Fake Degrees Prompt India Led by Infosys to Build an Ivy League

Commercial University Ltd. in New Delhi offers degrees in commerce, one of hundreds of private colleges trying to fill an education gap as India’s growth creates a middle class eager for its children to succeed.

The operation doesn’t have a campus, nor are its degrees recognized by the government. Commercial University, based in a post office building between the capital and the sprawling streets of the old city, is one of more than a dozen institutions labeled as “fake” in an alert on the website of the University Grants Commission, India’s college regulator.

Bogus degrees are a symptom of the crisis in India’s higher education that prompted Prime Minister Manmohan Singh to promise 1,000 new universities and hire S. Ramadorai, former chief of Tata Consultancy Services Ltd., to upgrade the system. Failure to prepare students for India’s new industries risks squandering the nation’s biggest competitive advantage -- the youngest population among the world’s top 10 economies -- and has forced companies led by Infosys Ltd. (INFO) to build their own colleges.

“There is a need to bridge the gap between what is required to do the job and where the education system leaves the students,” said Srikantan “Tan” Moorthy, head of education and research at Infosys, the nation’s second-biggest software company. “Bridging that gap, in our experience, takes quite some effort.”

Singh, Moorthy and overseas universities that want to build campuses in India are running out of time. India needs to add 340 million skilled workers in the next decade if the country is going to lift economic growth to 10 percent, the prime minister said.

‘Significant Gap’

“India can reap the demographic dividend of a young population provided the young citizens of the country are educated and possess the skills required for earning a decent livelihood,” Singh said at a skill development conference in January. “There is a significant gap between the requirement and the supply which, unless checked, will constrain our economic growth.”

The government raised spending on education by 24 percent last year to $10.2 billion and plans to add 14 universities, 374 colleges and 20 software engineering institutes. Singh hired Ramadorai, former chief of Asia’s largest software-services provider, to head a panel to advise on ways to improve skill development.

China, which produced a decade of more than 10 percent average growth to become the world’s second-largest economy, had a literacy rate in 2000 of 91 percent for people older than 15, according to the World Bank. Only 63 percent of Indians that age were literate in 2006. The median age of India’s population is 25.1 years, compared with 34.5 years in China, according to data from the United Nations.

Elite Schools

India’s higher-education challenge is typified by its top universities -- the seven Indian Institutes of Technology and six Indian Institutes of Management that were set up after independence to provide engineers and administrators. The list has been expanded since the beginning of last decade with seven more IIMs being added and eight new IITs.

These institutes get as many as 50 applicants for each place, compared with 17 at Harvard, even though none are ranked in the world’s top 300 universities by the London-based Times Education Supplement.

Together, the IITs produce only about 9,600 graduates a year -- fewer than Moscow State University -- and many students leave to work abroad. Alumni include Ajit Jain, a potential successor to Warren Buffett at Berkshire Hathaway in Omaha, Nebraska, who went to IIT Kharagpur; and Pepsico Inc. Chief Executive Officer Indra Nooyi who earned an MBA at IIM Calcutta.

Low Enrollment

India has one of the lowest gross enrollment ratios for college of just 13 percent, half the global average and below the 23 percent in China, according to KPMG. India’s government said it hopes to achieve 30 percent by 2020. The ratio measures the number of students enrolling in college after finishing school.

The deficit has encouraged a proliferation of schools claiming to offer higher education, some of which don’t provide a recognized degree, prompting the University Grants Commission to start its alert service. Delhi’s Commercial University, one of those singled out by the commission, said on its website it issues degrees under its own name and students can “legally describe themselves” as graduates even though it doesn’t have official recognition. A company official who wouldn’t give his name declined to comment when contacted by phone.

Even those who make it through accredited universities are often not ready for employment, according to educators at Infosys (INFO) and ICICI Bank Ltd. (ICICIBC), the country’s second-biggest lender. K. Ramkumar, executive director at ICICI (ICICBC) said most university curricula and teaching methods are out of date.

‘Mug the Paper’

“It is not application-based teaching, it is purely memory based,” he said. “You mug the paper and answer 20 questions and get the marks. The trouble is, when they come to ICICI or any other company, they aren’t able to recall any of that knowledge.”

Infosys has taken matters into its own hands with its own 350-acre (140-hectare) campus on the edge of Mysore, India’s ancient silk-weaving center. With its green lawns, marble- floored atrium and sweeping Doric-collonaded facade, it looks like someone dropped an ivy-league college into the middle of the dusty cotton and maize fields of Karnataka state.

Two hours’ drive from India’s software capital of Bangalore, Infosys’s Global Education Centre, or GEC, is a $330 million response to the education deficit, putting about 20,000 graduate recruits through the 23-week residential course each year to get them up to speed.

Car Ban

Students in crisp shirts and suits gather at the one of seven food courts that can seat more than 3,500 people, or take a campus bicycle from the nearby rack. Cars are banned from most parts of the campus, the only other transport is a fleet of electric golf carts.

Some head to the dorms, a chain of two-story buildings that spells the company name in low-rise letters; or the recreation center, with squash courts, bowling alley, swimming pool, and aerobics studio. The laundromat, supermarket and medical center are more Caltech than Karnataka.

