IIMs gain greater autonomy, can award MBAs under new law

India’s prestigious Indian Institutes of Management or IIMs are set to gain increased autonomy after the lower house of parliament passed a bill anointing them ‘institutions of national importance’.

The role of the Ministry of Human Resource Development or HRD – which oversees higher education – in these government-funded institutions will be limited and they will be given more say in faculty hiring and student recruitment.

In addition, IIMs will be allowed for the first time to award their own MBAs and doctoral degrees.

“It is an historical bill which will bring a new era in management education in the country,” said HRD Minister Prakash Javadekar, noting that IIMs will no longer need to come to the government for various permissions and clearances.

“There is tremendous government interference and control,” Javadekar told parliament. “We want to remove that. There would not be any government control...

“We have to trust the best brains, the best institutions.”

With the passage of the bill, privately funded business schools in the country are clamouring for similar privileges, fearing that many business schools – which are already experiencing a downturn in applications – will see a sharp impact on applications unless there is a level playing field.

The IIM Bill 2017 was passed by the law-making Lok Sabha or lower house on 28 July with near-unanimous support, and is due to become law as soon as it is ratified by the Rajya Sabha or upper house.

It grants statutory powers to all 20 IIMs to appoint administrators and faculty members and also to award internationally recognised MBA degrees rather than the current postgraduate diploma in management or PGDM, which is little understood abroad.

While the PGDM, and the title of ‘fellow’ given to researchers, are recognised as equivalent to an MBA and a PhD degree respectively, the equivalence is not always honoured, particularly outside the country, and is seen as one reason why top talent prefers to seek an internationally recognised MBA qualification at an overseas business school.

Private business schools

India’s privately-run business schools, numbering more than 500, will continue to be restricted to awarding the less-valued PGDM and fellow titles.

Under existing rules private institutions such as business schools can only award full degrees, including PhDs, if affiliated to accredited universities.

The HRD Ministry “should immediately take up the question of providing autonomy for privately-run management institutes and accord them a status on par with the IIMs,” said Harivansh Chaturvedi, director of the Birla Institute of Management Technology and president of the Education Promotion Society for India.

If this was not done, “recruiters and foreign universities will have doubts about the legal identity of the PGDM, now that the IIMs are discarding them.”

Foreign students and faculty

The passage of the bill will also make it easier for IIMs to attract foreign students and faculty “and bring in the kind of diversity and dynamism” that top-ranked international business schools such as Harvard, Kellogg and Stanford in the United States and London Business School in the United Kingdom are famous for.

According to Chaturvedi, private business schools provide some 60,000 management diploma holders to industry each year. “This is 10 times the number of graduates produced by the 20 IIMs.”

“Over the next decade, India’s expanding economy will require millions of managers, entrepreneurs and civil servants with a management orientation and only private institutions have the capacity to meet that need,” he said.

A landmark change

Granting increased autonomy through the bill is being seen as a landmark change for the specialist IIMs, which exist outside the university system.

Shashi Tharoor, who was a HRD minister in the previous government, said it was a “remarkable moment when a minister surrenders powers”.

Tharoor, under whose tenure – from October 2012 to May 2014 – the autonomy plan was originally conceived, said that the present government should have retained a say in determining the fee structure to ensure affordability by students from all sections of society.

However, Javadekar responded that the basic plan was to follow the example of the world’s best business management schools when it came to free and autonomous functioning and boosting research.

“Indian management students will no longer have to go abroad to earn PhDs,” he said.

Affirmative action

On the contentious issue of affirmative action for all government-funded institutions to reserve about 50% of seats for groups on the lower rungs of India’s caste ladder, Javadekar said “the law of the land will apply”.

Currently, a separate HRD Ministry plan to elevate India’s top 20 higher education institutions to ‘world class’ status remains stalled over the reservations issue.

New governance

The IIMs are the first group of ‘institutions of national importance’ to be empowered to appoint their own directors and chairs. The comparable Indian Institutes of Technology, which figure among the country’s top-ranked institutions, will continue to have their top appointments made by the HRD Ministry.

Effectively, each IIM will now be controlled by a governing board comprising up to 19 members, with only two government representatives and the rest nominated from among eminent people, faculty and alumni.

Academic content, admission criteria for courses and guidelines for the conduct of examinations are to be drawn up by the academic council of each IIM. The government’s role is limited to nominees to the coordination forum for the IIMs.

For accountability, independent agencies have been tasked with reviewing the performance of the IIMs, while their accounts are to be audited by the Comptroller and Auditor General, as with all government departments and undertakings.