The Indian Economy Blog

December 27, 2005

One Billion+ People…Then Why The Shortage Of Labor?

The answer: an inadequate and outdated educational system.

Ajay Shah writes

One of the key reasons why India is doing well today is the revolution in services exports, where white collar staff in India are plugged into globalisation, thanks to improvements in telecom. Today, there are probably a million people working in export-oriented IT and IT-enabled services, giving exports of roughly $15 billion, for an average rate of roughly $15,000 per manyear.

But this sector is experiencing acute problems with recruitment. Employers find that an Indian college education generally induces unacceptable skills, so there is a large mass of unemployable jobseekers, coupled with a shortage of skilled people. Will high growth rates continue to come about, or will India’s growth in this area get choked owing to the tiny output of a few good universities?


  1. Of course, the answer is the rigid college system. There is little change from year-to-year and sadly, no input from industry (except for certain elite insitutions). What is needed is a gradual move over from being a fixed-curriculum bachelor’s degree program to a program which allows the motivated students to take up more of the current-day educational topics like GAAP accouting, Sarbanes-Oxley and its impact, etc. I don’t expect everyone to be interested in such topics, but those who are motivated enough will take those topics and benefit from it.

    I remember at USC, 10 years back, they opened a new class called ‘ERP’. At the time it seemed nonsense, and very loosely defined. But one half of the class dealt with the business process that needs to be looked at for deploying an ERP solution and more importantly, the second half of the class dealt with SAP as an ERP system. Just the fact that we had ‘worked’ with SAP made our MBA resumes heavier. Looking back, I think it was a very important class that was introduced in my first year there, and am glad I took it.

    Similarly, colleges in India could start, with of course a lot of help from the industry, topical subjects to enable graduating students to make an impact right out of school.

    Comment by USC Trojan — December 27, 2005 @ 8:00 pm

  2. i’m doubtful about this lack of skilled labour,especially with engineers being churned out by the thousands.Since software firms are unlikely to have any other alternative source of cheap labour( can’t hire from outside), the comapnies will find a way out. providing specific courses themselves or something like that. don’t see any choking happening in the future.

    Comment by anusha — December 27, 2005 @ 8:01 pm

  3. i agree with the educational reform bit, but under such rigid institutional stuctures, that’ll take some time.

    Comment by anusha — December 27, 2005 @ 8:04 pm

  4. Well i think Indians are finaly learning an important lesson.
    Education does not stop or begin any where rather its an ongoing process.
    I mean here in US you have dropouts creating awesome products and becoming wealthier also.
    (BTW there is a dude by the name of Harvey slocum an american ‘non degreed’ engineer who was the head honcho incharge of the bhakra-nangal dam project.)
    College education everywhere provides a base upon which you can build and learn more.
    Its incorrect to assume that college education gives you the skills to perform your job.
    No course has ever done that.

    Comment by Guru Gulab Khatri — December 27, 2005 @ 11:48 pm

  5. As per Guru “College education everywhere provides a base upon which you can build and learn more.
    Its incorrect to assume that college education gives you the skills to perform your job.
    No course has ever done that.”

    Alas, the base that college education provides in India is very often flimsy or non-existent… My day job has given me enough data points re this…

    The success of college drop-outs like Gates or Jobs doesn’t necessarily indicate that college education in the US is worthless… it’s like saying that coaching is worthless because Bradman didn’t have coaching… these worthies are one-of-a-kind, or as they say in Latin, sui generis..

    Comment by Prashant Kothari — December 28, 2005 @ 2:01 pm

  6. The success of college drop-outs like Gates or Jobs doesn’t necessarily indicate that college education in the US is worthless

