Private Equity’s Expanding Footprint in India’s Schools and Hospitals

To understand the anger currently spilling onto the streets of Delhi and Ranchi, where young people have protested against examination leaks, one has to look beyond the immediate trigger. These agitations point to a wider erosion of confidence in institutions responsible for delivering essential services. As the state struggles to meet demand, private capital has stepped in to expand capacity and shape the delivery of healthcare and K-12 education. At one level, this has helped fill important gaps; at another, it has increased the commercial pressures surrounding services that should remain widely affordable and accessible.

The Dual-Sector Investment Model
For institutional investors, hospitals and K-12 schools can offer similar macroeconomic characteristics: relatively inelastic demand, recurring cash flows and significant unmet need. With combined central and state government spending on education estimated at 4.1% of GDP and public healthcare expenditure at around 1.8-2.0%, private capital is no longer merely plugging gaps. It is also driving consolidation in both sectors.

Several large funds now invest in education as well as healthcare. 

Private equity ownership or backing is also visible across a growing number of hospital networks. The trend is significant, although it does not amount to universal private equity ownership of the sector.

The Regulatory Grey Zone
The operating model behind much of this consolidation follows familiar private equity incentives. Funds seek to increase enterprise value over a finite investment horizon and eventually exit through a public listing or secondary sale. Many prefer to acquire established regional operators and use them as platforms for further expansion rather than build greenfield capacity. This is not unusual: private equity and venture capital funds are designed to invest, scale businesses and exit as valuations rise.

Investors also frequently favour asset-light models. In education, where K-12 schools are generally required to operate through non-profit entities, the property-and-operations, or PropCo/OpCo, model can separate ownership, management and service provision. A for-profit management entity may charge the non-profit school trust for curriculum, branding and back-office services. Such structures may comply with formal regulatory requirements, but they raise legitimate questions about management fees, related-party transactions and whether the non-profit character of schooling is being diluted. Traditional business houses have also long used variants of such arrangements.

When Financial Metrics Shape Care
In healthcare, the tension between financial and clinical priorities is more immediate. Metrics such as Average Revenue Per Occupied Bed (ARPOB) and EBITDA margins are legitimate measures of institutional performance. 

Excessive reliance on them, however, can influence investment decisions and the mix of services offered. PE-backed hospitals may have stronger incentives to expand higher-margin tertiary specialities such as oncology, orthopaedics and robotic surgery, while lower-margin general medicine receives less attention. The concern is not that specialisation is undesirable, but that commercial returns may begin to exercise undue influence over clinical priorities.

Doctors and teachers should remain central to the purpose and identity of hospitals and schools. Yet both risk being viewed primarily as drivers of utilisation, enrolment and revenue rather than as professionals serving a wider social objective. Where commercial targets dominate, access and social obligations can weaken. Questions have arisen, for example, over the willingness of some corporate hospital chains to participate in government insurance schemes such as Ayushman Bharat when reimbursement rates are considered inadequate. Private schools have also faced allegations of resisting or limiting admissions under economically weaker section quotas.

This can leave self-paying households carrying a larger burden. India’s out-of-pocket health expenditure remains high, while lower reimbursement rates under public schemes can produce disputes over hospital participation. There have also been reported instances of hospital chains declining to accept Central Government Health Scheme patients at notified rates for investigations and inpatient care.

Studies have shown that major out-of-pocket medical expenses can push lower-income households into poverty or force families to sell or mortgage assets. Public education varies widely across India, but many government schools continue to face gaps in physical infrastructure, teaching quality and academic support. Private schools, by contrast, often use stronger facilities and branding to attract parents across income groups.

The Limits of PPP
Why has corporatisation advanced faster than regulation? One explanation is the scale of unmet demand and the state’s limited fiscal and administrative capacity. Institutions such as NITI Aayog have championed public-private partnership models, but outcomes in healthcare and education have been mixed. In some cases, private operators have benefited from public land or institutional support without delivering affordable services at the expected scale. Dependence on private capital may also make governments cautious about imposing tighter conditions.

Regulation consequently remains uneven. With the social sector featuring health and education on the concurrent list, the governance architecture doesn’t follow a single template. For instance, the Clinical Establishments Act, drafted more than a decade ago, has not been adopted uniformly across states. Where PPP models have been implemented, there have also been allegations that beds reserved for poorer patients were diverted or not made available as intended. Even where individual allegations are disputed, they underline the need for transparent monitoring and stronger enforcement of contractual obligations.

Lessons From Other Markets
India is not the first developing economy to face these questions. International experience offers reasons for caution, although outcomes differ substantially across countries. South Africa’s concentrated private hospital market has faced criticism over rapid increases in the cost of private care. Brazil’s expansion of for-profit education brought scale, but also raised concerns about educational quality and regulatory oversight.

In the United States, research and reporting have linked some private equity-owned healthcare providers to aggressive billing practices, asset sales and hospital closures, particularly in vulnerable communities. China’s 2021 prohibition on for-profit tutoring followed mounting concern about education costs, inequality and the financial pressure on families. These examples do not establish that one outcome is inevitable. They do show that rapid commercialisation without effective regulation can provoke abrupt and costly policy responses.

The Terms of Private Capital
Private equity can be an important source of capital for India’s underfunded social infrastructure. But education and healthcare cannot be treated simply as lightly regulated commercial markets. Financial investment should be tied to patient and student outcomes, not only margin expansion and exit valuations.

A stronger and more coherent statutory framework is needed to govern management-fee arrangements in schools and address market concentration, pricing power and transparency in hospitals. Without such safeguards, India risks building high-quality institutional capacity that remains beyond the reach of large sections of the population.

The protests over examination failures illustrate how quickly institutional shortcomings can erode public trust. The lesson for healthcare and education is that additional capacity, whether public or private, will not be enough without accountability.

India therefore needs higher and better-targeted public spending on K-12 education and primary healthcare, with greater emphasis on outcomes rather than outlays alone. The Union government has shown through initiatives such as Jan Aushadhi that affordability can be addressed, while courts have intervened in disputes over fees charged by private schools. There is no ideological quarrel with private capital, whether traditional, private equity or venture capital. But healthcare and education require long-term commitment, transparent regulation and accountability to the people they serve. Profit is legitimate, but it must not come at the expense of access, quality or public purpose.