Foreign business schools fill a huge gap

When Aarti Kothari decided she needed a top-quality business education to further her career, her choices at first weren’t encouraging.

In a country suffering a dramatic shortage of placements for college students, the nation’s best business school, the Indian Institute of Management, had more than a hundred applicants for each seat.

Lesser programs, strapped for resources, offered degrees of questionable value. Going overseas was an option but only if she could find the nearly $100,000 it would take to pay for a leading U.S. business school degree.

So Kothari, a 26-year-old New Delhi journalist and economics graduate, was thrilled to win a spot at the Indian School of Business, a joint venture backed by Northwestern University’s Kellogg School of Management, the Wharton School at the University of Pennsylvania, the London Business School and McKinsey & Co., a management consulting group.

Today, she and 424 other Indian students study under visiting professors from Kellogg and other top business schools at a state-of-the-art facility in this booming southern Indian tech city. Such foreign-supported campuses, many believe, may be one answer to an educational shortage that threatens to hold back India’s ambitions to become a world economic power.

The Indian School of Business “is definitely not an Indian school,” said Kothari, strolling past classrooms full of students giving PowerPoint presentations. “I’m studying in world-class infrastructure with world-class professors.”

India, with its booming service economy but lagging higher education system, has one of the biggest gaps in the world between the number of skilled college graduates needed to fill jobs and the nation’s ability to produce them. That threatens to put the brakes on the country’s economic growth, now running at nearly 9% a year.

The country’s National Knowledge Commission says about 7% of Indians ages 18 to 24 enter college, half the average for Asia. To double enrollment, the commission says, India needs 1,500 new universities by 2015, something the country will be hard-pressed to achieve, particularly with a nationwide shortage of high-quality faculty.

The country’s laws in effect prohibit foreign colleges from setting up campuses to fill the gap. But dozens of universities from the U.S., Europe and elsewhere are finding creative ways to get a foothold in a market that offers both enormous demand and, potentially one day, enormous profits in terms of tuition and number of enrolled students.

“It’s very, very important to us,” said Dipak Jain, Kellogg’s dean, who played a key role in setting up the Indian School of Business and who travels there regularly to teach. “There are lots of eligible students all over the world, and not everyone can come to us. If the students can’t come to us, we need to go where the students are.”

In most cases, foreign colleges looking for a start in India have partnered with existing higher education institutions, offering help with curriculum development and staff training or setting up exchange programs.

The Indian School of Business follows a slightly different model. Set up as a new Indian-owned and managed school, it takes capital funding from Indian businesses and relies on a core group of 24 Indian professors supplemented by visiting faculty from top business schools abroad.

Each year, eight to 10 professors from Kellogg make the trip to Hyderabad, spending three to six weeks each, and Kellogg faculty members of Indian descent also serve as three of the institute’s seven “area leaders,” overseeing operations as well as entrepreneurship and accounting programs, said M. Rammohan Rao, dean of the institute.

“The quality of education is very high. Basically they’re getting the same quality” as students at Kellogg, Jain said.

A key difference, however, is that for $40,000 -- the cost of the one-year program, including food and housing on the school’s sprawling 250-acre campus -- students get no formal degree, just a certificate. That is widely recognized by Indian industries looking for workers but not by India’s government when it hires civil servants.

Under Indian law, only schools or institutes affiliated with established Indian universities can offer degree programs. But schools that affiliate must comply with a complicated set of affirmative-action laws that set aside large numbers of seats for lower castes and other classes of Indians.

“We don’t want to give degrees and come under too many restrictions,” Rao said.