World recession effect on Ed-Tech industry in India

By Ms. Sanghamitra Pati

The effects of the global recession, which, according to economist Nouriel Roubini, will begin by the end of 2022 and last until the end of 2023, will undoubtedly have an impact on India. Lower commodity prices, on the other hand, would mitigate the negative effects of the recession on the economy. From the United States toEurope, the Middle East to South Asia, every country is feeling the effects of Russian President Vladimir Putin's unprovoked attack on Ukraine. In addition to the deadly effects of the COVID-19 pandemic, the world has reached a tipping point due to the most recent geopolitical disaster. Global central banks have become overly aggressive in their efforts to control inflation. As the pandemic waves recede, India's EdTech startup landscape begins to unravel. With the opening of new schools and colleges, the demand for online tuition has dwindled dramatically, affecting the revenue of these companies significantly in recent months. These companies have been hit the hardest of all startups, as funding has dried up due to the recession, among other factors, forcing them to lay off employees.

According to a survey, Indian startups have already laid off nearly 10,000 workers this year, accounting for roughly one-third of those in the EdTech sector The pandemic aided the growth of EdTech startups in India over the last two years, transforming India into the world's EdTech hub as education went online. Indian EdTech startups raised $4.7 billion in 2021, up from $2.2 billion in 2020, making EdTech the thirdmost funded start-up category, trailing only e-commerce ($10.7 billion) and FinTech ($8 billion).

Now, if we talk about EdTech companies or startups in India, they have been the hardest hit. And not even only the EdTech companies but the education industry in total. Apart from being declared, there is a sudden decline in EdTech funding as well as EdTech operations, which is a megatrend in the overall industry. Investment in Indian startups as a whole dropped from $12 billion in Q1 2022 to $7.86 billion in Q2. In addition, total funding was less than $1 billion in July, the lowest in the previous 15 months.

In 2020 and 2021, edtech companies broke all fundraising records. Startups at all stages, from pre-product to late-stage, successfully raised back-to-back rounds. Byju's, Unacademy, Vedantu, UpGrad, Eruditus, ClassPlus,

BrightChamps, Cuemath, LEAP, and Teachmint ranked first and second, respectively, in the list of startups raising funds in 2020 and 2021. Companies like Unacademy, Vedantu, Teachmint, and BrightChamps are just a few examples of those that have recently announced funding rounds. But, layoffs and shutdowns are telling a story now, which is alarming. While all startups experienced layoffs in 2022, a disproportionate number of ed-tech companies reversed their rapid expansion by laying off workers to save costs and extend their runway. According to multiple media reports, Byju's and Unacademy each laid off over 1,000 employees in 2022. Both companies, however, claimed that the layoffs were less than 500 and 600, respectively. Byju’s-owned Toppr fired 350 employees, while WhiteHat Jr. fired 30, and there was also a mass resignation of more than 1,000 staff members. Another unicorn unveiled 724 employees in three phases. In the previous several months, edtech companies laid off between 3,000 and 400,000 people. The numbers could be larger. Aside from mass layoffs, startups in Lido, Udayy, and Crejo have been laid off. FuCrejo.Fun,er, learn, shlear, shut down operations several years, their rapid expansion was achieved at a plainly unsustainable cost, particularly in light of the recent financing crunch. Over hiring was a key culprit. Before the layoffs, Unacademy and Vedantu combined to employ nearly 6,000 people. Over 12,000 people work at Byju's, according to estimates. They lost a lot of money in FY20, FY21, and FY22 due to overstaffing and other factors.

Most FinTech startups lose a lot of money and even close down during a recession. While ed-tech businesses were able to expand during the last

What adds more to the pain is that the government of India has also started shifting its attention toward EdTech companies. Dharmendra Pradhan, the education minister, recently stated that the central government is working on a policy to regulate edtech platforms. While not quite as drastic as China's approach of seeking only non-profit firms in the sector, there is no doubt that the government will oppose any form of profiteering. Anil Sahasrabudhe, Chairman of the All India Council for Technical Education (AICTE), stated earlier this year that edtech companies cannot be allowed to venture into areas outside their domain, such as offering diploma and degree courses. He also stated that postgraduate management and computer application programs can only be offered by universities and approved colleges. No matter how fancy startups sound and look, they are the ones who are facing and will bear the major pain due to the US recession.