India braces for skills
shortage By Siddharth
Srivastava
NEW
DELHI - India Inc should brace up for
a shortage of 5 million to 6 million skilled
professionals in the next five years, as the
country's educational system is not geared to meet
the demand, industry body PHD Chamber of Commerce
and Industry (PHDCCI) said. The services and
manufacturing sectors will be the hardest hit.
According to the PHDCCI, educational
institutions in the private and public spheres are
not making systematic efforts to create and
upgrade skill sets of professionals to meet
requirements.
In India, higher education
continues to be steeped in bureaucratic
controls. Because of pockets of
political resistance, the sector has not been
successful in inviting much-needed foreign
investment and top institutes from abroad.
Hundreds of thousands of students apply for a
handful of quality openings, while many head
abroad.
"There are signals of manpower
shortages already on the horizon with the growth
rate picking up in recent years and wage rates
getting overheated. Our estimates show that the
manufacturing sector will be hard hit," PHDCCI
president Sanjay Bhatia said.
Manufacturing in India is turning highly
digital and requires skilled professionals, the
chamber said, adding that the
government-subsidized industrial training
institutes are still churning out manpower with
redundant skill sets, thus making it difficult for
the industry to hire them.
The service sector, which is growing much
faster than agriculture, requires more than 3
million skilled professionals per annum, it said.
Demand in services will be fueled by
such sectors as information technology, IT-enabled services,
banking, hospitality, retail and insurance, among
others.
This is the fourth straight year
that salaries in India, led by the IT industry,
are projected to rise faster than any other major
Asian country.
The attrition rates in
software firms continue to be very high in the
face of hiring by multinational firms IBM, Oracle,
Accenture, Microsoft and SAP.
The top five
domestic software firms, TCS, Infosys, Wipro,
Satyam and HCL Technologies alone added over
23,000 employees to their payrolls in the last
quarter of 2006, while taking their total
headcount to near 300,000. This year, they are
expected to hire 100,000 more.
According
to global research and market intelligence firm
International Data Corporation, despite the
appreciating rupee, India's IT sector will cross
the US$100 billion mark in revenue within the next
four years, with a growth rate of 18%.
Recently, N R Narayana Murthy, chief
mentor of software giant Infosys, said that India
should quickly put in place a modern and
world-class human resources policy to avoid
serious problems in further growth. "There is a
serious manpower shortage," said Murthy.
Indian retail is coming of age and set to
generate $430 billion from the current $328
billion with the entry of big players. More than $30
billion of investment is likely to be made in the
next five to seven years. This exponential growth
is expected to generate 18 million jobs, thereby
becoming the second-largest employment-generating
sector after agriculture.
Reformed real
estate investment laws for non-resident Indians
and foreign investors have provided the fillip to
catapult the real-estate market towards the $50
billion mark by 2010. This has created a massive
demand for civil engineers and construction
workers.
Real estate behemoth
DLF recently received approval from the market
regulator for its initial public offering, through which
it is expected to raise more than Rs100 billion
($2.5 billion). It is estimated that more than $2 billion is
likely to be pumped into the hospitality sector
over the next three years.
Elaborate plans
are being put in place. Indian Hotels (Taj brand),
Leela Venture, EIH (Oberoi Group), Kamat Hotels,
Royal Orchid and other leading chains are likely
to roll out a room inventory of about 6,500.
Global hospitality majors such as
Intercontinental, Starwood, Hilton, Accor and
Carlson are all stepping up their offerings.
In banking and
finance, the Barclays-ABN-Amro merger is set to create
8,000-10,000 jobs in India. Foreign banks such as
Citigroup, HSBC and Standard Chartered are looking
to hire over 50,000 employees in India in the next
three years.
Citigroup,
which recently announced a massive cut of more than
17,000 jobs worldwide, is planning to hire 5,000-8,000
employees in India as a result of restructuring.
The US firm currently employs over 22,000 in the
country.
According to the annual study of
human resources by consulting firm Hewitt
Associates, India will continue to be the highest
salary growth region in the Asia-Pacific region
with an all-time high average pay hike of 14.5% in
2007 against 14.4% in 2006, 14.1% in 2005 and
13.7% in 2004. Middle managers and professional
and technical employees will get the biggest rises
at 15.1% and 15.8% respectively.
"The war
for talent is becoming increasingly fierce in
India," said Sharad Vishvanath, a Hewitt
executive. "As a result, compensation plays a
fundamental role in attracting talent and ongoing
employee engagement."
Entry-level
placements at prestigious management institutes
reflect the trend. This year, at the Indian
Institute of Management Ahmedabad, the average
entry-level domestic salary increased by about 40%
to over Rs1.35 million, while the international
average stands at $115,300, a rise of about 25%.
Management graduates with a few years of
work experience have been handed $250,000 (Rs10
million) domestic pay packages, which going by
purchasing power parity translates into a much
bigger sum.
The trend is replicated at the
highly rated Indian Institutes of Technology
(IIT), for long the vanguard of India's "brain
drain". A couple of decades back, over 80% of
IITians flew off to foreign shores, the number one
destination being the US, to land themselves the
coveted dollar jobs. This movement has reduced to
just a handful now.
PHDCCI has said if the
country fails to meet the increasing demand,
cross-company poaching will further skew wage
distortions in the job market. Upgrading IITs will
require greater investment and public-private
partnerships and the government should set up a
task force to realistically assess manpower
requirements, the chamber advised.
In a
piquant situation recently, a leading legal
outsourcing firm, Pangea3, recruited 30 graduates
from the current academic session at various IITs.
According to an estimate by TeamLease
Services, a leading headhunting firm, it is
imperative that employment elasticity in
manufacturing be increased so that the manpower
requirements in the sector of over 2.5 million per
year will be met.
Siddharth
Srivastava is a New Delhi-based
journalist.
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