Since the Murli Manohar Joshi spat four years ago, IIMs have been subject to constant media attention. And this attention hasn’t been kind or flattering. Salaries are now reported with some cynicism and the institutions seem to have fallen from being seen as national symbols of pride to being perceived as elitist institutions. The recent fee hike announcement by IIM Ahmedabad (IIM-A) has done IIMs no favours either.
While minister for human resource development Arjun Singh seems to find adequate reason for the hike, there is much discontent. Both Central and state governments have sounded their disapproval and many have called the move “commercial” and “anti-middle-class”. Does this hike mean prospective students will forgo an IIM seat because they can’t afford it? Or will they join, graduate and then default because they can’t cough up the payments?
Neither is very likely. First, our bank lending policy ensures loans for worthy students. The State Bank of India website offers information on educational loans of up to Rs10 lakh for domestic studies. (Including a sum of up to Rs50,000 to buy a two-wheeler for use on campus.) Most banks also offer a repayment holiday of up to a year after graduation or six months after starting a job. Second, even at average salaries, an IIM graduate should have no trouble paying off his loans. This year’s average annual starting salary for an IIM-A graduate was above Rs17 lakh. With some fiscal prudence, at least post the repayment holiday, loan repayments will hardly dent his or her salary account. A quick NPV (net present value) calculation on future earnings will easily show this.
The greater issue here is the gradual transformation of erstwhile national “public goods”—IITs, IIMs, etc.—to market-priced, “rival” goods in scarce supply. Institutions of excellence stay that way while they don’t have to worry about keeping performance bars as high as possible. But no one wants to foot the bill. Even when the bill is great value for money. The real solution is to develop more institutions of excellence with a semblance of quality control. Imagine what you could do with Rs60,000 crore and some vision. You don’t need an MBA to figure that one out.
Why shouldn’t IIMs hike fees? Write to us at views@livemint.com