July - 2006 issue > Guru Speak
Skill Shortage: The Looming Challenge for India
Kiran Karnik
Saturday, July 1, 2006
The NASSCOM-McKinsey Report 2005 suggests that the total addressable market for global offshoring is approximately $300 billion, of which $110 billion will be offshored by 2010. India has the potential to capture more than 50 percent of this opportunity and generate export revenues of approximately $60 billion by growing at 25 percent year-on-year till 2010. The prospects for growth are highlighted by the report’s estimates that the addressable market for global off shoring is almost ten times the present size. Keeping this in mind and looking at other aspects of demand and supply, the report concludes that the Indian IT and BPO industry can generate export revenues of $60 billion in 2010.

Inherent advantages like abundant talent supply, strong cost-and-leadership oriented companies, regulatory support, scaleable high-quality infrastructure, and a growing domestic market, have been instrumental in driving the growth of this sector. By 2010, it could contribute 1 percent per year to GDP growth, directly employ approximately 2.3 million people, provide indirect employment to another 6.5 million workers and pay for a massive infrastructure build-out. This industry alone would account for over 44 percent of export growth over the next five years.

Industry leaders have debated and deliberated about possible stumbling blocks in this growth path, and the factors that dominate are ‘skills’ and ‘quality’ of the workforce, which needs to be improved significantly. As of today, only 25 percent of technical graduates and 10-15 percent of general college graduates are suitable for immediate employment in the offshore IT and BPO industries respectively, as per industry estimates. The skill-sets required by industry are just not there in a majority of the young graduates. This is causing serious concerns of a skills shortage of paucity amidst abundance.
While on one side, India has the world’s largest stock of scientists, engineers and technicians; we have been unable to derive full economic benefit from this talent base because of the mismatch between industry needs and university output. So where and what is it that we need to do to correct the situation? One thing that does seem necessary is a radical change in the policies and mindset with regard to education.

The main problems facing the higher education system today are quite well known. One key issue, especially in technical education is the curriculum, which is often obsolete. To rectify this, the IT industry has been working with universities and institutions in an attempt to upgrade and update the curriculum.

Over-centralization, and the resultant lack of autonomy and accountability is another key concern. Resource constraints and wastage; heavy subsidies; lack of resource sharing among institutions; high drop out rates; poor quality and relevance of content leading to skills shortage for the industry; difficulties in attracting and retaining high quality faculty; low technology and infrastructure support and limited access and regional disparity are some of the other key concern areas.
India had a head start in education and in terms of possessing the largest available talent pool, however the inadequate measures being taken to address the issues which will come up, exhibit a sense of complacency. In comparison, the large investments being made by nations like China, Singapore and Australia in education, and allowing freedom to their institutions, is a sign of the awareness these nations have of the looming challenge (and opportunity) that lies ahead. Starting with afar-smaller tertiary education system, today China is way ahead of India and will double and treble its output of professional graduates in a very short time.

What the industry needs is two things–one short term, for addressing the problem at hand; the other, long term solutions so that we create a self sustaining system.

In the long term, radical reforms are essential if we are to compete globally. Today only 10 percent of the graduates are employable in the IT industry. We need to reform the education system, and free it from the stifling control of governments and other regulating bodies, so that institutions have flexibility on fees, salaries and curriculum, among other things. They need to be detached from any political influences and control. It is necessary to make teaching an attractive career option. We need to experiment with adapting the Special Economic Zone concept (deregulation and removal of restrictions) for education, and create Special Education Zones. As an experimental measure, an institute could be permitted to run on a model where there is no ceiling on the fee charged, as long as free education and adequate support is offered to a fixed percentage of students who meet the entry requirements.

NASSCOM, with the support of the IT industry, has been working on an IT Workforce Development initiative, to engage academia on a sustained basis through faculty development programs, mentorship of colleges, curriculum updates and regular industry-academia interface. Faculty members are invited by companies to understand the industry’s outlook, needs and technologies so that they could, in turn, sensitize the students to these developments. Another important area that industry aims to address through such initiatives is the development of soft skills - especially in communication and presentation. NASSCOM has signed MoUs with UGC and AICTE to take forward these initiatives.

In the short term, we have to think of ways to groom the qualified students in an effort to make them ‘employable’ in the industry. NASSCOM has been exploring the possibility of 2-3 month courses in a “finishing school” for IT professionals. This will add 20-25 percent people to the ‘employable’ pool. Meanwhile, there is already BPO certification available for entry-level employees (NASSCOM Assessment of Competence). The objective of this is to test candidates on seven identified basic skills required of BPO employees. These include keyboard, communication, articulation and presentation, in addition to teamwork. The NAC pilot has been rolled out. The test will shorten the recruitment process. More importantly, it will provide feedback and thus enable candidates to improve in areas where their score indicates inadequacies. It will also enable aspirants from all over the country to appear for the test, thereby enlarging opportunities for individuals, and the recruitment-universe for companies.

Human resources, in terms of quality and quantity, are India’s biggest assets. A favorable demographic structure (with about 50 percent of the population below 25 years of age) adds to this advantage. However, to capitalize fully on this opportunity and not face the possibility of a skills-shortage, it is essential to gear up the education system through innovative initiatives.

* The author is President, NASSCOM. The views expressed here are personal.

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