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India has a severe shortage of higher education institutions and a booming population with more than 30 percent of its 1.1 billion people under 14 years old.
Human resources development minister Kapil Sibal said that inviting foreign universities into the country could help provide some of the millions of young people with skills needed in the fast-growing economy.
"I do not see why foreign institutions should not be allowed," Sibal told the Financial Times, spelling out a policy announced in parliament last week.
"We should have the legislation passed that puts in place a mechanism, framework and regulator for the foreign universities to start functioning."
Sibal said the new laws, which would likely face strong opposition in parliament, could be in place by July next year in time for the start of the next academic year.
For decades, India's best and brightest students have headed abroad to complete their education with many never returning.
But the government ha