The M.B.A. Export Boom

By Simon Robinson / Hyderabad

Correction Appended: January 15, 2008

Gautam Varma was ready to take the next step. With a degree in computer engineering from Purdue University and a few years working for Motorola in Chicago, Varma, 27, felt a stint in grad school would help him move up into management. So last year he applied to a couple of U.S. schools and to the Indian School of Business (ISB), a six-year-old institution in the southern city of Hyderabad that has academic ties to Northwestern University's Kellogg School of Management, the Wharton School at the University of Pennsylvania, and the London Business School. He was thrilled when he got into ISB. "The more I looked, the more I realized it was on a par with U.S. schools," says Varma, who also liked the idea of being able to return home. "So far, I'm really impressed. Friends want to apply here next year because it's quickly gained such recognition. Indians are flooding back to India, and for them this is the ideal setup."

It's a tempting one for foreign universities too. Although they are currently barred from setting up full operations in India, dozens of American and European schools are finding creative ways to team up with local partners so that they can enter the potentially lucrative Indian market. The push to get in comes more than a decade after China opened up to foreign universities.

Now India is considering an approach similar to China's to help improve its woefully inconsistent higher education, which includes a handful of world-class government-run management and technology schools as well as hundreds of much more mediocre institutions. A transfusion of government spending, coupled with foreign investment--financial and academic--will, the government hopes, boost the number of Indians who attend university from 7% to closer to 15% and provide well-trained workers for India's booming economy, which, perversely in a country of 1.1 billion people, is struggling with a growing skills shortage.

For the foreign schools, the new relationships mean both a large pool of potential students who may not want or be able to travel to the U.S. and a way to expose those back home to a part of the world that has become increasingly important. Already, Ivy League institutions such as Harvard, Yale and Columbia are running joint courses with local schools or offering independent short programs. George Washington University and the University of North Dakota are also tying up with Indian schools. Georgia Institute of Technology has begun talks with one of the state governments and regulators to see if it can legally get around the general ban on foreign universities' setting up shop in India. If successful, it would become the first American university to offer graduate degrees identical to those it awards to students in Atlanta. It hopes to open a campus in Hyderabad in 2009. "No school in America can afford to be U.S.-centric these days. We need our students to understand how things work in Asia," says Kellogg dean Dipak Jain.

Not everyone in India welcomes the newcomers. The government of Prime Minister Manmohan Singh relies on leftist parties for its political survival, and those parties and some student activists are against foreign universities, which they see as a threat to India's indigenous education system. "I really don't think foreign universities are the answer to our problem," says Amrita Bahri, 22, president of the Delhi University Students Union. "They may surely develop the infrastructure, but they will also surely inflate the fee structure and make education more of a commercial venture."

Operating abroad poses challenges for the outsiders too. Indian universities set aside almost half of all admissions slots for students from "listed tribes," or lower castes. The quota system has helped millions who would otherwise not be able to attend university, but it also prevents schools from controlling the academic quality of their student body. A proposed bill would exempt foreign universities from this form of affirmative action, but their administrators worry that future governments might rescind the exemption.

Such uncertainties have affected foreign universities operating in China since Beijing opened up its higher-education sector in the 1980s. There are now 800 programs jointly run by foreign and Chinese schools, but government directives, bureaucratic red tape and other hassles make them an ongoing challenge for Western partners. Southwest University was one of the dozens whose programs were cancelled during a relicensing campaign the Ministry of Education initiated years ago. But American interest, particularly for starting business schools, remains high. "Any business school that wants to remain relevant is going to be actively involved in engaging its students and faculty with China as the world's fastest-growing economy," says Howard Frank, dean of the University of Maryland's Robert H. Smith School of Business, which runs an M.B.A. program in both Beijing and Shanghai. "The program's returns include the benefits of that engagement."

That's also the idea behind the ISB. The brainchild of Rajat Gupta, former head of McKinsey & Co., the school is funded by some of the country's biggest corporations. Kellogg, Wharton and the London Business School helped design the curriculum. Tuition for the one-year M.B.A. degree is about $43,000, and most of its 400 or so students pay full fare, although there are some scholarships. The majority of the faculty are U.S.-educated Indians, many of whom were teaching in the U.S. and have been lured home with salaries of about $75,000, five times what the country's best government universities pay. Ravi Bapna, 38, who recently returned from the University of Connecticut to start the school's Centre for Information Technology and the Networked Economy, is excited by the enthusiasm and skills of his new students but says India needs hundreds more new universities: "Our biggest resources are human capital, and if we can't bring people up to speed, then we're not going to be able to compete. We're O.K. through high school, and then it's just a cliff--you just fall off."

The original version of this article incorrectly stated that the University of Hawaii's MBA program in China had been cancelled.

With reporting by With Reporting by Lin Yang / Beijng