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There is a shortage of skilled labour in India.

Wages for skilled staff are rising sharply, and staff turnover has risen. The universities are in deep distress, and so far, reforms of government policies in higher education have not begun. Yet, the situation on skilled labour is likely to improve significantly. The United Progressiva Alliance government has undertaken many initiatives on higher education. These include raising the number of seats in universities and starting new universities. But my sense is that these do not achieve high-quality education. An essential gap in universities lies in recruitment, compensation, and incentives. A good PhD in most fields now commands a global market. The wages in Indian universities lag far behind the prices available elsewhere in the world and in the Indian private sector. This has sharply curtailed the supply of good researchers who are willing to work in universities. There is a selectivity bias where the best people are leaving universities or not joining them at all. The UPA approach of focusing on quantities (more seats, more universities) does not address these fundamental difficulties. Announcing more seats at the IITs or building new IITs will not solve the recruitment crisis that the IITs face. India needs to move closer to the carrot and stick of the top universities of the world, where high wages in universities are accompanied by powerful incentives to perform. Universities need to be much more flexible in starting and shutting down departments and programmes, and innovative in processes, so as to respond to the needs and opportunities of a fast-changing country. So far, there is no sign of movement on these issues. Hence, I share the widespread sense that higher education in India is fundamentally broken and that there is no light at the end of the tunnel. However, there are five other aspects in the picture which suggest that the crisis in staffing will abate. The first point is about the business cycle. We are at an unprecedented moment in Indian history with high GDP growth and an incipient investment boom. Everywhere in the world, the labour market is tight in the high of the business cycle and soft at the bottom. To some extent, what we are seeing is a cyclical phenomenon and not a structural one. The second issue concerns job matching. In a fast-growing economy, where numerous new firms and completely new industries are taking root, matching the right job to the right person at the right wage is legitimately difficult. In an old-fashioned static environment, job matching was much easier. But in the present rapidly changing environment, there will be many situations where the right job is not matched up to the right person at the right price. This inevitably induces high staff turnover. Acute staff turnover is perhaps a feature of this unique moment in India, where so many things about firms and markets are changing rapidly. In a few years, more stability is likely to come about. My third proposition is that college degrees are less important than meets the eye. A lot of extremely successful people in the world have a college degree in fields like history or the liberal arts, where no tangible technical skills were learned. A lot of top CEOs frankly say that their MBA education was useless. An extensive research literature finds remarkably little impact of either elementary or higher education on GDP growth. Universities may play a role in socialisation and in screening but the education that is imparted there is much less important in the working years than is presumed to be. In other words, the Indian model of having difficult entrance examinations coupled with no teaching has its strengths, for it achieves the things that matter (screening and socialisation) while skimping on the things that matter less (learning history or economics in an undergraduate programme).

