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US credit downgrade worries Indian business schools

Last updated on: August 10, 2011 12:12 IST

US credit downgrade worries Indian business schools

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Vinay Umarji in Ahmedabad

Days after the American government lost its top-tier AAA credit rating from Standard & Poor's, engineering institutes and business schools in India are bracing for a possible impact on their placements.

While the rating cut will raise borrowing costs for the US government, companies and consumers, Indian educational institutes fear it may also impact recruitment plans of international companies.

This may translate into a not-so-impressive placement season for graduating students, dragging down average salaries.

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Institutes that Business Standard spoke to said they feared a repeat of 2008, when the global financial turmoil took its toll on placements of graduating students at institutes, including the Indian Institutes of Technology (IITs) and Indian Institutes of Management (IIMs).

During 2008, many students from these institutions received regret letters from banking and finance recruiters who'd initially held out offers.

Placements at IIT Bombay, said an official, could be impacted by 20 per cent, as many domestic companies which recruit from the campus have facilities in the North America and Europe.

The institutes also say placements for certain verticals may be impacted.

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"A double-dip recession will definitely end up affecting the marketing vertical as far as summer (training) placements are concerned.

However, I am optimistic, given that the process itself does not start until October and last year for a class of 44 students, we had 26 visiting companies.

Even if things do deteriorate, we should have a decent placement season," said MJ Xavier, director, IIM Ranchi.  ICICI Bank and J P Morgan Chase had already confirmed they were coming, Xavier added.

Mumbai-based ICFAI Business School has decided to advance its final placements from February next year to this October.

"We are being cautious. That's the reason we're starting early, by October, so that by November, we are through with campus recruitments," says Hema Sisodia, dean, corporate relations and campus placements.

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KJ Somaiya Institute of Management Studies and Research and Indian Institute of Management, Calcutta (IIM-C) also believe that finance and information technology segments are most likely to be impacted.

A major chunk of the Indian IT industry depends on exports to the US.

IIM-C is mulling an increase in the number of firms that need to be invited for placements.

"These are early days; yet, we are expecting that there might be a dip in the number of offers made by investment banking firms, among other sectors to go down.

Plus, this year we will have a large batch to place, with 460 students.

To deal with the two possibilities, we will add new verticals in which companies can be invited," says Amit Dhiman, professor in charge of placement.

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Seconding this is N D Sharma, placement co-ordinator at Somaiya. "The whole issue has warmed up in the last week or two.

It might have an impact on our placements.

But if the US situation snowballs, finance and IT verticals will be impacted the most.

Staffing is a part of business; if the business gets impacted, staffing will be impacted, too. All we can do is, instead of 100 companies, we will invite 200 companies," he says.


Additional inputs from Swati Garg & Kalpana Pathak


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