1 Billion Customers for Education

India is allowing foreign universities to come into the country. Will the U.S. take advantage of this massive opportunity?

By Sanjay Saigal

The sixteenth century universalist poet Kabir captures the high Indian regard for education:

गुरु गोबिंद दोऊ खडे, काके लागूं पाये
बलिहारी गुरु आप की, गोबिंद दियो मिलाये

To whom should I bow, my Guru or the Lord?
I bow to thee, O Guru, for you have shown me God

A host to universities since before the time of Christ, India has long revered learning, which, along with spirituality have been the pillars of the Indian notion of civilization (Sankriti). Despite the history, at the time of independence in 1947, only one in five citizens was literate. In independent India, equitable access to education was considered of first importance, hence the sector came under the purview of the government.

Until economic liberalization in 1991, India's best tertiary institutions were exclusively public funded. These included the well-known Indian Institutes of Technology (IITs) and the Indian Institutes of Management (IIMs). The first private university was recognized in 1995 - today, India has 77. Most private universities are run on unabashedly profit-oriented lines. While the better ones compete with the top public institutions, most do not. Philanthropic support of college and universities is weak, even as the ranks of the wealthy grows in strength.

Since the 1950, scientific and technological education has been the darling of Indian education policy-makers. In the Nehruvian vision, the government controlled the "commanding heights" of the economy. Naturally, business education was not high among the priorities. Yet over time, quality MBA programs gained favor with credential-hungry students aiming for private sector careers. In the last fifteen years, private business schools such as the Indian School of Business (ISB) have begun to compete with the IIMs. (For instance, see this recent ranking of MBA programs by the Financial Times).

Isn't that wonderful? Well, yes and no.

Consider, for instance, the following data from a report published last year by an Indian employment company, MeritTrac:

  • Recognized MBA programs produce around 70,000 graduates each year.
  • Approximately 20,000 of them may be considered "employable".
  • The annual demand for MBAs is estimated to be 128,000.

To echo Woody Allen in Annie Hall, the food is terrible, and such small portions!

The deficit in 2009, the baseline year of MertTrac's study, was over 100,000 MBAs. Over the least 10 years, the Indian economy has growing at an average annual rate of 7.6%. The number of recognized MBA programs has been increasing, but the number of employable MBA graduates has not, bottlenecked by a shortage of trained faculty. Every year, the Indian industry finds itself in a deeper hole.

The data actually understate the severity of the problem:

  1. The biggest problem is that many, if not most, MBA programs are overly theoretical. Faculty typically lack actual industry experience and the sort of faculty consulting that drives US business school research is not the norm. Industry-academic collaboration on other fronts is still in its infancy. Though the 20,000-odd MBA graduates that MeritTrac considers employable are smart, motivated and well-versed in book knowledge, they don't necessarily know much of the professional world.
  2. Due to the rapid and recent economic expansion, the majority of managers already in the workforce do not have formal business training, MBA or otherwise. This seems like an addressable problem. Short term, specialized management development programs (MDPs) exist. There are few well-designed MDPs that can provide working managers with a 360-degree view of the business landscape like an MBA program can. MBA programs directed to working professionals - so-called Executive MBAs - are expensive in terms of money and time.
  3. The cultural context has been incredibly important in the professionalization of management in America. That context is largely missing in India. The situation has brightened tremendously in the last two decades, but business careers and Western business practices still carry a faint whiff of disrepute. Recent scandals such as Satyam Computers' accounting fiasco and Enron's Dhabol debacle have not helped. Even today, the Union Carbide gas leak in Bhopal, which occurred in 1984, remains in the news.

All this sounds terribly negative. But let us recall: the social premium for education remains as high as ever. By 2020, the average Indian is projected to be 29 years old. The working population is estimated to reach 882 million. (The billion in my title is rhetorical license.) The Indian Ministry of Labor recently estimated that only 6% of workers today have a professional certification. Since much of India's economic activity engages with the Western world -- India has been called "the office to the world" -- new capabilities in professional training cannot be "good enough for government work", they have to be at world standards.

Though US universities didn't invent it, modern management education is largely an American construct. When it comes to business education in English, the US occupies the center of gravity. The potential role for US business schools in training the Indian manager of tomorrow is huge. (Contrast that potential with other American "soft" exports - film, music, and sports. In all three areas, India has hugely successful existing incumbents.)

As part of its revamp of the education sector, the Indian government has introduced legislation that will allow foreign universities to set up shop independently. To nobody's surprise, the bill, which has been in the works for over two years, is facing resistance on many fronts. In part due to the corruption crises going on right now, the fate of the bill is uncertain. Even if it passes in its current form, its many strictures suggest that US universities are unlikely to establish Indian campuses anytime soon. Partnership with local colleges and universities remains the best channel for the foreseeable future.

In 1946, the then freedom fighter Jawaharlal Nehru wrote from prison:

And then came the Americans. They were very much in a hurry, eager to get things done, ignorant of the ways... and not particularly anxious to learn them. Intolerant of delay, they pushed aside obstructions and red-tape methods and upset the even tenor of life... While the help they were bringing was very welcome, they were not liked in the highest official circles, and relations were strained.

Nehru was writing about 1942, when WWII arrived on Indian's eastern flank. At the time "official circles" excluded Indians. Clearly, American policy and defense experts left an impression, though not necessarily the intended one. Sixty five years later and 15 years into India's economic re-engagement with the world, Nehru's observations remain pungently relevant. My fellow guest-blogger Liam Casey recently highlighted the importance of building personal relationships in China. That is no less important in India. Perhaps it is even more important in a trust-centered activity like education. In this post, I have sketched the outlines of why the time is ripe to build Indo-US bridges in management education. For educational institutions with an appreciation of the context and a properly calibrated set of expectations, the opportunity to profitably participate in India's re-emergence is extraordinary.

Sanjay Saigal is founder and CEO of Mudrika Education, Inc., with offices in Silicon Valley, CA and Delhi, India.