A fairly small sprinkling of such people can be very useful in diffusing knowledge in their surroundings. Universities giving out degrees in IT on this scale just did not exist--and still do not. If the gentle reader is sceptical about the potential for 12th standard students to grow into complex knowledge workers. there is something of great importance which has been going on in India from 1991 onwards. 29. Prime Minister Manmohan Singh said recently at an inauguration speech marking the 150th anniversary of the University of Mumbai Karthik Agashe. ³If it doesn't happen over a period of time. In the early 1990s. Hence.000 apiece. Each switch boosted the men¶s salaries by an average of 40 per cent. educated and mobile ² are the faces of India¶s boom. Trade barriers have come down. is very good by world standards. In urban areas. then where does it happen? What appears to dominate is "learning by doing". Both are ready to jump ship again if their current employer. more than half the enrolment is in private schools. whom they decline to name. in Bangalore. The last element which is in India's favour is that wages at the high end are now attractive enough to pull a thin cream of Indians and foreigners who have careers abroad to relocate to India. . hang out at Western. India fares well by world standards in producing a large number of good-quality students at the 12th standard.If learning does not happen in universities.´ fostering an image of India as a rising economic power. People learn inside firms. mathematics and physics at the Indian 12th standard. who met Agashe in 2005 when they worked for the US software maker Oracle Corp. They invest in stocks. ³I get into a job. and their learning is best when the firm is in a brutally competitive and globalised market.6 per cent a year during the past three years. Manjit Singh. Only 10 per cent of Indians from 18 to 24 are enrolled in higher education compared with 45 per cent in developed countries. if someone had talked about a million people being employed in the IT sector. has changed jobs four times in his 4 1/2year career. a 27-year-old software salesman.´ says Agashe.´ he says. For 16 years now. seated in the coffee shop of the Taj Residency hotel in Bangalore. capital controls have eased. How did India do it? Bright 12th standard kids with an indifferent college education picked up a few months' vocational training and learned on the job.´ Agashe and Singh -. The quality of English.young. Is their job-hopping mercenary? ³Absolutely. I only have to point to the example of India's IT industry. this is not the place for me to work. enrolment in private schools is roughly a quarter. doesn¶t transfer them to the US so they can get more sales experience ² and another raise. has had three jobs in 3 1/2 years. They¶ve helped spur the fastest growth in more than five decades ² an average of 8. In this respect.style malls and catch such movies as ³Live Free or Die Hard. the learning that is acquired at the workplace. the supply of good 12th standard students is very large and growing rapidly. ICSE and those taking the IIT entrance exam. particularly with the CBSE. and thus assisting the process of learning on the job. Ten years of experience in Tata Steel is worth more in building top-quality staff for running a steel company than any university education that I can think of. and a middle manager in Tata Steel [Get Quote] today is competing in the world market for steel. to about $20. The experience that has been picked up in export-oriented firms has been a marvellous teacher for this million-strong workforce. and in rural areas also. I'll search for a better company. this would have seemed impossible. I expect certain things. we have been building a new cadre of individuals who have learned inside competitive firms with an increasing degree of globalisation.

380²$21. Naukri means job in Hindi.´ Pai says. ³It is not the lack of power. medicine and finance and attract foreign investment. Director of Human Resources at Bangalore. has more than doubled to 50 million in the past decade. Prime Minister Manmohan Singh said recently at an inauguration speech marking the 150th anniversary of the University of Mumbai. Government control Mr Pai says India¶s greatest calamity is the government's failure to improve education.000 salaries ahead of most.970 a year. General Electric Co. $21.000 people during the year that ends on March 31. Managing Director at Hindustan Construction Co. The global average is 86 per cent. 54 per cent of the population earns an annual household income of less than $1. he says. Chief Executive Officer of Info Edge (India) Ltd. And their successes are masking a potentially crippling shortage of skilled employees that threatens India¶s economic growth. 2008. defines as people with annual disposable income of $4. outsiders view the country as flush with English-speaking workers who can fill advanced jobs in technology. According to McKinsey.´ Precious people Along with Infosys and other Indian companies.1 billion made up of people age 24 or younger. but it is lack of qualified people. ³Excessive control on education by government has been one of the biggest flaws. ³The demographic dividend theory in India is bogus. Those who do graduate from college aren¶t good enough for most jobs.5 per cent in 2003. Mr Pai says. which runs naukri. Rising salaries India¶s middle class. nor lack of roads. to add to Infosys¶s 76.890 in India equals $117.650 in purchasing power parity.Bogus theory With 54 per cent of India¶s population of 1. India¶s second-largest software services company. a Mumbai-based engineering and construction firm. accountants and programmers and coveting people like Agashe and Singh.000 employees. ³They are not trained people.´ says Ajit Gulabchand.890. still hasn¶t succeeded in providing universal elementary education. and Google Inc. which New York-based consulting firm McKinsey & Co. The percentage of first graders who continue to the fifth grade was 78.com. are looking to India for engineers. India. the country's biggest employment Web site.´ Agashe. Only 10 per cent of Indians ages 18 to 24 are enrolled in higher education compared with 45 per cent in developed countries. according to the South Asia Economic Report by the Asian Development Bank. That perception is wrong. which gained independence from British rule in 1947. who wants to hire 26. At the same time. ³The numbers being educated are far too low compared to what India would normally require.40 a day ² putting Agashe and Singh and their $20. says T V Mohandas Pai.based Infosys Technologies Ltd. says Sanjeev Bikhchandani. scores of international firms such as Citigroup Inc. ³This is the single biggest factor that is going to hurt India. or $5. which corrects for differences in price levels between nations. Singh and others with the know-how employers require are rare.´ India¶s soaring growth puts an extra burden on the workforce. Mr .´ says Mr Pai.

