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).

If learning does not happen in universities, then where does it happen? What appears to dominate is "learning by doing", the learning that is acquired at the workplace. People learn inside firms, and their learning is best when the firm is in a brutally competitive and globalised market. In this respect, there is something of great importance which has been going on in India from 1991 onwards. For 16 years now, we have been building a new cadre of individuals who have learned inside competitive firms with an increasing degree of globalisation. Trade barriers have come down, capital controls have eased, and a middle manager in Tata Steel [Get Quote] today is competing in the world market for steel. 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. India fares well by world standards in producing a large number of good-quality students at the 12th standard. The quality of English, mathematics and physics at the Indian 12th standard, particularly with the CBSE, ICSE and those taking the IIT entrance exam, is very good by world standards. In urban areas, more than half the enrolment is in private schools; and in rural areas also, enrolment in private schools is roughly a quarter. Hence, the supply of good 12th standard students is very large and growing rapidly. If the gentle reader is sceptical about the potential for 12th standard students to grow into complex knowledge workers, I only have to point to the example of India's IT industry. In the early 1990s, if someone had talked about a million people being employed in the IT sector, this would have seemed impossible. Universities giving out degrees in IT on this scale just did not exist--and still do not. 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. The experience that has been picked up in export-oriented firms has been a marvellous teacher for this million-strong workforce. 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. A fairly small sprinkling of such people can be very useful in diffusing knowledge in their surroundings, and thus assisting the process of learning on the job. Only 10 per cent of Indians from 18 to 24 are enrolled in higher education compared with 45 per cent in developed countries, Prime Minister Manmohan Singh said recently at an inauguration speech marking the 150th anniversary of the University of Mumbai Karthik Agashe, a 27-year-old software salesman, has changed jobs four times in his 4 1/2year career. Manjit Singh, 29, who met Agashe in 2005 when they worked for the US software maker Oracle Corp. in Bangalore, has had three jobs in 3 1/2 years. Each switch boosted the mens salaries by an average of 40 per cent, to about $20,000 apiece. Both are ready to jump ship again if their current employer, whom they decline to name, doesnt transfer them to the US so they can get more sales experience and another raise. Is their job-hopping mercenary? Absolutely, says Agashe, seated in the coffee shop of the Taj Residency hotel in Bangalore. I get into a job, I expect certain things, he says.

If it doesn't happen over a period of time, this is not the place for me to work. I'll search for a better company. Agashe and Singh -- young, educated and mobile are the faces of Indias boom. Theyve helped spur the fastest growth in more than five decades an average of 8.6 per cent a year during the past three years. They invest in stocks, hang out at Western- style malls and catch such movies as Live Free or Die Hard, fostering an image of India as a rising economic power.

Bogus theory With 54 per cent of Indias population of 1.1 billion made up of people age 24 or younger, outsiders view the country as flush with English-speaking workers who can fill advanced jobs in technology, medicine and finance and attract foreign investment, says T V Mohandas Pai, Director of Human Resources at Bangalore- based Infosys Technologies Ltd, Indias second-largest software services company. That perception is wrong, he says. The demographic dividend theory in India is bogus, Pai says. They are not trained people. Agashe, Singh and others with the know-how employers require are rare. And their successes are masking a potentially crippling shortage of skilled employees that threatens Indias economic growth, Mr Pai says. This is the single biggest factor that is going to hurt India, says Mr Pai, who wants to hire 26,000 people during the year that ends on March 31, 2008, to add to Infosyss 76,000 employees. It is not the lack of power, nor lack of roads, but it is lack of qualified people. Precious people Along with Infosys and other Indian companies, scores of international firms such as Citigroup Inc, General Electric Co. and Google Inc. are looking to India for engineers, accountants and programmers and coveting people like Agashe and Singh. Only 10 per cent of Indians ages 18 to 24 are enrolled in higher education compared with 45 per cent in developed countries, Prime Minister Manmohan Singh said recently at an inauguration speech marking the 150th anniversary of the University of Mumbai. Those who do graduate from college arent good enough for most jobs, says Sanjeev Bikhchandani, Chief Executive Officer of Info Edge (India) Ltd, which runs naukri.com, the country's biggest employment Web site. Naukri means job in Hindi. Rising salaries Indias middle class, which New York-based consulting firm McKinsey & Co. defines as people with annual disposable income of $4,380$21,890, has more than doubled to 50 million in the past decade. At the same time, 54 per cent of the population earns an annual household income of less than $1,970 a year, or $5.40 a day putting Agashe and Singh and their $20,000 salaries ahead of most. According to McKinsey, $21,890 in India equals $117,650 in purchasing power parity, which corrects for differences in price levels between nations. Government control Mr Pai says Indias greatest calamity is the government's failure to improve education. India, which gained independence from British rule in 1947, still hasnt succeeded in providing universal elementary education. The percentage of first graders who continue to the fifth grade was 78.5 per cent in 2003, according to the South Asia Economic Report by the Asian Development Bank. The global average is 86 per cent. Excessive control on education by government has been one of the biggest flaws, says Ajit Gulabchand, Managing Director at Hindustan Construction Co, a Mumbai-based engineering and construction firm. The numbers being educated are far too low compared to what India would normally require. Indias soaring growth puts an extra burden on the workforce, Mr

