US universities sell executive courses in India

Faced with a severe downturn at home, several US universities have now turned to India to sell their executive education programmes.

A team of professors from nine universities, including The Ohio State University, George Washington University and Northeastern University, is currently in the country to meet top companies for this purpose. Some of the companies this team plans to meet are Siemens India, RPG Enterprises, GlaxoSmithkline, Mphasis and Infosys Technologies.

“Our university has lost corporate clients to the slowdown. We are in India to build a relationship with the companies here,” said Professor Sumit Kundu, faculty director of E-MBA and coordinator (department of management and international business), Florida International University.

In the past, executive education programmes have been a good source of revenue for universities in the US. In some cases, their contribution to the annual revenue was as high as 40 per cent.

Until some months back, companies in the US used to fully reimburse the students who went for such programmes. Thanks to the meltdown, the same companies have now decided to slash the subsidy by 50 per cent and more. As a result, there are few takers for these programmes. “Certainly, revenue is suffering,” said Kundu.

India, to be sure, could be a good hunting ground for these universities as there is a shortage of executive education programmes in Indian business schools. Though there are over 1,500 business schools in India, only the Indian Institutes of Management and other quality B-schools offer such programmes. In contrast, around 500 universities in the US run executive education programmes.

“This serves as an opportunity for us to reach out to the business education market in India,” said V Kanti Prasad, Dean and Bostrom Professor of Entrepreneurship and Innovation, University of Wisconsin, Milwaukee.

The US universities however have not slashed the executive education fee, in spite of the slowdown. For instance, Florida International University charges around $50,000. It is looking at charging around $100 per hour as executive education fee from Indian companies.

It helps that six quarters of contraction makes it that much easier for a positive uptick since the base effect kicks in. There is, though, he admits, no one number that captures the shift in mood as yet – the unemployment numbers later this week could well show a hike.

Unlike former Reserve Bank of India Governor Bimal Jalan, who was featured in this space yesterday, Chaudhuri remains bullish on India and forecasts growth of a little over 7 per cent this year and a little under 7.5 per in 2009-10. The maths? Consumption demand, he asserts, is by and large unaffected except in segments like automobiles (more on that later); exports will continue to fare badly, but since imports will also fall because of the lower crude oil prices, the net effect on GDP growth will be negligible and may even be positive (think GDP=C+I+G+X-M).

Chaudhuri sees investment falling in the first half of 2009-10, but once confidence returns (aided by the fact that, once global markets revive, India Inc will find it easier to raise funds overseas), it will rebound in the second half. Don’t forget, he says, Indian companies are raising debt even now – and a very low Libor means, even at higher spreads, the rates are attractive. Debt, of course, is one end of the spectrum, and Chaudhuri acknowledges that unless markets revive, there will be no equity – so, return of confidence is the key.

What can the government do to raise confidence? Chaudhuri ticks off the usual infrastructure spending and lower interest rates; he then adds that RBI needs to ‘rebuild competition in the domestic credit sector’.

In a nutshell, the truck/construction-machinery/two-wheeler industry, for instance, is largely financed by NBFCs which are facing a liquidity problem thanks to the pressure on mutual funds –RBI has already taken measures to provide them refinance windows and needs to keep a vigil on this. “Once NBFCs are liquid, a large part of the demand will return.” A tenth of incremental credit in the economy comes from this sector. Chaudhuri doesn’t think there is any need for a large stimulus package of the sort several of his brethren are calling for, primarily since India’s fundamentals and demand remain intact and the corporate sector is in very good shape.

The joker in the pack is the next government. He is convinced, however, that even if the BJP or the Congress pre-election coalitions are unable to get enough seats, neither will extend support to a possible Third Front government, given the levels of tension with Pakistan and even the possibility of war. What if he’s wrong and a Third Front comes to power? Will India Inc still invest? “Tear up everything I’ve said on the economy, make a rocket and fly it.”