The boys wear khaki pants and light-blue shirts. municipalities and village committees control and fund 90 per cent of schools for grades one to five. The village got its first high school last year. a day. says.´ Mr Singh said in his speech.the parents get some knowledge. Christ Church College in Kanpur. has five rooms and a sloping tile roof. Without a college degree. there¶s no electricity from 6 am to 6 pm while children are present. she says. the 235 graduates of Indian Institute of Management Ahmedabad received 493 offers from 91 firms. The government supplies textbooks. 120 were from overseas. . 434 kilometers southeast of New Delhi. Barefoot children On a August afternoon. computer.500 graduates a year.´ says Kalyani Gandhi. The country¶s six Indian Institutes of Management turn out a total of about 1.´ Mr Kumar. and they are eager to send their children to school. says Krishna Kumar. In August. the primary school is one of the better ones. or $2. During summer. opened in 1866. who teaches English and history at Ganangur. ³The classrooms haven¶t changed in two decades. The classrooms each have rows of benches and attached desks. Chairman of the Nadathur S. students who wanted to continue on to grades eight to 10 after primary school had to travel 10 kilometers each day to attend another village's high school. one of the country¶s premier management schools. ³Almost two-thirds of our universities and 90 percent of our colleges are rated below average on quality. the red-brick buildings have no electricity. the children stare excitedly at visitors. ³We are not getting faculty. Paint peels from the walls of the theatrestyle lecture rooms. when the outside temperature reaches 35 degrees centigrade (95 degrees Fahrenheit). up from 86 in 2006. according to its Web site. a village of about 1. Of the offers. an employee at a call centre can make Rs 30. In 2007. built in 1950. The Bangalore college has positions for 110 teachers. Below average ³Because of mass media ² television. newspaper -. and the girls wear dresses. Raghavan Centre for Entrepreneurial Learning at the Indian Institute of Management Bangalore. India¶s federal and state governments. which have six rows of wood-and-iron benches for about 90 students. says. The single-story building. Head of the Economics Department. There haven¶t been more than 80 for the past few years. In Ganangur. and most girls will drop out and get married by the time they¶re 15.Gulabchand. Before. a blackboard and a cupboard. even though they themselves are illiterate. 72 per cent for grades six to eight and 41 per cent for high schools.500 people 30 kilometers (19 miles) Northeast of Mysore. an arm of the government. Most people in Ganangur are either farmers or labourers who earn about 100 rupees. Most boys at the high school will attend nearby colleges. Salaries set by the University Grants Commission.´ says Ramit Mitra.000 a month after a few years ² twice as much as a university lecturer.50. making the students with their master¶s-level degrees prized hires. Some of the students are barefoot. Most universities are government controlled ² and in poor shape. discourage teaching as a profession. a midday meal and uniforms.

