A nation saddled with unskilled MBAs

Keeping in sync with the growth of Indian economy is the requisite of workforce for a sizable number of management jobs in various sectors across the country. Every year lakhs of MBAs pass out of the colleges but are unable to get suitable jobs as per the educational degree and investment made over the period of 2 years.

Sachin joined a low-rung private business school in 2009 after numerous unsuccessful attempts to get through top-notch B-school in the previous CAT exams. The thought behind the step was to get a high salaried job in a reputed organization by the end of 2 year course.

His family availed a substantial amount of education loan for the purpose. However, the calamity struck when Sachin graduated from the B-school without any placement offer.

After toiling for many months and undergoing innumerable interviews, he finally bagged a job but compromised considerably on the salary and work profile. 

Sachin was one of the fortunate few who finally earned a job as still there are many struggling to find a decent livelihood source in order to repay their education loans.

As per the recent study by ASSOCHAM only one out of the aspiring 10 candidates avails suitable job (executive level) offer. The primary reason is the sub-standard quality of the course material against the existing standards of the industry in majority of the management institutes.

The latest NASCOM study further adds that in the period 2008 to 20012 the rate of campus placements has dropped by 40%. Barring IIMs and other quality institutes most of the lower-ranked institutes attract students on the basis of placement records and high salary offers.

Conversely low campus recruitments has led to closure of 180 business schools in 2012 in the major cities and other 160 are fighting hard for their survival.

In addition, the rising inflation level and operational costs has made survival very difficult for them.

This led to dropping educational standards leading to:

Pitiable placement and internship facilities

Negligible research work and live projects

  • Reduction in the regular faculty size ignoring the existing AICTE norms

A generation under-skilled graduates over the years has cropped up

In order to compete with the ever increasing number of management institutes, spending on advertisement has also increased considerably. Further, inclusion of foreign trips and other attractions in the course package has raised the curriculum fees beyond the reach of common man.

Despite the management education industry earning huge losses, the number of B-schools has increased to 4,500(almost three times) leading to 3.6 lakh MBA seats (almost half are vacant) in total from 2007 to 2012.

It accounts for 1600% growth (for the past two decades combined) as per research consultancy KPMG. This is a big surprise surely.

A total of 2.15 lakh students appeared for the CAT examination for the year 2012-13, a 4% increase in the number of candidates against last year’s figure (2.05 lakh) but very few students from the given figure are expected to enter these low-rung management institutes in continuance with the trend over last few years.

What drives substandard management institutes despite incurring losses?

The answer lies in the escalating real estate costs over the years.

Most of the lower-rung B-schools have come out with new branches in tier-2 and tier-3 cities with a real estate business plan in mind. Considering substantial tax exemptions on educational institutions, the deal provides a “win-win-situation”.

Mushrooming institutes around the Delhi/NCR region sustain the argument completely.

Promoters wait for the best deal from a real estate developer and sell their stakes in lieu of big money.

The deal size could be estimated from Rs 5 to Rs 10 crore depending on the location and infrastructure of the institute and poor supervision of AICTE is also helping big time.

India is in a pressing need for quality managers. On an average around 2 lakh fresh MBAs would be required in the coming years. However, in an absence of quality management institutions the situation is all set to worsen further.

Presently only around 30,000 fresh MBAs from top 50 B-schools are deemed fit for the jobs and therefore command inflated salaries whereas others remain remorsefully unemployed and underpaid.

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