To its supporters, it holds out the promise of desperately needed university places for greater numbers of India's vast population.

To its critics, it raises the prospect of an influx of foreign-owned "degree mills" and the commercialisation of Indian higher education.

The long-awaited foreign education providers bill, allowing overseas universities to award degrees independently and to set up branch campuses in India, was approved by the country's Cabinet this month.

A previous bill was blocked by the Communist Party of India (Marxist), but it is no longer part of the country's ruling coalition.

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However, the bill still needs approval from Parliament before it becomes law.

Universities in the UK and the US will be watching developments with interest.

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Kapil Sibal, the minister for human resource development who is championing the bill, sees opening up the Indian academy to foreign institutions as an integral step towards meeting the government's target for 30 per cent of young people to enter higher education.

This is a tall order in a country with a population of 1.2 billion and a current higher education participation rate of just 12 per cent.

William Lawton, policy adviser at the UK Higher Education International Unit, met Mr Sibal in India earlier this month.

He said the key change for foreign institutions would be the ability to award their degrees independently - which means they could be taught in partnership with Indian universities - rather than a green light to open branch campuses.

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"The level of activity is going to have to go up because of the increased demand for higher education in India, which the minister knows the country cannot cope with," Dr Lawton said. "That is why he is seeking international input. India's capacity requirements are on another scale altogether."

Don Olcott, chief executive of the Observatory on Borderless Higher Education, said he did not expect a decline in the number of Indian students coming to the UK if the bill becomes law. At present they are the largest group of overseas students after those from China.

"The bill will take time to implement and the demand by Indian students to attend high-quality, reputable universities in the UK, the US, Australia and other countries is unlikely to be seriously affected in the short term," he said.

Lancaster University is one of several British institutions that already have a presence in India. It linked with a private company to launch the GD Goenka World Institute in Gurgaon, near Delhi, last year.

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Anthony Marsella, Lancaster's director of marketing and external linkages, said the standard model of educating international students in the UK is "not a sustainable position in the long term".

Indian critics of foreign provision fear students will be exploited by universities seeking profitable ventures. But Dr Marsella said that the advantages of foreign provision for India include students benefiting from high-quality education at a lower cost than living abroad, local economic benefits and additional employment opportunities for Indian academics.

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"I think that India benefits more than the UK - exactly the opposite of students coming to Britain to study," he said. "It is a more equitable deal for India."

john.morgan@tsleducation.com.