The percentage growth in number of engineering institutions in India have came down from high of 43% in 2008-09 (academic year) to 3% in 2012-13. This translates into slowdown in starting of new institutions from 720 in 2008-09 to 105 in 2012-13. Likewise, for business schools, growth declined from 33% in 2008-09 to 3% 2012-13. In terms of absolute numbers, the number of new B-schools declined from 417 in 2009-10 to 82 in 2012-13.
This decline is a combination of two primary factors--weak regulatory mechanisms and profit motives of some private players. During the years of high growth in engineering and management institutions corruption in regulatory authorities was also riding high and many institutions were approved by overlooking qualitative deficiencies for bribes. At the same time, many private players were rushing into education "business" as a low-risk, high cash-flow business with an opportunity to leverage on real-estate (another sector plagued with tax-evaded "black" money") and tax-free status of pseudo-non-profits. This opened the floodgates of many private institutions which compromised quality to save money on soft and hard infrastructure. And, hence students graduating from these institutions were unemployable (of course, the recession did not help either) which in turn created negative word of mouth for institutions to get future student enrollment. Given that private institutions rely solely on tuition for revenue, lack of enrollment means financial instability. As a result, a large number of engineering and management institutions are now facing problems of vacant seats and are even available for sale. This in turn has slowed the growth of new institutions.
Although the growth of engineering and management institutions has slowed down, with 3,500 engineering colleges and 2,500 B-schools, India has disproportionately large number of institutions, indicating high value Indians place of job-oriented, professional programs with social prestige.