    My point was not to say that college education is worthless. It was to say that education is an ongoing process. Its silly to argue that Jobs,Gates are uneducated, Or thomas edison was uneducated. These folks are highly educated. Their aggregate knowledge will be greater than a proffessor.
    The point is a once you as an individual has realized that there is something you ougthto to learn, then plug those holes in your knowledge…Dont blame college educational system or something else for that.
    The second point was for society not to buy too much into degreed vs non degreed folks.
    knowledge is knowledge regardless of how its earned.
    Granted certain skills are easier learned in a college. Topology being an example.
    But a dedicated person can find courses(i sat through a college course without registering and the teacher did not care) or learn it on his own.
    On the other hand take the new language C#, It doesnt require college. Microsoft and oreillys web site are good enough.
    I did not like GuruCharan Das’s India Unbound(sorry a lot of you guys are fans) But i will use his example. I like his articles though, He wrote on his website that he went for a classics and philosophical education rather than business, and yet he was able to use it to his advantage.
    My observation in dealing with Indians is that its not the formal educational system rather the informal educational system(ie society) that creates problems in how people use their education…..

    Comment by Guru Gulab Khatri — December 29, 2005 @ 12:38 am

  7. I agree with Guru’s comments. Indian society and business leaders do differentiate between “degreed” and “non-degreed”. But in their defense, “degree/grades/college” is a way of filtering candidates and reducing their risks in recruiting. I have seen some duds from IITs also, but usually it is considered pretty safe to pick candidates from II*. I think education provides a very good exposure (and contacts) to pursue individual interests. But, unfortunately Indian system relies too much on “degree” because it is easier to evaulate individual candidate, more than anything else.

    Comment by Sanjath — January 6, 2006 @ 1:02 am

  8. India actually is very big in IT training sector, and is expanding into China to provide programmer courses. I think the IT industry will certainly do somethign to sort things out if the skill mismatch problem in the labor market become too costly.

    Comment by R-Squared — January 28, 2006 @ 12:10 pm

  9. The labor supply is largely proportional to the number of English speaking graduates in the country. While we are a billion plus people, how many of them are getting an education in English medium schools? The most likely answer is that this happens largely in urban areas in tier I, II and III cities.

    I think accusing our schools of being inadequate and outdated may be a bit harsh. Our school systems were built to educate our children with relatively limited resources and this is true even now. To expect the system to ramp up all of a sudden is a big ask.

    An invisible problem that has occurred has been the mediocrity creeping into the teaching talent in our schools. With the boom in IT many of the best minds are now in professional jobs instead of traditional teaching jobs and this is specially true for women. Lets face it our kids are being taught by teachers far less motivated than those who taught us.

    Industry needs to stop pointing fingers and instead start thinking of what can be done to sort this out. Among other things, we have to start by paying more for our kids’ tuition.

    Comment by Nikhil Nayak — November 3, 2007 @ 1:32 pm

  10. I think the larger point of the education system argument is how it sets the product(graduate) up for facing the challenges that a professional career demands, rather than what specifically they teach or not.

    Think of it in terms of teaching the same curriculum but drive the students to explore beyond the fixed curriculum itself. As I went through undergrad, I had the same syllabus as someone who had graduated 10 years prior and the emphasis continued to be on graduating rather than learning.

    I along with 240 of my classmates in different trades went from subject to subject and class to class without a coherent understanding of what we wanted to do with what we learned. Lack of continuity and support for expanding upon things learned were major hurdles as none of the professors were willing to discuss expansionary ideas (they could have been dumb, i admit) but nonetheless, they were more concerned about whether I had turned in the last paper on time and marking them.

    Most of my peers suddenly became experts and visionaries once they arrived in the US or UK!! – How was this possible? The simple reason is that they are challenged to come up with ideas that are based on what they had learned in the classroom setting, something we ignore in most undergraduate/graduate learning programs in India. Teaching someone a class with an eye on helping the student explore the subject or taking an exam are two different skills, the latter being the easiest.

    The point is underscored nicely here – A friend of mine who recently successfully completed a CFA program with absolutely no background in accounting & finance when asked how he did it answered – Indians are very adept at taking exams and this was just another EXAM! He admits that he did not understand the theory of most of what he studied – he could mechanically solve most of the problems but that was it. Disclaimer: He continues to strive to learn the theory and thought behind the subjects and his effort is laudable – something the indian education system needs to inculcate.

    Comment by Piyush — November 6, 2007 @ 10:33 pm

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