Gulabchand, says. In Ganangur, a village of about 1,500 people 30 kilometers (19 miles) Northeast of Mysore, the primary school is one of the better ones. The single-story building, built in 1950, has five rooms and a sloping tile roof. The classrooms each have rows of benches and attached desks, a blackboard and a cupboard. The government supplies textbooks, a midday meal and uniforms. Barefoot children On a August afternoon, the children stare excitedly at visitors. The boys wear khaki pants and light-blue shirts, and the girls wear dresses. Some of the students are barefoot. During summer, when the outside temperature reaches 35 degrees centigrade (95 degrees Fahrenheit), theres no electricity from 6 am to 6 pm while children are present. Most people in Ganangur are either farmers or labourers who earn about 100 rupees, or $2.50, a day. The village got its first high school last year. Before, 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. Most boys at the high school will attend nearby colleges, and most girls will drop out and get married by the time theyre 15, says Krishna Kumar, who teaches English and history at Ganangur. Below average Because of mass media television, computer, newspaper -- the parents get some knowledge, and they are eager to send their children to school, even though they themselves are illiterate, Mr Kumar, says. Indias federal and state governments, municipalities and village committees control and fund 90 per cent of schools for grades one to five, 72 per cent for grades six to eight and 41 per cent for high schools. Most universities are government controlled and in poor shape. Almost two-thirds of our universities and 90 percent of our colleges are rated below average on quality, Mr Singh said in his speech. Christ Church College in Kanpur, 434 kilometers southeast of New Delhi, opened in 1866. In August, the red-brick buildings have no electricity. Paint peels from the walls of the theatrestyle lecture rooms, which have six rows of wood-and-iron benches for about 90 students. The classrooms havent changed in two decades, says Ramit Mitra, Head of the Economics Department. Salaries set by the University Grants Commission, an arm of the government, discourage teaching as a profession. Without a college degree, an employee at a call centre can make Rs 30,000 a month after a few years twice as much as a university lecturer. We are not getting faculty, says Kalyani Gandhi, Chairman of the Nadathur S. Raghavan Centre for Entrepreneurial Learning at the Indian Institute of Management Bangalore, one of the countrys premier management schools. The Bangalore college has positions for 110 teachers. There havent been more than 80 for the past few years, she says. The countrys six Indian Institutes of Management turn out a total of about 1,500 graduates a year, making the students with their masters-level degrees prized hires. In 2007, the 235 graduates of Indian Institute of Management Ahmedabad received 493 offers from 91 firms, according to its Web site. Of the offers, 120 were from overseas, up from 86 in 2006.

