The last decade witnessed a boom in aspirants desiring an MBA degree and this boom has lately inflated to a full sized balloon. According to the IIM Review Committee report, published on September 25, 2008, the number of CAT takers increased from 2,500 in 1990 to 250,000 in 2008. A large number of middle and low rung MBA schools have been mushrooming all over India, particularly in the metros. Although the Indian management education sector is barely 50 years old, MBA institutes have grown from 80 university-based department and schools of management in 1990 to a whopping 1,800 full-fledged MBA schools in just about 20 years. But has this great Indian MBA growth balloon been pricked off late? Are these early signs of the dipping craze for an MBA degree? Will this become a major cause of worry for the Indian management education sector?
According to the information available with MBAUniverse.com, the percentage of students enrolling in an MBA coaching institute this year (2009) has seen a huge plunge. Evidently, this phenomenon is going to affect the entire MBA ecosystem in India. Dipping enrolments in the MBA coaching institutes will ultimately lead to a lesser number of entrance exam takers and then maybe lesser number of admission seekers at the MBA schools too. This might even hit the financing and education loan industry. MBAUniverse.com examines the trend.
THE BIG DIP
MBAUniverse.com spoke to the heads of some of the top MBA coaching institutes in India such as T.I.M.E, IMS Learning and PT Education and alarmingly all of them had the same story to tell.
According to Nishant Priyadarshi, Director, T.I.M.E. Lucknow, there has been a definite dip in the percentage of student enrolments at their MBA coaching institute this year. Priyadarshi mentioned that the percentage of dip is anywhere between 30 and 40 per cent. “It’s not that only coaching for CAT exam has taken a beating, even the enrolments for MAT coaching has seen a similar dip. This is true for the country as a whole, as well for UP and Lucknow region,” Priyadarshi said.
Abhishek Anand, Director of T.I.M.E, Kanpur said, “the drop in the number of enquiries is palpable, which is clearly more than 40 per cent.”
Same was the case with IMS Learning, Mumbai. Kamlesh Sajnani, Director, IMS Learning, Mumbai said that at his MBA coaching institute the dip in students’ enrolment is by 10 to 12 per cent. “According to market sources, almost all MBA coaching institutes in India are reeling under the impact of slowdown. Overall market has been affected. At IMS Learning, too, we anticipated that there will be a drop in the enrolments,” Sajnani said.
Sandeep Manudhane, Director, PT Education, Indore feels not one or two, but all the players in the MBA entrance exam segment has seen a dip in the total number of enrolments this year. “At PT Education, we have seen at least half of our centers registering a dip of five to 20 per cent,” he said.
WHY THIS DIP?
The MBA coaching institutes were unanimous in their views of the reasons for the dip in the total number of enrolments. According to them, the slowing economy coupled with lower placements and rising tuition fees at the MBA schools are the key reasons.
Slowing economy:
Priyadarshi of T.I.M.E said, “Naturally, the biggest reason for this dip is recession and the fact that even those who passed-out from some of the top MBA schools in India this year had to battle with the placements with no jobs or with jobs far below their expectations.” Sajnani of IMS Learning voiced similar views. “The current state of economic affairs is the reason why some students have deferred their plans to get an MBA degree. A growing sense of lack of job security in the minds of those who are in private sector companies is also one of the reasons why potential candidates found it best to chuck their plans of obtaining an MBA degree,” Sajnani said. Manundhane of PT Education also agreed with Sajnani’s views and said, “A lot of students nowadays are going by the ‘wait and watch’ theory, which came as a surprise to most of us who are accustomed to thinking that education is a recession-proof sector.”
Rampant fee hike:
Another important reason for this dip is the fee hike by both top tier as well as mid tier MBA schools in India. Explaining Priyadarshi said, “The fee at IIMs has gone up from 4-5 lakhs to 11-12 lakhs in a couple of years.” Other MBA coaching institute directors too echoed similar sentiments and said that most students felt it was best to wait until the economy recovers since getting an MBA degree involves a huge sum of money. “I feel for a student for whom investment is a problem, it might be more worthwhile to choose FMS New Delhi in place of IIM Ahmedabad these days,” Priyadarshi said. According to him, even the low rung MBA schools are carrying out massive fee hikes.
DROPPING ROI:
Today, students also calculate the ROI (return on investment) for these MBA schools by comparing their fees and the salaries offered. And, needless to say, most of the MBA schools fall below their expectations. Since most of the students take education loan to meet the huge expenditure, if they don’t get a job which pays them as well, it turns out to be a bad investment. “Ever since there has been a huge fee hike, the average salary has dropped in all MBA schools drastically. Moreover, not all students have graduated out of the MBA schools with job in hands this year,” Sajnani claimed.
ENTRANCE EXAMS GOING ONLINE:
CAT 2009 turned into a computer-based exam this year, and now with MAT following suit more students are getting confused and anxious. Also last year’s CAT exam had a major part of questions from Verbal Ability or English language, which is a deterrent for aspirants from rural areas. “The computer-based test and the stress on Verbal Ability section has put off a good part of non-urban students who are not comfortable with computers or are weak in English,” Priyadarshi said.
Anand of T.I.M.E. spoke on similar lines. “The increasing difficulty level of the CAT exams, especially English, deters the semi-urban crowd. CAT which is going to be a computer-based test from this year is a big blow as it creates an added fear in the minds of such students. I fear this will harm the management education sector sharply,” Anand said.
These factors have made potential candidates think hard before embarking on the MBA journey as it trudges past a large number of hurdles and roadblocks that only seems to be going uphill year after year.
Next: What MBA coaching industry believes should be done to control the damage
