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India...s Technology Companies Facing a Shortage of Workers

By Somini Sengupta


As its technology companies soar to the outsourcing skies, India is bumping up against an improbable challenge. In a country once regarded as a bottomless well of low-cost, ready-to-work, English-speaking engineers, a shortage looms.

India still produces plenty of engineers, nearly 400,000 a year at last count. But their competence has become the issue.

A study commissioned by a trade group, the National Association of Software and Service Companies, or Nasscom, found only 1 in 4 engineering graduates to be employable. The rest are deficient in the required technical skills, fluency in English or ability to work in a team or deliver basic oral presentations.

The skills gap reflects the narrow availability of high-quality college education in India and the galloping pace of the country’s service-driven economy, which is growing faster than nearly all but China’s. Software exports alone expanded by 33 percent in the last year.

The university systems of few countries would be able to keep up with such demand, and India is certainly having trouble. The best and most selective universities generate too few graduates, and new private colleges are producing graduates of uneven quality.

Many fear that the labor pinch may signal bottlenecks in other parts of the economy. It is already being felt in the information technology sector.

With the number of technology jobs expected to nearly double to 1.7 million in the next four years, companies are scrambling to find fresh engineering talent and to upgrade the schools that produce it.

Some companies are training faculty members themselves, offering courses tailored to industry needs and improving college labs and libraries. They are rushing to get first choice of would-be engineers long before they have completed their course work. And they are fanning out to small, remote colleges that almost no one had heard of before.

The country’s most successful technology concerns can no longer afford to hire only from the most prestigious Indian universities. Nor can they expect recent graduates to be ready to hit the shop floor. Most companies require in-house training of anywhere from two to six months.

Demand is beginning to be felt on the bottom line. Entry-level salaries in the software industry have shot up by an average of 10 to 15 percent in recent years. And Nasscom forecasts a shortage of 500,000 professional workers in the technology sector by 2010.

No doubt, the labor crunch is a problem of plenty, and it is starting to pop up across the service economy. ICICI, the country’s largest financial services company, announced plans to hire up to 40,000 workers in the next three years.

The Retailers Association of India announced in July that its fast-expanding industry would need nearly 115,000 workers in the next six months. Reuters reported in October that Google was having trouble finding Indian workers proficient in the languages and design technologies used in the latest generation of Web sites.