India's education systems
The looming threat of a skills shortage in the key IT sector, and corporate plans to deal with it. India’s service sector growth is threatened by a shortage of highly-skilled labor, resulting from weaknesses in the education system. Increased investment in IT education by leading companies may only partially off set this threat.
ANALYSIS: All three of India’s leading software companies are developing educational institutions to increase the number of high-skilled workers:
- Tata Consultancy Services (TCS), the largest of the three, has already set up a training institute, which it is likely to expand;
- Infosys is planning to establish its own IT college in Bangalore; and
- Wipro is proposing to build an IT training college in southern India.
These investments will raise their recruiting costs. However, given the industry’s rapid expansion, IT education is a key priority as an emerging skills shortage may threaten future growth. Over the last decade, annual IT sector growth rates of 20-30% have depleted existing talent pools, producing high-skilled labor shortages and driving up salaries which, for Indian IT engineers, are thought to have quadrupled over the past five years.
Despite this trend, Indian wages remain extremely competitive as compared to the United States, with Indian IT sector workers earning an average of 18,000 dollars a year against 65,00 dollars for US employees. However, in more competitive countries like Singapore, average annual salaries are 32,000 dollars, and other cost factors — such as quality of infrastructure — are more favorable. Cost pressures and an emerging skills shortage, suggest that the Indian IT industry is at risk of losing its current competitive advantage.
Educational expansion. The move to develop private training institutes is a result of the Indian education system’s failure to produce high-skilled IT workers. This is despite the high number of college graduates. In the last fifteen years, the country has seen prodigious growth in tertiary-sector education, with the number of private and public colleges offering higher educational qualifications rising from 5,000 to 12,000. The number of engineering students has expanded at an annual rate of 20%, with India producing 520,000 engineering graduates each year — the second largest number in the world.
India has a small number of exclusive, centrally-regulated Institutes of Technology and Science, which are extremely competitive and where entry standards are closely monitored. However, beyond these there has been a sudden growth of new technology colleges — run either by state governments or by the private sector — where standards are less rigorous, and where the success of an application may depend on the family’s willingness to pay exorbitant admission fees, rather than the
student’s academic record.
Quality problems. Accordingly, the number of new graduates is not matched by improvements in quality. India’s software association, NASSCOM, recently commissioned a survey which found that:
- nearly 70% of engineering graduates from southern India — where most of the IT industry is based — do not even possess the skills required for traineeships in the IT industry;
- northern states fared slightly better, with only 60% of graduates deemed inadequate for jobs in the sector; and
- two out of every three engineering graduates would be unable to make a satisfactory contribution to the industry for lack of the requisite analytical or linguistic skills.
The nature of state school examinations also contributes to the problem of quality. Exams depend! heavily on rote learning and do little to promote independent analytical thinking. Moreover, public schools are subject to rules of positive discrimination, which require them to admit a certain proportion of students from the lower castes, at lower admissions standards. In certain southern Indian states, where 75% of college places are allocated on the basis of caste and community, such affirmative action severely affects educational standards and compromises the quality of graduates.
Thus far, these regulations have only applied to public-sector institutions, although the central Institutes of Technology and Science have claimed exemption to foster the highest talents regardless of a student’s caste or community background. However, the present Congress-led government is coming under increasing pressure — from mainly regional ‘populist’ parties — to extend positive discrimination measures into the central Institutes of Technology and Science and private sector education. If the government is unable to withstand these pressures, the result may be an increase in the number of graduates with skill-sets that do not reflect their formal
qualifications.
Foreign opportunities. An increasing number of children from India’s rapidly expanding middle class are looking abroad for an education because of the inadequacies of the domestic education system. Since 1999, the number of Indian students in colleges abroad has expanded rapidly:
- from 36,000 to 79,000 in the United States;
- from 6,000 to 15,000 in the United Kingdom; and
- from 8,000 to 20,000 inAustralia.
By 2025, half of all international students at universities around the world will be of Indian origin. Over a two-year period in the 1990′s, 65% of graduates from the Indian Institute of Technology in Chennai were estimated to have left the country. However, despite the apparent growth in the number of Indian students overseas, foreign universities remain prohibitively expensive for all but the upper echelons of the country’s middle class. A very small proportion of foreign-educated Indian students return to the country after completing their studies abroad, further compounding the skills shortage. While recent improvements in economic opportunities in India have seen a steady stream of non-resident Indians returning home, the great majority continue to spend their working lives abroad.
Educational investment. The central government is unable to devote additional resources to tertiary institutes of learning due to the need to increase expenditure in primary education. While improving literacy rates have given India hope of developing a ‘semi-skilled’ manufacturing-sector workforce, the expansion of high quality tertiary institutions has suffered as a result. Companies such as Infosys ,Wipro and TCS are facing up to the skills challenge and, in the immediate future, their own educational initiatives may satisfy their own labor needs. However, the great majority of Indian IT companies are much smaller and thus unable to make similar investments in skills development.
CONCLUSION: The onus of educating the next generation of IT engineers is likely to fall increasingly on the technology industry itself. Moreover, in view of the persistent deficiencies in the national education system, India’s present advantages in IT services — including business and knowledge-process outsourcing — could prove increasingly difficult to sustain.
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
