IMC 2012 Theme - Indian Management Education: Survival of the Fittest: Read Theme Paper, Watch Keynote Addresses

Indian Management Education: Survival of the Fittest

Introduction
India is a booming MBA market with 3,500 MBA institutions, including about 300 PGDM institutions, and more than 3,00,000 students enrolled in various MBA or PGDM programmes. However, at present, the MBA market is passing through a critical phase of “shake-out and consolidation”. MBAUniverse.com, India’s most respected voice of the MBA community, sees this as a painful, but inevitable development.

• It is in this backdrop that we have chosen a provocative but realistic theme for the conclave: Survival of the Fittest. We have researched and compiled some of the facts and gathered experts’ views as well.
• This theme paper is aimed at offering insights on what is the crisis and why is the crisis. We have also highlighted some of the recent positive developments in management education in India.
• This theme paper has been prepared by MBAUniverse.com editorial team.

The churn
The Indian MBA market is passing through a turbulent period. While top B-schools are expanding capacity through addition of seats and new campuses, some management institutions are applying for closure. Most of the tier-II and tier-III B-schools are facing challenges on the admissions and placement fronts. In spite of the hype and expectations, few foreign B-schools have entered the Indian market to offer regular programs, and are yet to establish their India operations. Corporate-sponsored B-schools & universities, who have the scale and insights, are facing tough challenges of admissions and placements. Clearly, there is a lot of churn in the Indian MBA market.

Dr Santarupt Misra, Director-HR, Aditya Birla Management Corporation, highlights the sentiments well when he told
MBAUniverse.com, “The state of schools today can be summarised as the good, the bad and the ugly.”
The good part is that we have shown our capability in building high quality B-schools like the IIMs and private institutions like SP Jain, ISB, XLRI, etc., that are of international standards. Management education has seen a lot of investment in the past and the number of business schools has mushroomed in the country. This has created an artificial comfort about being capable of developing management education in keeping with the growing demand. However, while quantity has increased, quality has become an issue. To make matters worse, the sector is struggling with too many government regulations, which in themselves are not appropriate.

Demand drop
The biggest challenge facing our B-schools is the drop in demand for their MBA/PGDM programs. Forget about the tier-II and tier-III institutions, even the elite B-schools are no longer enjoying the kind of demand they used to just a few years back. Across the top private B-schools, the demand for the MBA/PGDM programme has dipped by 25–40 per cent over the last three–four years.

The table below captures a snapshot across 2009–2011 academic sessions at some of the top B-schools in India:

(Source: MBAUniverse.com B-school survey 2011)

A top university B-school like Delhi University’s Faculty of Management Studies (FMS) is also facing a dip in demand. While FMS Delhi had 75,000 applications in 2009, the number dropped to 57,226 in 2011.

Considering that IIMs were insulated in this mess, the number of common admission test (CAT) takers dipped significantly in the last few years.

Entrance Exam: CAT

So is it fair to conclude that there has been a decline in demand for management education across institutions.

Increase in supply
Even as the demand has been falling, there has been a steady increase in the supply of MBA/PGDM seats. According to the AICTE, the number of seats has seen a steady rise over the past six years. Over past six years, the number of seats in management education has increased almost four fold. The Yo-Y growth has been over 20 per cent with the academic year 2010–11 witnessing the highest growth in intake of about 55 per cent.

While the exact number of approved intake was 94,704 for the academic year 2006–07, the number went up to 3,52,571 for 2011–12.

Supply exceeds demand

Source: AICTE Approval Process Hand Book 2012–13

In last few years, many private universities have started focusing more on their MBA programs. Some of these universities can attract students due to better brand recall and relatively lower fees as compared with standalone PGDM institutions. These universities have much more flexibility so far as increasing seats is concerned. So they offer large number of seats where demand exists. This increase in supply is adding further fuel to the fire.

Low occupancy rates at B-schools
Oversupply of seats and a drop in demand have led to a decline in the occupancy rates in B-schools. According to a CRISIL report released in February 2012, a shake-out in the business education in India seems evident. B-schools struggle to fill their seats and 35 per cent of the total seats available remain vacant. As per the CRISIL research, the vacancy rate in 2011–12 has climbed to about 45 per cent.

The research analysis also indicates wide variation in occupancy levels across various states and geographies. There is, however, a limited number of around 50 per cent seat fill-in average occupancy.

The situation is worse when one looks at public university B-schools, which form the bulk of MBA seats.
According to an article in The Times of India dated July 29, 2012, nearly 89 per cent MBA seats remain vacant in B-schools in Uttar Pradesh.

In yet another indication of the deteriorating standards of education in the state, nearly 89 per cent of the total MBA seats are left vacant. Be it the supply outstripping demand or the lack of basic infrastructure or few placements, students who participated in the state entrance examination (SEE) counselling did not opt for B-schools.

According to the report, out of 28,000 seats offered by 421 colleges, around 3,300 have been filled. As far as the scenario of admission in Lucknow is concerned, the figures are shocking. The state capital has nearly 55 management colleges. Of that, 29 failed to get a single admission from SEE counselling. Single admission has taken place in another 13 colleges, while in two colleges, two students each have taken admission. The figures show that there are nearly 45 colleges where the total number admissions has not exceeded merely five. Last year, only 4,373 students were enrolled in MBA courses as against 32,228 seats, the report said.

A similar report dated July 5, 2012, in the same publication suggests that a large number of seats in the Nagpur division in Maharashtra is going to remain vacant this year as well, continuing the trend of the last couple of years. According to the report, the number of seats filled last year was less than the total seats available. While a total of 5,490 seats are up for grabs in 60 colleges across the division, a total of 2,677 seats remained vacant last year, leading to some institutes going bankrupt, the report said across the division, a total of 2,677 seats remained vacant last year, leading to some institutes going bankrupt, the report said.