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

or 4.7 per cent of its annual revenue, in the year that ended on March 31. Infosys puts fresh graduate recruits through a 14-16 week boot camp at a 110-hectare (270 acre) campus on the outskirts of Mysore, 150 kilometers southwest of Bangalore. Finishing touches A short walk past landscaped lawns leads to the recreation centre, which looks like a hacienda. It has a gym, a bowling alley, badminton and tennis courts, snooker tables, a supermarket and an open-air pool complete with deck chairs and umbrellas. One afternoon students mill around in jeans and t-shirts. Next door, theres a four-screen movie theatre. The Floating Restaurant, surrounded by a fishpond, serves Indian and international dishes such as Indonesian nasi goreng, Thai vegetables and lamb, bean and artichoke stew. Mr Pai says the training centre is essential to give Infosyss recruits the finishing touches how to dress, speak, 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. Because it cant find enough engineers, Infosys has hired geologists and turned them into software developers. We have taken away all the civil engineers everywhere, and we are going to take away more of them, he says. We have taken away all the accountants everywhere, and we will take away more of them. Mahindra & Mahindra Ltd, Indias biggest maker of tractors and sport utility vehicles, may be one victim of Pais talent stealing.. Singhs dilemma Our biggest problem is we do not have enough experienced manpower to design the last 5 per cent, he says, referring to the troubleshooting stage. The last 5 per cent is not something you read in textbooks. Its what you get after getting gray hair. Unfortunately, before someone gets gray hair, he moves on because of the way the whole job market is churning in India today. Agashe and Singh are prime examples of the churn. As they debate yet another job switch, they have their resumes posted on job search Web site naukri.com. They say theyre getting lots of interest from headhunters. A year after quitting Oracle, Singh says, the company phoned to invite him back to a better job at a higher salary. I get a call from a consultant who offers me the same role, with more money, says Singh, who shares an apartment with a friend. Im in a dilemma: Should I take it, or should I honour my commitment to my present employer? Singhs dilemma is one symptom of his countrys talent shortage. Key to Indias economic future and its attraction to investors is providing the training and education that will produce millions more skilled workers like him.

Shortfall in skilled labor in India could divert outsourcing projects, says report

India, a prime destination for the booming outsourcing industry, is facing a shortfall of skilled workforce. This shortfall might force outsourcing jobs to be diverted to other destinations such as China and the Philippines. There is a phenomenal growth in the number of call centers and outsourcing firms, but young aspiring Indians do not qualify because of their poor English. The shortfall, according to a report by ABC, will be to the tune of 5,00,000 workers in the next few years. Monsters and Critics.com reports: The problem with the skilled worker shortage in the second-most populous nation in the world is not quantity but quality, the report said. Many of the 3.6 million graduates churned out every year by Indian universities are considered mediocre, the report said. According to a survey report, while the countrys Sensex ambits the mystic 15,000 levels with the economic system progressing speedily in the direction of a double-digit growth, Indian industry continues to roll under intense shortage of competent manpower. According to the examination done by the Federation of Indian Chambers of Commerce and Industry (FICCI), which is based on reaction from 20 industrial spheres, in the biotechnology segment alone the shortage of doctorate and post doctorate researchers is a huge 80 percent. Likewise, the food processing business faces massive shortage of electricians, agricultural researchers, refrigeration mechanics, together with scarcity of certificate holders and people skilled in short-run courses. The study also foregrounded an obvious workforce crunch in the health division and according to FICCI, intense shortage of doctors is likely more than the next few years, particularly anaesthetists, radiologists, gynaecologists and surgeons. Large gaps would come into view by the next few years in segments like basic cardiac life support, advanced cardiac life support and advanced trauma life support including shortage of trained nurses. The survey depicts that in 2006 companies faced an acute shortage in various specialized categories in the banking and finance segment. The segment faces a 90% lack of risk managers, IT experts 65%, treasury managers 50%, credit operations experts 75%, financial analysts 80%, wealth managers 80% and economic and planning analysts 80%. FICCI stated, Skill shortages exist across many segments of the industry and economy of the country. 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. 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.

Solutions
Sensing the threat, government and industry are scrambling. Nasscom has begun a skill assessment and certification program for entry-level employees in back-office work; the group has plans to create such program for software services. The government has introduced computer classes in schools. Companies are working with academic institutions so that graduating students will have skills tailored to the job market. Outsourcing companies are taking matters into their own hands to meet mid-level skills shortages by setting up vast, dedicated training centers. Tata Consultancy Services, the country s largest software services company, has a large training center in Trivandrum in southern India, while its nearest rival, Infosys Technologies, has a training campus in Mysore, a 100 miles south of its headquarters in Bangalore. Conclusion "The challenge is also how to retain the pool. It's a collective challenge. We require a holistic approach to expand the pool and train people. The question here is how to retain the manpower to deliver quality and value."

Key discussion topics include:

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How do companies experience the skills squeeze? Is there already a war for talent, 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.