INDIA: Hundreds of business, engineering institutions close

Lack of quality teaching, absence of industry collaborations, a slowing economic growth rate and excess supply have forced the closure of hundreds of management and engineering institutions in India over the past few years, an industry study has revealed.

The study, published late last month by the Associated Chambers of Commerce and Industry of India (ASSOCHAM), B-schools and Engineering Colleges Shut Down – Big business struggles, found that MBA seats grew almost four-fold: from 95,000 in 2006-07 to 360,000 in 2011-12.

However, job opportunities for MBA graduates have not increased at the same rate. On-campus recruitment by companies was down by 40% in 2012 compared to 2009, ASSOCHAM said.


Just one in 10 students – not including graduates of the country’s top 20 business schools – secured a job just after graduating, compared to 54% of business school graduates in 2008, the study highlighted.

More than 180 business schools closed down in 2012 in the major cities of Delhi, Mumbai, Bangalore, Ahmadabad, Kolkata, Lucknow and Dehradun among others, because they could not attract enough students.

Another 160 institutions are struggling to survive and are expected to close in 2013.

Quantity over quality

The rapid expansion of tier-2 and tier-3 management education institutes without adequate quality controls was the primary reason behind the closures, said ASSOCHAM Secretary General DS Rawat.

“While students paid exorbitant fees, they did not get a return on their investment,” Rawat told University World News.

“While hundreds of engineering and management colleges were opened, they were looking at just campus placement and jobs. There were no quality controls in terms of infrastructure, qualified faculty or industry interface for students,” he said.

The ASSOCHAM study revealed: “The need to update and retrain faculty in emerging global business perspectives is practically absent in many B-schools, often making the course content redundant.”

Rawat said: “If the course does not meet the needs of the corporate world then graduates are not employable and placements stop after a while. The only option left is to close shop.”

Mismatch between industry and education

A growing gap between the demands of industry and the education and skills that many universities offer has resulted in a generation of overqualified but underemployed – and dissatisfied – graduates.

Rachna Sinha, a Delhi-based MBA graduate, is slowly losing hope of making it to the top rungs of the corporate ladder. "I've only got rejections so far. The harsh reality is that my MBA doesn't guarantee me a job,” said Sinha.

Repeated studies by industry groups have shown that the majority of India's graduates, including those specialising in engineering and management, are unemployable.

A survey conducted jointly by the regulatory body the All India Council for Technical Education (AICTE) and the industry body the Confederation of Indian Industry last November found that only one in five established engineering colleges was “in synergy” with industry.

"Several sub-standard business schools graduate their students without any exposure to industry or any form of work experience. Students lack both soft skills and technical skills. As such, they are unemployable,” said Premchand Palety, chief executive of the Centre for Forecasting and Research, or C fore, a multidisciplinary research organisation based in Gurgaon near New Delhi.

The ASSOCHAM survey said students were equally to blame.

"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,” Rawat noted.

Lack of effective regulation

India has had wild and unregulated increases in both management and engineering institutions in the past decade – it has 360,000 management seats and 1.5 million engineering places on offer.

Most of the growth has occurred in the private for-profit sector, with private institutions contributing to 80% of enrolments in professional programmes.

In 2011, 50% of management seats in the western state of Maharashtra, whose capital is Mumbai, remained vacant while 53,000 engineering seats in the southern state of Tamil Nadu had no takers. In the southern state of Karnataka, 60% of seats offered by the Consortium of Medical, Engineering and Dental Colleges of Karnataka remained vacant in 2011.

Experts also blame the AICTE for the unregulated and uneven growth of technical institutions in India.

“Historically, AICTE has helped mushroom dubious institutions and hindered the growth of quality institutions by archaic rules and endless administrative procedures,” said C fore’s Palety.

He added that when prestigious institutes were allowed to expand their number of seats, it led to the crowding out of dubious institutions.

While several smaller institutions are struggling to find students, India’s premier engineering and management institutes – the Indian institutes of technology (IITs) and Indian institutes of management (IIMs) – have not seen any decline in demand.

In 2012, almost 214,000 students signed up to sit for the Common Admission Test for entry into IIMs, competing for 3,500 seats.

Following requests from several state governments in 2012, the AICTE announced that it may stop accepting proposals for new technical colleges in states with surplus capacity.

The moratorium could be in place from 2014 in certain states affected by excess supply, the AICTE has said.

However, a senior AICTE official denied halting the approval of new engineering colleges despite huge vacancies in private colleges in 2012.

“We cannot stop giving approval if the institute meets AICTE quality norms, [and] has the required faculty and infrastructure,” said the official, who did not want to be named.

He added that if anyone found a technical institute to be deficient in providing good education, they could demand its closure through the courts. But stopping the approval process completely was “not a healthy practice”.

Palety agreed that denying new engineering and business schools the opportunity to set up was not the solution.

“The survival of an institution will depend on market forces. It will succeed if it has good quality. What is needed is a robust accreditation system, which fixes benchmarks that every institution needs to adhere to.”