India's business leaders have reacted strongly to government opposition to the opening up of higher education to private investment that might help millions of young people.

The Federation of Indian Chambers of Commerce and Industry has expressed "strong reservations" about the rejection by education bodies of recommendations by the National Knowledge Commission, set up by Manmohan Singh, prime minister, on measures to attract greater private investment.

India faces the challenge of finding ways to give skills to a large population of whom more than 550m are under the age of 25.

Over the next six years, India needs to create 1,500 universities, by some estimates, but faces a big funding gap. Educational institutions in the UK, US and elsewhere are lining up to help with the tertiary level expansion through faculty partnerships, distance learning and by setting up campuses.

The federation fears that advances by some institutions, such as the Indian School of Business, Hyderabad, Manipal University and the Birla Institute of Technology and Science, Pilani, may stall without public-private partnerships to promote global academic standards and more flexible fee structures.

The supply of education is out of touch with an economy that grew at 9 per cent over the past three years. The prize for many young people is a place at an overstretched institute of technology or management.

Harsh Pati Singhania, the federation president, said: "The reported decision to reject the NKC's recommendations by the Central Advisory Board of Education and the human resources development ministry will, without doubt, slow down the reform process urgently needed to give an impetus to the expansion of quality higher education in India."

Copyright The Financial Times Limited 2009