Nearby, a geodesic dome houses three cinemas that screen movies at the weekend. Inside, hundreds of new hires are filling out salary forms, a reminder that this is a business, not a philanthropic venture. Infosys spends about $6,000 per student, equivalent to about $120 million or roughly 8 percent of its $1.5 billion profit in the financial year ended March 2011.

Steve Jobs

The aspirations of the project are illustrated by the classroom names in the glass and concrete education center -- Robert Noyce, John Pierpont Morgan, Steve Jobs.

In one room, hunched over a terminal, 22-year-old Preety Thakur is trying to figure out how to deal with a client request for more information options in a software package, applying skills she learnt in her morning class. It’s a world away from her life in Baddi, a small industrial town in the mountains of Himachal Pradesh in northern India.

“When I entered this campus, it was a dream come true,” she said as colleagues around her rush to meet a deadline. “The educators are world class. In college it was mostly theoretical. Here there is a lot of emphasis on practical learning.”

Infosys is trying to instill the same application-based learning in 450 state-run colleges through a program called Campus Connect.

Like Infosys, ICICI responded to the shortage of qualified graduates by running courses at four institutes including the ICICI Manipal Academy for Banking and Insurance based near Mangalore in Karnataka.

Boot Campus

“The classes that we conduct are very similar to working in our bank,” Ramkumar said. “We start at about 8 a.m. and we go to sleep by 11 p.m. Work ethics, value and organization’s culture are drilled into people. I am proud to say that the structure is modeled on how armed forces recruit their officers like the Indian Military Academy, Westpoint and Sandhurst.”

Around 13 million students were enrolled in higher education in India in 2008, the third-highest number after the U.S. and China, according to a report in December by advisory company KPMG.

Singh plans to double the enrolment ratio in the next eight years by adding as many as 1,000 more universities. The government accepted recommendations of the National Knowledge Commission to boost higher education spending and periodically revise the curricula.

“They have been promising to do it but it is already too late -- we are in a crisis,” said T.V. Mohandas Pai, director of Manipal Universal Learning, a private university and a former director of human resources at Bangalore-based Infosys. “The government’s mindset in education is one of control. The students are not gaining adequate skills because investment is not there and the curriculum is very dated.”

Talent Crunch

In a February survey of more than 1,000 Indian recruiters by Naukri.com, a job search website, 61 percent said they face a talent crunch while hiring. India does not allow private colleges to earn a profit. The fee structure is regulated and there are more than three government bodies that set the rules.

Narayanan Ramaswamy, head of education for KPMG in India, said the country needs to streamline the rules and attract foreign institutes to improve competition.

At present, foreign universities are banned from offering degrees in India and legislation to allow them to set up operations is pending in parliament. Some including Kellogg School of Management and Wharton School, University of Pennsylvania, have partnered with Indian colleges who issue a local degree at the end of the course.

Wharton Way

“If there is a Wharton or others who come in and prove that their teaching is good, then we will see discerning Indian students heading to such institutes,” Ramaswamy said. “By not having any quality institutes here, you are only promoting mediocrity.”

The lack of skilled workers in India is a major growth constraint for 51 percent of businesses, according to a report released in January by Grant Thornton International Ltd., a global consulting and accounting company. That’s compared with an average of 38 percent in Asia-Pacific excluding Japan.

Factory workers in India are almost four times less productive than in Thailand and five times less productive than in China, according to a report released last month by McKinsey & Co.

“There is basic minimum that is expected and even that is not happening in many cases,” said Ramaswamy. “If an engineer cannot articulate his logic properly, why should I hire him? Nearly 50 percent of students we are looking at are not worth recruiting.”

To contact the reporter on this story: Unni Krishnan in New Delhi at ukrishnan2@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net.

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Photographer: Namas Bhojani/Bloomberg

The Infosys Ltd. Mysore Campus is located in Mysore, India.

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Photographer: Namas Bhojani/Bloomberg

The Infosys Ltd. Mysore Campus is located in Mysore, India. Close

The Infosys Ltd. Mysore Campus is located in Mysore, India.

Photographer: Namas Bhojani/Bloomberg

Students walk through the Infosys Ltd. Mysore Campus, in Mysore, India. Close

Students walk through the Infosys Ltd. Mysore Campus, in Mysore, India.

Photographer: Namas Bhojani/Bloomberg

Srikantan Moorthy, senior vice president and head of Education and Research at Infosys Ltd. Close

Srikantan Moorthy, senior vice president and head of Education and Research at Infosys Ltd.

Photographer: Namas Bhojani/Bloomberg

Students attend a lecture at the Infosys Ltd. Mysore Campus in Mysore, India. Close

Students attend a lecture at the Infosys Ltd. Mysore Campus in Mysore, India.

Photographer: Namas Bhojani/Bloomberg

Students attend a lecture at the Infosys Ltd. Mysore Campus in Mysore, India. Close

Students attend a lecture at the Infosys Ltd. Mysore Campus in Mysore, India.

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