Industry body Assocham on Monday said that over $13 billion is spent every year by about 450,000 Indian students on higher education abroad as they are not accommodated by domestic institutions.

Over 90 per cent of students appearing for IIT and IIM entrance examinations are rejected due to capacity constraints, of which the top 40 per cent pay to get admission abroad.

"Over 150,000 students every year go overseas for university education, which costs India a foreign exchange outflow of $10 billion. This amount is sufficient to build more IIMs and IITs," it said.

The primary reason for a large number of Indian students seeking professional education abroad is lack of capacity in Indian institutions. The trend can be reversed by opening series of quality institutes with public-private partnership by completely deregulating higher education, Assocham President Venugopal Dhoot said in a statement.

Higher education in India is subsidised as an IIT student pays an average $120 monthly fee, while students opting for education in institutions in Australia, Canada, Singapore, the US and UK shell out $1500-$5000 as fees every month.

Deregulation of higher education in the country will result in creating annual revenues of $50-$100 billion, besides providing 10-20 million additional jobs in the field of education alone, the chamber said. India has only 27,000 foreign students, as compared to four lakh in Australia.

Assocham further said vocational education in India is a meagre five per cent of its total employed workforce of 459.10 million as against 95 per cent in South Korea, 80 per cent in Japan and 70 per cent in Germany.