´ he says.000 proposed new workers ² if he can find them. who heads the Mumbai-based company's operations in Latin America. and then backed out because their current employers agreed to pay more. a weekly magazine of the Communist Party of India (Marxist). $17 billion market Permitting foreign universities to operate in India would improve quality and enable more students to attend. he knows he¶ll have to train most of his 26. ³This is a country of a billion people. employees have been hard to land.´ says Dinesh Mirchandani. the company boosted salaries 52 per cent across the organisation. . Indian companies are courting workers from other countries. A recent issue of People¶s Democracy. or teachers don¶t show up. ³Usually. Gulabchand says. there are no classes. the most in a decade. Regional Managing Director for Asia-Pacific in the Mumbai office of Boyden Global Executive Search. I did not want to waste three years of my life.Students accepted 64 of the foreign offers at salaries as high as $300. A civil engineer with 10 years of experience gets about Rs 1 million a year.´ says Nobrega.000 workers in Mexico because people aren¶t available in India. Some Indian companies are luring employees with the promise that they can gain work experience while they earn a college degree. making training part of the onthe. Tata raised salaries by 12-15 per cent to stem defections. ³There was a time when engineers used to come very cheap. and there are people going to bed hungry at night. based in Hawthorne. it put overseas expansion on hold for three years because that would have stretched it too thin. says foreign institutions would lead to commercialisation and deterioration of quality.´ Tata Consultancy Services Ltd plans to add 5. says Gabriel Rozman. Hindustan Construction is bringing in civil engineers from the Philippines. ³There is an absolute war for talent. Singh¶s government deferred introducing a law to allow international universities to open campuses after its communist allies opposed the idea. Conrad Group¶s Nobrega says. which pays about Rs 15 million a year. Spain and Portugal. ³The government is going to have to quickly embrace public-private partnership in education to bring in the best minds and bring in the capital.job experience and trying to hold onto the people they have.´ Instead. In April. Even so. Hindustan Construction has endured three instances in the past year and a half in which candidates accepted a vice president job. she takes classes while working for Genpact.000.´ Strapped for employees and with the government at a standstill on foreign universities. New York. Last year. who works as a recruitment executive. who estimates that a $17 billion-a-year market for higher education awaits foreigners. µWar for talent¶ ³People are behaving in unethical ways. The company spent $145 million on training. In 2006. As Mr Pai carries out Infosys¶ hiring plans. College a waste? ³What¶s the point in attending college?´ says Bhatnagar.

Mr Pai says the training centre is essential to give Infosys¶s recruits the finishing touches ² how to dress. in the year that ended on March 31. there¶s a four-screen movie theatre. which looks like a hacienda. serves Indian and international dishes such as Indonesian nasi goreng. ³The last 5 per cent is not something you read in textbooks.7 per cent of its annual revenue. Next door.´ says Singh. who shares an apartment with a friend.´ Mahindra & Mahindra Ltd. snooker tables.com. Key to India¶s economic future and its attraction to investors is providing the training and education that will produce millions more skilled workers like him. It has a gym. with more money. and we will take away more of them. bean and artichoke stew. they have their resumes posted on job search Web site naukri. The Floating Restaurant. As they debate yet another job switch.´ he says. One afternoon students mill around in jeans and t-shirts. It¶s what you get after getting gray hair. ³I get a call from a consultant who offers me the same role.. They say they¶re getting lots of interest from headhunters. may be one victim of Pai¶s talent stealing. Infosys has hired geologists and turned them into software developers. referring to the troubleshooting stage. a supermarket and an open-air pool complete with deck chairs and umbrellas. 150 kilometers southwest of Bangalore. ³I¶m in a dilemma: Should I take it. India¶s biggest maker of tractors and sport utility vehicles. says report .´ Agashe and Singh are prime examples of the churn. before someone gets gray hair. surrounded by a fishpond. Singh¶s dilemma ³Our biggest problem is we do not have enough experienced manpower to design the last 5 per cent. Finishing touches A short walk past landscaped lawns leads to the recreation centre. badminton and tennis courts. ³We have taken away all the civil engineers everywhere. he moves on because of the way the whole job market is churning in India today. the company phoned to invite him back to a better job at a higher salary. and we are going to take away more of them. a bowling alley. use the correct cutlery during official dinners and master phone and email etiquette to communicate with global clients such as Airbus SAS and Sears Holdings Corp. Singh says.or 4. Shortfall in skilled labor in India could divert outsourcing projects. Infosys puts fresh graduate recruits through a 14-16 week boot camp at a 110-hectare (270 acre) campus on the outskirts of Mysore. speak. Thai vegetables and lamb. A year after quitting Oracle. Because it can¶t find enough engineers. or should I honour my commitment to my present employer?´ Singh¶s dilemma is one symptom of his country¶s talent shortage. Unfortunately. ³We have taken away all the accountants everywhere.´ he says.

