They sprung up like mushrooms when India’s economy was booming. But now, the country’s business schools are running out of business ‒ and shutting down en masse.

Between 2012 and 2015, over 300 business schools have shut shop, signalling an end to the craze for management education that once gripped India’s burgeoning middle-class.

India currently has 3,217 institutes offering Masters in Business Administration (MBA) degrees, according to an All India Council for Technical Education document (pdf), compared to 3,541 such institutions in 2011-'12.

Except three states ‒ Jharkhand, Bihar and Kerala ‒ there has been a decline in the number of B-schools across all other parts of India. Maharashtra saw the highest decline with 24 institutes shutting down in 2014, followed by Tamil Nadu at 23.

B-school boom

Between 2007 and 2012, India added 927 B-schools, according to the AICTE, which is the apex body for technical education in India. This coincided with the period of India’s economy booming at an average rate of  7% annually when a number of entrepreneurs started their own management institutes.

But with a slowdown in the economy over the past few years, and as corporates eventually understood the mediocrity of the quality of education at these institutes, many chose only to hire from the top rung institutes even if they had to shell out a little extra.

“Our bottom-tier of MBA programmes has little direction and contribution,” a 2014 research report (pdf) on India’s management education said. “With the regulator being only approving authority and having little interference on academic quality pursued by the B-schools, the majority of B-schools have failed to impress industry with their MBA products.”

“In mid-tier B-schools, demand for seats dropped significantly in the last five years,” the report added. “As a result, virtually any graduate can get admission to a B-school. This results in a fall in the standards of MBA education, leading to low employability.”

The US-based non-profit, Association to Advance Collegiate Schools of Business, estimates that (pdf) India has over 3,900 educational institutions offering business degrees. That’s more than twice that of the US (1,624) and the Philippines (1,259), the other two leading nations on its rankings.

Yet, three institutes from India had found themselves on the Financial Times Global MBA rankings 2015. The Indian Institute of Management (IIM)-Ahmedabad was ranked 26th, while the Indian School of Business was 33rd on the list. IIM-Bangalore meanwhile was ranked 82th in the list, which was topped by Harvard Business School.

Different degrees

Not all Indian B-schools offer the same degrees.

Institutes like the IIMs, which are autonomous, offer a postgraduate diploma in management, while an MBA is offered by universities, or colleges and institutions affiliated to the universities.

It is in the institutes offering the MBA degree that have seen a decline.

In a 2014 report (pdf), market research firm Crisil estimated that over 80% of the current intake capacity in India’s management education sector is at bottom rung B-schools, which typically lack in infrastructure and faculty, and fail to attract students.

“Consequently, several institutes have had to shut shop,” the report added. “Even then, the average occupancy rate remains far from comfortable at around 68-70% in 2013-14.”

And more institutions will close as students either choose other professional courses ‒ or focus on getting into top tier schools.

After the boom, a bust in India’s B-school business is now underway.

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