the current account deficit due to the outflow of foreign currency.
Likening the trend to “brain drain,” Dhankhar emphasized the additional economic implications of what he termed “forex drain.” He urged students to avoid the “herd mentality” of studying abroad without considering its broader impact and stressed that this craze needs to be addressed at both an individual and policy level.

The economic reality of studying abroad: Forex and exchange rate implications

The financial aspect of Dhankhar’s argument cannot be ignored. When students choose to study abroad, they need to convert Indian Rupees (INR) into foreign currencies like the US Dollar (USD), British Pound (GBP), or Euro (EUR) to pay for tuition fees, housing, and other living expenses. This increased demand for foreign currency contributes to the depletion of India’s foreign exchange reserves. If this trend continues unchecked, it could exacerbate India’s trade imbalance, especially if the Rupee continues to weaken against stronger global currencies.
For instance, an Indian student studying in the United States might already face financial pressure due to the high cost of tuition. If the Rupee depreciates further against the Dollar, the cost of education would effectively increase, making it even more expensive to study abroad. Dhankhar’s caution highlights a valid economic concern: the constant outflow of money for educational purposes can deplete India’s reserves, impacting the national economy.

The positive side of studying abroad: Remittances and skill enhancement

While Dhankhar’s remarks focused on the negative aspects, it is essential to acknowledge the benefits of Indian students studying abroad. Many students who secure jobs in foreign countries after completing their education often send remittances back to India. These remittances, while smaller than the outflow, do contribute foreign currency to India’s reserves, providing some economic balance. In 2023, India received over $100 billion in remittances from its diaspora, a testament to how these funds play a vital role in the country’s economy.
Furthermore, students who gain international exposure often acquire skills and experiences that might not be available within India. They bring back knowledge, technical expertise, and global networks that can enrich India’s workforce and potentially foster innovation and entrepreneurship upon their return. This exchange of knowledge is a key component of a globally interconnected world, and many believe that a well-rounded education involves cross-cultural experiences.

Why Indian students prefer to study abroad: Is herd mentality to blame?

Dhankhar’s warning against the “herd mentality” highlights a significant issue. For many students and parents, studying abroad has become a status symbol. They often pursue foreign education without objectively evaluating the quality of institutions or considering long-term career prospects. This mindset can lead to poor decisions, with students enrolling in substandard universities that offer little value beyond the label of a “foreign degree.”
However, it’s crucial to understand why this mentality exists. The decision to study abroad is not just a result of misplaced aspirations but often stems from systemic challenges within India’s education system. Despite the presence of prestigious institutions like the IITs and IIMs, there are limited opportunities, and the demand for seats far exceeds the supply. Many students look overseas for alternatives where they can access quality education, better infrastructure, and courses that may not be available in India. Therefore, the desire to study abroad is not just a “craze”; it is often driven by a quest for better opportunities and learning environments.
One of the key reasons many Indian students choose to study abroad is the limited availability of spots in India’s top institutions. Despite excellent academic performance, students often fail to secure seats in prestigious Indian universities due to excessively high cut-offs, reservation policies, or even instances of corruption. For example, in the highly competitive Indian Institutes of Technology (IITs), lakhs of students appear for the JEE Mains and JEE Advanced exams, but only a few thousand are admitted.
Moreover, as per government policy, a significant percentage of seats are reserved for students from SC, ST, OBC-NCL, and EWS categories (15%, 7.5%, 27%, and 10%, respectively). While this ensures inclusivity and equal opportunity for underprivileged groups, it also means that many high-scoring students from the General category miss out on admissions, even if they score higher than some students in reserved categories. This scenario has led to a sense of frustration and a feeling of being deprived among many students who, despite their hard work, do not secure a seat in their dream institutions.
The competitive environment in India’s top institutions has driven many students to explore options abroad. Foreign universities, particularly in the US, UK, Canada, and Australia, often rank higher in global university rankings and present an attractive alternative. With a broader array of programmes, advanced research facilities, and less stringent admission criteria, these institutions provide students with opportunities that they may not find in India.
Additionally, the cost of studying abroad has become more comparable to fees at some top Indian institutions. For instance, IITs, which once had the reputation of offering affordable, high-quality education, have increased their fees in recent years. With tuition costs rising, many students find that studying abroad, where they can access better facilities, research opportunities, and international exposure, is a more attractive investment in their future. Thus, the allure of studying abroad is not just about prestige but also about a genuine quest for better educational prospects.

The way forward: Strengthening Indian institutions

To counter this trend, Dhankar emphasized the need to strengthen Indian educational institutions and called on the private sector to support the education system. He urged educational institutions to be financially sustainable and highlighted the importance of providing accurate information to students about studying abroad, particularly regarding the quality and ranking of foreign institutions.
He also called for increased efforts to establish high-quality institutions in tier 2 and 3 cities, as well as in rural areas, to make top-tier education accessible across the country and reduce the need for students to look abroad for better opportunities.