India’s MBA bubble is bursting – Assocham report

It had to happen sooner or later – the MBA education bubble – fueled by tales of multi-crore fresher salary packages – is bursting.

According to the latest numbers from a study by business association Assocham, about 340 business schools are in the process of either winding down or have already shut shop since 2012. Last year alone, 180 B-schools went out of business and another 160 are likely to shut shop this year, the report said.

The reason is the sudden fall in placement rates in the last two years. “Only 10% of graduates from Indian business schools excluding those from the top 20 schools get a job straight after completing their course, compared with 54% in 2008,” the report said. “The MBA capacity in the country was built based on the projection of a 9 to 10 per cent economic growth rate.”

The number of B-schools rose almost exponentially in the late 2000s. In the last five years, the number of B-schools in India has tripled to about 4,500 or about 3.6 lakh seats, the report said.

The underlying reason for the shut down is not very surprising — MBA education had become a fad, fueled by unrealistic expectations and dreams of turning millionaires overnight, the report titled “B-schools and Engineering colleges shut down- Big Business Struggles” points out.

“Students are not concerned about the quality of education in an institute, they only want to know the placement and salary statistics and discounts offered on the fee structure and this has spoiled the entire education system,” points out D S Rawat, Secretary General of the industry chamber that released the report.

On the other side of the coin, B-schools were a bit too successful in marketing, the report said.

“They offer theoretical courses which lacks practical skills required by the corporate sector today .. the faculty is not good enough and there is no infrastructure .. only 10% of the graduates are actually employable despite the robust demand for MBAs,” the report said.

“Many private schools are just a business model by some management gurus to earn some money out of investment. Many MBA schools are utterly media savvy. They take page after page ad space in leading news paper to declare their achievement,” the report pointed out.

Indeed B-schools have become one of the biggest advertisers, especially in the print medium.

The advertising spend is supported by the huge amounts of money charged from students for the two year course. On an average, the course fees range from Rs 3 lakh to Rs 5 lakh for two years, the report said. However, in terms of actual benefit to the students, the schools had very little to offer, it said.

“The biggest reason for the gap is the rapid mushrooming of tier-2 and tier-3 management education institutes that has unfortunately not been matched by commensurate uplift in the quality of management education,” Rawat said. The report, however, found that the IIMs or the Indian Institutes of Managments continued to maintain a high level of training and was effective in creating industry-oriented professionals.

Another segment facing the heat is MCA or master of computer application. Nearly 95 colleges stopped offering the programme in 2012 and only 25 started MCA courses, the report found.