Indian B-School Bubble?

Are Indian B-schools in a bubble as some project about American higher education? (Here is my EDU article). Schumpeter in his recent article in entitled “The latest bubble?” in the Economist, argues that American higher education bubble is already beginning to burst. Specifically, for business schools he concludes “Middle-ranking schools are seeing a significant drop in demand, which they have masked by taking weaker candidates, but which will eventually force them to start cutting back.” He also cites Peter Thiel, co-founder of PayPal who “believes that higher education fills all the criteria for a bubble: tuition costs are too high, debt loads are too onerous, and there is mounting evidence that the rewards are over-rated.”

With more than 3,000 B-schools, India has three-times the number of B-schools as compared to the US. This difference becomes stark considering that the size of the Indian economy is one-tenth of the US economy. The end result is poor quality of education, oversupply of MBA graduates which in turn increases unemployability and underemployability among graduates.

A recent article notes that according to All India Council for Technical Education (AICTE), last year nearly 60,000, or 30 per cent of the approved 200,000 management seats, remained vacant. Also, the number of applications coming in for the Common Admission Test (CAT) for MBA entrance have decreased from 260,000 to 200,000 in the last three years.

This clearly indicates that Indian B-schools are in a bubble. Except top-100 institutions, most will suffer from bursting of this bubble which is characterized by irrational exuberance, oversupply and poor quality.

Interestingly, China is witnessing a boom in B-schools. The reason being that they caught on to the management education quite late and at the same time the size and growth of the economy is able to absorb MBA graduates. For example, there are nearly 230 B-schools offering MBA in China in 2010 while there are more than 3,000 B-schools in India.

Bubbles have a long history of existence around the world and they inevitably bust with severe damage to individuals, society and economy (remember dot-com bubble? housing bubble?). It’s time we collectively make our best effort to reduce the damage from the Indian B-schools bubble. Institutions have to start questioning if they are contributing to expanding the B-school bubble or containing it?

Click below to read my detailed article in EDU magazine.

 

7 Comments

  1. Very nice article indeed Rahul. I've been working in the eLearning space in India for the last couple of years and the "shallowness" about this whole business education thing is quite scary. We have business graduates who don't have a whiff of what they are supposed to do. The basic acumen is absent (forget the skills) and even after doing their Masters, their employibility is close to zero.

    I guess we owe this to the commercialisation of business education and churning out "degrees" and not EDUCATING the students. As you have mentioned, the "correction" is bound to happen and the sooner it happens, the better for us.

    Congratulations on a very good article and I shall certainly follow your writeups!

    Regards,
    Ashutosh

  2. I totally agree with you. In such case it is really important for students to focus on quality education and not just a degree to mint more money. In this case, global B-Schools have done a great job by focusing on learning than just jobs. Students there go to b-schools to learn and gain knowledge.

  3. One reason for the growth of B-schools is that the undergraduate education in India is very poor quality. Students see MBA as a means to get a job. I know atleast 5 schools in Mumbai alone which is on the selling block.

  4. I am glad you mentioned the college bubble in America, a topic that has me quite worried. It has the same stench as the housing bubble. We see universities that have an attitude saying, "Don't worry about tuition. We'll find some government money or loans to pay for it." Some parents and teachers advise, "Don't think about the debt, just get the degree." This is the same way of thinking that got mortgages for people who could not afford them. Tuition is rising faster than many can comfortably accept. It's just like the soaring housing prices of just a few years ago. We need a generation of autodidacts to usher in an appreciation of learning over prestige. What's more important: a clever mind or a fancy piece of paper?

  5. In the current scenario MBA becomes a trend/tag in India and almost every student wishes to take this tag with them, as per my observation 5 years back engineering was in the peek & now the days MBA. Lots of private institutions offering MBA without course MAT/CAT/GMAT scores, even their marks in graduation is below 50%, this is nothing just a business for those institutions. The ultimate result that we will face in the coming future is a huge gathering of unemployed MBA people.

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