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Corporate Feb 18, 2013

Why Arindam Chaudhuri is the Subrata Roy of the MBA business

By Vivek Kaul

One of my bigger regrets in life is that I spent two years doing a post-graduate diploma in management (or what is better known as an MBA). Around 16-17 months into the course came the realisation that I was wasting my time. Since I had already wasted a lot of time, I thought wasting a few months more and completing the course would do me no harm. And which is precisely what I did.

The course barely helped me improve intellectually (though I have to concede that I ended up learning some versions of compound interest, which I still use to make a living) but it did help me improve my job prospects.

The institute I did my MBA from was neither recognised by the All India Council for Technical Education(AICTE) nor was it affiliated to any university. Despite that students did not shy away from applying and the application to acceptance ratio was around 200:1 (which meant for every 200 people who applied only one was finally selected).

To give the institute due credit, at no point did they try to mislead. Time and again they repeated the fact that their course was not recognised. But that did not make any difference to those applying. They came by the droves. What also helped was a lot of positive coverage in the media.

Arindam

It is preposterous that any negative information on IIPM gets contested in lower courts around the country and is ultimately removed from the internet

This was primarily because the institute figured in the top 20 in most business school rankings at that point of time. What it told the potential applicants was that despite not being recognised the institute was reasonably good and one would have decent job prospects after completing the course. (For the record, even the Hyderabad-base Indian School of Business has not sought AICTE recognition. It is sure of its pedigree).

While I did not gain much from the course (having chosen the wrong specialisation and then losing interest totally), most of my batchmates thought the education offered was good (if not excellent) for the kind of money that was charged. In MBA lingo, there was great bang for the buck. And more than 10 years later, most of my batchmates have high-paying, high-flying jobs .

The point I am trying to make here is that being affiliated to a university or being recognised by the AICTE has nothing to do with offering quality education which can make one employable. If that was the case our universities wouldn't be churning out so many unemployable graduates and engineers. So in that sense I really do not have a problem with the existence of an MBA chain like the Indian Institute of Planning and Management (IIPM).

There is a clear-cut reason behind the mushrooming of MBA institutes (like IIPM) across the country. As the Indian economy expanded over the last two decades there has been a greater need for people who have some understanding of management and business. The seats in government-run MBA institutes (the IIMs, and business schools run by universities) have remained stagnant over the years. Only in recent years has the government started expanding, by setting up more IIMs.

Hence there has been a great demand for an MBA degree, given the perception that it improves job prospects significantly. And since everybody couldn't get into an IIM, entrepreneurs all over the country, sniffing an opportunity, jumped in to set up MBA institutes. The AICTE was more than helpful when it came to approvals and that explains how all kinds of institutes got approved.

In states like Maharashtra, where politicians run most education institutes, these MBA institutes immediately got a university affiliation. Setting up an education institute with approvals is one thing, but providing quality education is totally another thing. So even though all these institutes with approvals were set up, the quality of their education and infrastructure was suspect and continues to remain suspect.

The point here is that since the government couldn't cater to the demand given that it had more pressing needs, the private sector came in. Hence, all kinds of institutes were set up, the good, the bad and the ugly. In fact one education entrepreneur regularly set up MBA institutes when the economy was on its way up, and shut them down when the economy flagged.

A fair comparison for the MBA education system in our country is the banking system. A November 2011 presentation made by the India Brand Equity Foundation (a trust established by the Ministry of Commerce and the Confederation of Indian Industries (CII)) makes some very interesting points:

- Of the 600,000 village habitations in India only 5 percent have a commercial bank branch

- Only 40 percent of the adult population has bank accounts.

Given this, it is no surprise that a lot of Indians don't deposit their savings with banks, because around where they live there are no banks. Or the amount of money they want to save is so small that it is not profitable for banks to entertain them.

Hence, they end up saving money with firms like Sahara and other non banking firms. The lack of banking facilities has allowed firms like Sahara to thrive and become very big. And one of the things about becoming big is that you want to continue to remain big, doing whatever it takes. As Raghuram Rajan and Luigi Zingales write in the Saving Capitalism from the Capitalists "Those in power - the incumbents - prefer to stay in power."

In that sense, Sahara, led by Subrata Roy, and IIPM, led by Arindam Chaudhuri, are very similar. Both thrived primarily because the system that was in place was not big enough to meet the demand of the citizens of this country. They created their own system to exploit this demand and became very big in that process. And now that they are big, they want to remain big. It is a natural progression of things.

This has led to Sahara trying almost every possible trick in the book to stay in business and not hand over the Rs 24,000 crore that the Supreme Court has directed it to pay the Securities and Exchange Board of India. In IIPM's case, it has meant an all-out effort to remove almost every negative thing that gets said against it and Arindam Chaudhuri. Also, being a big advertiser in newspapers, has meant that no newspaper of standing writes anything against it.

To conclude, getting a government approval to set up an MBA institute is no guarantee for quality education. Hence, I really have no problem in non-AICTE-affiliated/non-university-recognised business schools operating in the country, because those with approvals aren't any great shakes either.

But at the same time, it is important that prospective candidates who want to do an MBA make informed judgments. And to do that they need access to all kinds of information and not only the brochure of the institute they want to apply to.

Hence, it is preposterous that any negative information on IIPM gets contested in lower courts around the country and is ultimately removed from the internet. If after going through this information students still want to apply and join IIPM, then it is really their choice and that should be respected.

The point is that if prospective MBA candidates have to make their decisions to figure out which institutes to apply for only on the basis of information provided by those institutes and their brochures, then they would end up counting chickens before they are hatched.

Vivek Kaul is a writer. He can be reached at vivek.kaul@gmail.com. He did his post-graduate diploma in management (PGDM) from the Symbiosis Centre for Management and HRD. The institute is now a part of the Symbiosis International University, a deemed university

by Vivek Kaul

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