India offers overseas study loan

India's offer of bank loans for students who study overseas is likely to increase the scramble among the middle classes for a foreign degree, according to the country's communists.

Finance minister Yashwant Sinha announced in his annual federal budget that bank loans of up to R1.5 million (£22,000) would be available at low interest without the need for any collateral. The loans would be repayable over a period of five to seven years, with a provision for a "grace" period. Those who want to pursue higher education in India would be able to borrow up to R750,000.

"I have personally experienced poverty and faced problems in pursuing higher education," Mr Sinha told parliament. "I therefore feel that no deserving student in the country should be deprived of higher and technical education for want of finances."

Political opponents of the ruling coalition have called it an attempt to "pamper" the urban middle class. "What we need is more investment in school education and more incentives to the deprived families to send their children to schools," a Communist Party of India (Marxist) MP said.

However, the announcement has been widely welcomed in India, where a foreign degree is regarded as a status symbol. It has been described as an "egalitarian" measure aimed at breaking the class barrier that allowed only the rich to reap the economic and social advantages of foreign education.

It should also come as a boon to foreign institutions, including British universities and colleges, which have been trying to attract Indian students. With more students in a position to pay, the profile of Indian students studying overseas is likely to expand.