Saturday, September 28, 2013

Number of CAT aspirants at seven-year low; MBA degree falls from grace

The number of applicants for CAT (Common Admission Test) 2013 has dipped to a seven year low, indicating that an MBA degree has fallen from grace in the backdrop of a dull economy, escalating costs and uncertain placements. Only around 196.000 vouchers have been sold for this year's common admission test to 13 of the premier Indian Institutes of Management (IIMs) and 120-odd non-IIMs, marking a nearly 33% comedown from a high of 290,000 in 2008.

Till September 26, the last day of online registrations, 196,095 vouchers had been sold, said CAT 2013 convenor Rohit Kapoor of IIM-Indore. Registrations for the test closed at 194,514.

The last time CAT had seen such few takers was in 2006, when some 191,000 students had appeared for the test. Ironically, the lower interest comes at a time when IIMs have added 115 seats, taking the tally across these 13 institutes alone to a total of 3,335. The IIMs and test-conducting firm Prometric had been preparing for more students to appear for CAT 2013 — to be conducted from October 16 to November 11, 2013 — with the test centres spread across 40 cities against 36 last year.

Despite a greater number of seats, interest from candidates seems to be waning, with an MBA degree no longer seen as guaranteeing a good job. "At one time, an MBA was perceived to be the ticket to a good job and a good life," says Amitabh Jhingan, Partner, Transaction Advisory Services and National Sector Leader - Education, E&Y. "That story hasn't played out."

He says that a number of MBA institutes which have sprung up are not providing students any jobs. Some of those have even wound up. "At the top 10-20 institutes though, there is unlikely to be a drop in interest or a lowering in cut-offs," says Jhingan. Agrees Anindya Sen, Dean (Academic) at IIM-Calcutta: "There was a time when it was all about the craze for an MBA degree. Now that is changing."

Students realise, he adds, that other than at a handful of B-schools at the top, the expenses of acquiring a management education are not worth it in terms of the returns. "On the supply side too, a lot of B-schools have closed down. This is a market correction of sorts," he says.

IIM-Indore's Kapoor, who in some reports had been attributed to be expecting voucher sales of 250,000-plus, says: "The decline in registration numbers doesn't bother us because 193,000 is itself a huge number and this time round, we will have more serious and focused candidates sitting for the exam," he says. "The reasons for the decrease in numbers may be varied — the economy, job market and other such issues may have deterred many from applying for the test," said Kapoor.

The MBA boom spawned the rise of a spate of second-rung B-schools. When the market was good and jobs were plentiful, every institute kept increasing its fees. But as economic conditions worsened and so also the job market, placements of students became tough. Despite the schools' inability to place students, they didn't lower their fees.

Saddled with huge batch sizes and a slow job market, even the IIMs faced difficulty in placing the last 5% to 15% of their batches (ET, March 18, 2013). However, in many of the older IIMs' cases, fees have gone up by three to four times from 2007-09 levels when they charged an average of Rs. 400,000. For the Class of 2015, IIM-Lucknow charges around Rs. 108,000 after a fee cut, while at the top end, IIM-Ahmedabad and IIM-Bangalore charge Rs. 1.6 and Rs. 1.7 million, respectively.

One of the main reasons behind dwindling CAT registrations is return on investment. Other options are also proving attractive to students. "Today, if you take GATE (Graduate Aptitude Test in Engineering), you can end up in a public sector company and get a decent starting salary Rs. 1-1.1 million," says Satya Narayanan R., Chairman, Career Launcher. There are students who are reluctant to pay Rs. 1.6-1.7 million for an MBA. They prefer to work for some more time, save up and do an MBA from say an INSEAD, and get paid in dollars, he adds.

Source: The Economic Times, September 28, 2013

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