New Indian MBA bill a boon to India’s b-schools

Debeshi Gooptu Bakshi writes this about foreign b-schools in India

A major shakeup is on the cards for India’s business education market. In less than a year’s time, Union Minister Kapil Sibal’s Foreign Educational Institutions (Regulation of Entry and Operation) Bill, 2010, will become a law, and foreign business schools will be allowed to set up shop in the country.

Academic circles are abuzz with news of institutions treading the path to India. Schools such as Duke University’s Fuqua School of Business (U.S.), Georgia Institute of Technology (U.S.), and York University’s Schulich School of Business (Canada) are already laying the groundwork. In fact, the Schulich campus in Hyderabad will be ready by 2013.

In a country where a mere 150,000 out of the estimated 500,000 applicants get admitted into the 2,000 or so recognized business schools, this development is being viewed as a positive trend. The entry of foreign institutes would allow more Indian students to have access to quality education.

According to the National Knowledge Commission, a high-level advisory body to the Prime Minister of India, nearly 160,000 Indians spend U.S. $4 billion annually on overseas education. By offering foreign degrees in India, the government would be able to reduce both the numbers headed overseas and significant amounts of foreign exchange spent on acquiring a foreign qualification.

Cautious Optimism

Academics in India are optimistic that the bill will change the face of management education in the country. With an increase in the number of business schools, students will have more to choose from, and not be limited by the shortage of seats.
Professor Sougata Ray, Dean, Programme Initiatives, Indian Institute of Management, Calcutta (IIMC), says, “The bill is certainly a welcome move as there is a great demand for quality management education in India. Large numbers of students do not get admitted to the IIMs and end up spending huge sums of money going abroad. By allowing foreign universities into India, these students will now get a chance to study at a good institute.”

Ajit Rangnekar, Dean, Indian School of Business (ISB), Hyderabad, agrees. “We have always believed that the best public policy for improving educational institutions is to enable and encourage competition. The introduction of this bill allowing foreign institutions into India seems to be a step in the right direction. There is a large pool of bright young students whose aspirations have been limited by the lack of right opportunities.”

Healthy competition, even playing field

Top Indian business schools such as the IIMs and the ISB are not threatened by foreign competitors on their home turf. Most Indian management schools already have long-standing collaboration agreements with leading global institutes. “I am all for competition,” says Ray. “Indian business schools will be motivated to think out of the box, explore and present innovative solutions in teaching and research. All of this will go a long way in helping us improve our standards.”

Both academics agree that an appropriate regulatory framework is key to the Bill’s successful implementation in India. Many in Indian academic circles believe that top of the line universities such as Harvard and Cambridge will not dilute their brand by setting up offshore campuses in India. Rather, second or third-tier business schools will rush in to maximize their financial gains. These institutions, and the programmes they offer to students will need to be supervised by the government.
According to the bill, foreign institutions wishing to set up campuses in India need to deposit U.S. $10.6 million as corpus fund. Tuition fees will be regulated by the University Grants Commission, India’s apex higher education quality regulator, and institutes will not be allowed to transfer profits home from educational activities in India.

“It is not about foreign institutes coming to India,” argues Professor Abhijit Bhattacharya, Dean, Globsyn Business School, Ahmedabad. “The government needs to make sure that the right kind of institution offering the right kind of programme is allowed entry. Otherwise there would be total mismanagement.” Ray agrees “Our policy makers need to keep a check on the profile of the international institutes. There are mediocre, sub-standard institutes in India as well as abroad. These should not be allowed to thrive, at the expense of the students.”

Faculty shortage
For years now, India’s higher education sector has been reeling from a severe faculty shortage. In an effort to combat this, business schools have been strengthening their doctoral programs and encouraging more students to take up research. The biggest challenge lies in ensuring that the faculty crisis is not aggravated by the entry of foreign institutions. Government-regulated institutions such as the IIMs stand to lose out if foreign universities poach their faculty by offering higher salaries and perks.
Look at these figures. A newly-hired assistant professor joining a top-25 U.S. business school receives a pre-tax salary of about U.S. $135,000- $170,000 plus pension and healthcare. In India, starting salaries for IIM professors are less than U.S. $14,000 – $17,000 per annum.

Ray says, “The IIMs are softer targets. We are paid peanuts in comparison to our Western counterparts. The government needs to make sure that our professors are paid market-driven salaries, otherwise there would be a severe crisis in the market with the entry of foreign schools.”
Challenges aside, the news seems generally positive. With an effective regulatory framework in place, stringent monitoring, and more autonomy for the government-regulated players, MBA aspirants have a lot to look forward to. Shruti Singh, 26, an HR professional applying for an MBA programme in 2011, says, “It is not easy to get into the IIMs and I did not want to settle for a second-grade college. Hopefully, with the Foreign Universities Bill, I will have more choice, just in case I don’t make it to an IIM.”

Tim Gore, Director, The Centre for Indian Business, University of Greenwich, says, “I see no danger for the Indian education sector in this Foreign Education Institutions Bill. Most foreign institutions will want to partner with Indian institutions and this represents a positive opportunity for both institutions to offer greater value to their students through a more international focus and better international recognition of their qualifications. The good local institutions will be formidable competitors to any foreign institutions wishing to work in India as they will have their reputation and the local knowledge and networks necessary to succeed.”

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