According to a Financial Times survey, no Indian business school figures in the top 100 business schools in the world. One would have thought that the IIMs, established in the 1960s, would have forced their way into the elite group. After all, 45 years of being at the top in India should have created a global brand rubbing shoulders with the best.
Indeed, the timing of the survey is fortuitous since it comes at a time when supply of cross-border education and tuition fees charged by management institutes has been discussed passionately by both sides in this debate. One view has been that Indian business schools should be confined to addressing the domestic market before they venture abroad, while the tuition fees they charge should be capped at about one-third of what schools are on average charging at the moment.
Both steps are retrograde and fortunately neither of them is being pursued with any degree of seriousness. The IIMs have been allowed to go abroad and the Supreme Court has decreed that the fees should be decided by the individual school with the state government's oversight.
Both these factors are among several that influence the quality of a business school and its international reputation. The others are quality of students, faculty, infrastructure and placements and the FT survey dutifully captures all of these. If the resultant index is interpreted as reflecting international competitiveness, then it can serve as a guide for strategic direction and policy initiatives.
That no Indian B-school is internationally competitive is a result of the lack of international and domestic competition. This may be a surprising statement given that 1,200 or more such schools exist in India. The market has settled itself into an equilibrium where there is not much "competition' for students among the various segments.
Competition is much more effective and severe among the students themselves. The status quo thus established is comfortable and as long as there is an endless supply of domestic students, the equilibrium is unlikely to be disturbed. This is similar to the protected market that was available to Indian automobile companies, for instance, in the 1980s, replete with long waiting lists and a conspicuous absence of innovative activity.
Allowing B-schools to establish branches abroad is a necessary but not sufficient condition to disturb the existing equilibrium. While such a move can no doubt act as a "window" of learning for the schools going abroad, it will not spur "innovation" in domestic management education.
What is needed is lowering entry barriers for overseas business schools to establish branches in India (a la Singapore) as well as for private domestic players to enter the education market space. Niche players like ISB are unlikely to provide effective competition to the established schools.
Foreign business schools will not pose a threat to domestic schools, given their high establishment costs. Ultimately, it seems that intense domestic competition and the fight for attaining leadership will provide the right incentives for a few Indian business schools to emerge as world class.
The author is Professor of Economics at IMI.
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