It is high time that policymakers critically observe the amendment in the fee structure of India’s premier management institutions of national interest
Unlike other nations, education in India is considered a costly affair. Historically, Government spending in education has been low, with less than four per cent of the GDP spent per annum. This lack of budgetary support coupled with an increasing population has resulted in the cost of education becoming inflated in the country. However, in India, where a majority of the population finds it hard to make ends meet, parents and students consider a good education from a reputed institute a dream worth chasing. Inevitably, a good education, be it primary, secondary, higher or professional, has made its place in the list of fundamental needs of individuals. Considering this, the Government has, time and again, intervened to regulate and formulate policies for promoting quality education across the country.
Timely financial support and policy measures become enablers for not only educational institutions but students, too. They collectively promote quality education in order to deliver a skilled human capital that, in turn, takes the economy on a higher and sustainable growth trajectory. Of late, there have been a slew of reforms in higher and professional education, which institutions have responded to in different ways. This article examines one such reform, its consequences and impact on the country’s education scene.
The concept of Indian Institutes of Management (IIMs) was initiated by Jawaharlal Nehru on the recommendation of the Planning Commission in 1960. Subsequently, IIM-Calcutta and IIM-Ahmedabad were established in 1961 with the support of the Ford Foundation, India Inc. and the Harvard Business School. This followed the emergence of other IIMs, and today there are 20 in number, including six legacy IIMs and 14 new ones set up after 2007.
The establishment of IIMs aimed to produce a skilled workforce equipped with managerial and decision-making skills required for growing industrialisation in the country. The need for such managerial skills was felt, especially post-1991, when investment and privatisation buttressed the emergence of corporate giants in the liberalised Indian economy. Given their role in nation-building, IIMs were declared “institutions of national importance” by the Ministry of Education after the passage of the IIM Act, 2017. The Act also awarded autonomy to the IIMs for fee regulations apart from selection and removal of the chairperson and director, student intake and institute expansion. The Government and bureaucracy cannot intervene in the day-to-day and strategic operations of IIMs.
Exercising this autonomy last year, about half of the IIMs increased their already exorbitant fees for the two-year full-time MBA course. This included IIMs from Lucknow, Calcutta, Bangalore, Jammu, Tiruchirappalli, Sirmaur, Nagpur, Udaipur and Rohtak. The fees increase ranged between three per cent (Rohtak) and 36 per cent (Lucknow), averaging at 13 per cent. There already exists a difference in the fee structure of old and new IIMs, which was further widened by the current hike. With the fee hike in 2020 for the academic year 2020-2022, the average fee in old IIMs is Rs 20.7 lakh, whereas that in new IIMs is Rs 13.7 lakh. The managements of these premier institutions attribute this hike to inflation and the associated cost of faculty and infrastructure. However, as such, no quantitative assessment is provided to justify this argument. Lack of accountability due to the absence of Government intervention leads to more questions than answers.
On the other hand, the management institutions under the ambit of the University Grants Commission (UGC) and the All India Council for Technical Education (AICTE), are restricted from increasing their fees. In its notification dated May 1, 2020, the AICTE had asked the B-schools offering AICTE-approved Post Graduate Diploma in Management (PGDM) programmes not to increase either admission or tuition fee for the academic session 2020-21 for existing as well as new students. These two contrasting stories — fee hike in unregulated IIMs and no fee hike in regulated institutions — make one think. Did autonomy play a significant role in incentivising the IIMs to hike fees?
Fee hike in premier management institutions becomes a hurdle for eligible aspirants to acquire managerial skills. This problem was aggravated by the fee hike coinciding with the economic recession and the COVID-19 pandemic. When the contagion has taken a toll on lives, livelihoods and incomes, an increase in management education fees has made it impossible for most aspirants to achieve their dream of studying at these premier institutions. Collectively, the current scenario compromises the very fundamental objective of education in the nation that aims to provide affordable education to the prospective and existing workforce in nation-building.
It is well-known that premier management institutions invite heavyweight offer letters from corporate giants. These huge placement packages are the primary catalyst for fierce competition among management study aspirants and even professionals to get into premier IIMs. The bigger the package offered for a particular IIM, the fiercer the competition to get into the institute. Does this higher demand for a particular IIM translate into higher fee following the fundamental principles of economics?
In other words, it was worth investigating the relationship between placement packages from India Inc. and the fees of IIMs. To this end, we collated the average package and fees of all 20 IIMs for 2020 and performed a linear regression analysis due to which we discovered a significant cyclical relationship between an IIM’s fees and the packages offered during placements. This implied that an IIM attracting a higher salary with a lucrative job opportunity was likely to charge more than other IIMs.
In the empirical analysis, top IIMs (as per the National Institutional Ranking Framework) like IIM-Ahmedabad, IIM-Bangalore and IIM Calcutta attract extremely high packages (average Rs 26.8 lakh per annum) and they charge inordinately high fees (average Rs 23 lakh) as compared to other IIMs, particularly the new ones.
This resembles the typical pricing structure of a market commodity wherein the supply-demand dynamic in the market decides the product price. Education is not a market commodity meant to meet an individual’s demand. Therefore, it cannot be left unregulated, especially in terms of pricing or fees structure. Education serves a larger purpose of social uplift and nation-building by generating a well-trained and equipped human capital.
An inflated fee in premier management institutions leaves most eligible aspirants with the only option of an education loan to fund their dreams. An education loan poses a demonic challenge of repayment. This burden is carried by the students during the course of their study and afterwards too. The managerially-trained brains coming out with the burden of liabilities experience constrained freedom and lack of creative thinking. This thwarts productivity and overall value addition to the economy. It is high time that policymakers critically observe the amendment in the fee structure of India’s premier management institutions of national interest. Policymakers must curtail unregulated fee hike in premier institutions, keeping in mind the following question: How can the objective of strengthening the human capital with managerial skills and its affordability marry each other?
Soni and Kalyanasundaram are senior research fellows at the Department of Management Studies of Indian Institute of Science, Bengaluru. The views expressed are personal.