Why Admission Offer at IIMs No Longer Calls for Celebration


By Rishabh Agarwal

One decade is a long time. One decade ago, getting an offer letter from the IIMs could have made you jump sky high. Sweets would have been distributed by your parents among your neighbours on this extraordinary achievement.

I am also reminded of the winning and confident attitudes of the students at these premier institutes those days. That was the time when students used to attend the interviews in shorts and get selected with the promise of fat pay cheques.

How the newspaper front pages were filled with unbelievable offers of top salary figures (1 crore+ ) at IIMs and even at other B-schools such as ISB.

It was also the time when Atal Bihari Vajpayee headed the first BJP-led NDA Government at the centre (1999-2004). The then HRD Minister Murli Manohar Joshi wanted to drastically reduce fees at IIMs reasoning that such high fees were probably not affordable to the majority of students. Fees at that time was Rs 3 lakh for 2 year MBA programs. The Minister wanted to bring it down to Rs. 0.75 lakh – a steep reduction by 75% in order to make it affordable to the common people.

However, the BJP did not return to power after the elections being replaced by the Congress-led UPA. The issue, meanwhile, got lost. By then, the IIMs came up with a proposal to create their own endowment funds. They argued that their students were getting hefty salary packages and the fees were pegged too low against mounting expenses.

At that time, the ISB was charging Rs 20 lakh+ fees while IIMs were charging a mere Rs 3 lakh. IIMs argued that their fees were substantially lower than their global peers (not a very good argument when one looks at global per capita income vs. Indian per capita income) and started hiking the fees incrementally or in some cases, rather steeply.

Following the example of the IIMs, even other leading B-schools got emboldened to increase fees by 4-5 times within a short period of time.

Worryingly, during last one decade, fees at IIMs/ top B-Schools went up by leaps and bounds right from Rs. 3 lakh to Rs. 20 lakh. However, average placements remain stuck at almost decade old figures.

Lets take a case. A medium family background scene. Father is briefed by his dear son of his feat of scoring top CAT score (somewhere >99 percentile) and securing seat in several of IIMs and other leading B-Schools of India. He also shares other details of the offer letter including fees of the program close to Rs. 20 lakh.

I assume he will react happily under the hope that some great fortune is on the way.

However, they (parents) realise that their son or daughter will have to take an educational loan of Rs. 20 lakh for the MBA program. It would turn out to be a whopping Rs. 35,000 monthly instalment to be repaid for full 7 years.

This is the case of a common medium income level family entering into such a large liability in return for a tacit asset which is “education”. You cannot touch it. It is a degree rather than some house or car. You cannot sell it even if you want.

I might sound rude here but facts are facts. The boy or girl who is going to probably earn decently after completion of the course (please don’t assume that all IIM graduates earn more than Rs.1.5 – 2 lakh per month) would be treading a very risky and frustrating path.

What if something happens to the career of that boy or girl. He or she will further slip into loan trap and it will be very difficult for a family to rescue their son or daughter from chronic tension of monthly instalments repayments.

Don’t forget these sons/ daughters have moral duty to support their old parents / younger siblings financially as they are expected to come forward in this age group.

A fees of Rs. 20 lakh in a developing nation like India is highly unwarrented when the applicant is already cracking some national exam (> 99 percentile) to earn his seat. India has per capita income of mere few thousand rupees per month. Imagine someone who is admitted to big institutes with hefty tuition fees tag coming from such a family.

Over the years, admission procedures at IITs / IIMs have become highly skewed in favour of people from “well off” families rather than the poorer classes.

Another irony is that in India, the prevailing Education Loan Interest Rate is 11-14% while the Home Loan/Car Loan Interest Rates stands at only 9-10%/ and 8-9% respectively.

Moreover, with such a hefty loan on your head drastically reduces your bargaining power with recruiting companies on campus. It results in sub-ordinary packages cum job profiles. Over the years, it becomes even more difficult to land suitable roles.

Now compare this scenario that your son or daughter gets admission into IAS / NDA / PCS / PSUs, etc. For sure, the family should start celebration on such achievement.

In the past, it was the trend that people, despite having secured govt. / PSU jobs, used to try for premier IIMs/ top B-schools in order to get into top corporate jobs and aiming for top salary packages.

The incentive/ reason was that this talented bunch was not convinced with slow growth of govt. jobs and they aspired for global profiles. But I don’t think this is happening any more.

Firstly, your salary has got reduced to mediocre 50k-100k per month on majority basis (not talking of few 10% who make it to 200k per month).

Secondly, more worrisome is that you are having a loan with EMI of 35k for full seven years. Please note that you cannot even think of a break in these seven years supposedly (due to any reasons – start ups or something like that) even if you need/ aspire for.

In view of the above arguments, there are high chances that your family might not even cherish if you crack MBA exam in future. The sheen/ craze has got reduced significantly now.

IIT/ IIM graduates along with other top T/ B School graduates are expected to lead/ start their own start-ups (these guys have great potential for start ups).

It is again a noble move, but with above facts as I mentioned, at least for a middle class family background guy such step is a simple “no-no”.

By virtue of the high fees structure, the IIMs are no longer attracting best of best minds from large pool of society. Rather, they are only attracting privileged convent educated kids from metros who already groom themselves for these elite institutes.

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Have a look at selection procedure and one can easily figure out how you stand no chance when you are from Hindi/Regional Medium school with “humble” (read poor) family background.

We should not forget IIMs are prestigious institutes set up by the Government of India with a vision of providing leaders to corporate world and society at large.

Citizens already pay Income Tax and all other applicable taxes. It is the government’s responsibility to at least maintain affordable fees at their best institutes to meet the aspirations of all segments of the society.

  admin-ajaxI hope present BJP government would look into their unfinished agenda/ education loan interest rate and consider how justified is charging hefty fees from very those students who crack top scores and are invited to join these prestigious education institutions. Such a rethink is also necessary if the government wants its Start Up India initiative to succeed.

Rishabh Agarwal, Tech – SCM Enthusiast/Public Policy/Strategy in the Oil & Energy sector, is an alum of IIM Calcutta.


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