This question can easily trip you in an interview and you need to be well-prepared with the answer for this question.
Why does the interviewer ask you this question?
Most of the evaluators look highly upon good academic performance - so, in case you have poor grades, they would like to know the reasons for the same.
The interviewer would be interested in knowing if you are a habitual poor performer, or have done badly for a particular course.
The interviewer would be interested in knowing if you are hardworking and ready to improve.
How should you prepare for this question?
Remember that your main aim is to divert the attention of the examiner from your grades, (which is your weakness in this case) to your areas of strength (maybe some extra-curricular activities, hobbies, current affairs etc.). The lesser the time spent discussing your poor academic performance, the better. Do not spend more time talking about the poor performance at length with long explanations.
Low grades show that you lack consistency, perseverance and the ability to put in hard work. If you could subtly (through your hobbies, extracurricular activities etc.) show that you do possess these qualities, it would be a definite advantage for you.
Low grades do not necessarily mean low caliber. You may not be interested in your subject but you could have done a lot of reading on some topics that interest you (e.g. astronomy, history, epics etc.) But be very well prepared, as you will be questioned on the subjects you claim to be good at.
You may have scored less, but may be strong conceptually. In this case, you may put across the fact that you are not a test taker but fairly well versed with the key concepts. You may also lead the panel to your favorite subject.
If you have a consistent level of good performance, you may be asked what other activities you pursued (apart from academics). The panel wants to evaluate your personality as a whole. They are keen to know whether you were good only in your studies or you took active interest in some other activities as well. If you follow certain hobbies and have received awards in some extracurricular activities, be sure to mention them.
Good answers (in case of poor academic performance)
The answers to this question are very much specific to the candidate. Following are some answers usually given to explain the reasons for bad grades:-
If your grades have improved over time, it could be a good indication of the fact that you learn things fast. You could say that "being a slow starter is one of my weaknesses, but I keep improving over time. I hope that I would be a topper in the institute I join."
If you have low grades but are confident in the subject, you could say, "I believe that grades do not completely reflect on how well one knows one's subject - even though I might have got bad grades, I am confident about my subject”. And be ready to be asked the most difficult questions possible in your subject - but if you answer well, it will create a good impression.
If you have several extracurricular activities, talk at length about your extra-curricular activities, what you learnt from such activities. Try to make your answer interesting. In case you are able to interest the interviewers in your extra-curricular activities, it is highly probable that they would not quiz you further in academics.
If there were some unfortunate events that diverted your attention from studies (e.g. loss of a near and dear one, an illness etc.), you could state those reasons. Interviewers are usually sympathetic towards such answers - we all face those difficult days in life. But you may be required to produce necessary certificates for chronic illness etc.
The above are some of the approaches you can adopt to justify your academic performance. Analyse the above carefully and identify the approach that works best for you.
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