00. wealth managers ± 80% and economic and planning analysts ± 80%. refrigeration mechanics. which is based on reaction from 20 industrial spheres. Many of the 3.com reports: The problem with the skilled worker shortage in the second-most populous nation in the world is not quantity but quality. but young aspiring Indians do not qualify because of their poor English. The shortfall.´ The chamber has recommended both the administration and industrial sector to take prompt corrective action and concentrate on constructing efficient resources to tackle the issue. intense shortage of doctors is likely more than the next few years.6 million graduates churned out every year by Indian universities are considered mediocre. The survey depicts that in 2006 companies faced an acute shortage in various specialized categories in the banking and finance segment. The study also foregrounded an obvious workforce crunch in the health division and according to FICCI. There is a phenomenal growth in the number of call centers and outsourcing firms. IT experts ± 65%. advanced cardiac life support and advanced trauma life support including shortage of trained nurses. in the biotechnology segment alone the shortage of doctorate and post doctorate researchers is a huge 80 percent. Large gaps would come into view by the next few years in segments like basic cardiac life support. radiologists. will be to the tune of 5. This shortfall might force outsourcing jobs to be diverted to other destinations such as China and the Philippines. ³Skill shortages exist across many segments of the industry and economy of the country. FICCI stated.000 workers in the next few years. We have in fact moved from a position where not only the technically qualified professionals in various streams are in short supply but there also exists an acute shortage of shop floor workers. credit operations experts ± 75%. the report said. gynaecologists and surgeons. treasury managers ± 50%.India. the report said. a prime destination for the booming outsourcing industry. Monsters and Critics. . is facing a shortfall of skilled workforce. financial analysts ± 80%. The segment faces a 90% lack of risk managers. together with scarcity of certificate holders and people skilled in short-run courses. while the country¶s Sensex ambits the mystic 15. according to a report by ABC. Likewise. According to a survey report.000 levels with the economic system progressing speedily in the direction of a double-digit growth. agricultural researchers. According to the examination done by the Federation of Indian Chambers of Commerce and Industry (FICCI). Indian industry continues to roll under intense shortage of competent manpower. the food processing business faces massive shortage of electricians. particularly anaesthetists.

Solutions Sensing the threat. . The question here is how to retain the manpower to deliver quality and value. Companies are working with academic institutions so that graduating students will have skills tailored to the job market. Nasscom has begun a skill assessment and certification program for entry-level employees in back-office work. Outsourcing companies are taking matters into their own hands to meet mid-level skills shortages by setting up vast. a 100 miles south of its headquarters in Bangalore. Infosys Technologies. has a training campus in Mysore. government and industry are scrambling. the group has plans to create such program for software services. The government has introduced computer classes in schools." Key discussion topics include: y y y y y y y y How do companies experience the skills squeeze? Is there already a war for talent. dedicated training centers. We require a holistic approach to expand the pool and train people. Conclusion "The challenge is also how to retain the pool. is it only just starting or is the situation better than often described? How can India's knowledge-based and service-driven economy sustain growth? Is there enough talent to maintain the economic expansion in India? How will India perform in comparison to China? Is there an advantage for one of the fierce competitors? Which sectors are most affected by the labor shortage? What can companies do to address the skills squeeze? This webcast examines these issues with a focus on India's growth prospects over the next years. has a large training center in Trivandrum in southern India. It's a collective challenge. the country s largest software services company. Tata Consultancy Services. while its nearest rival.