India's Employability Gap and the IT industry

Last Saturday I was on a panel titled 'Plugging The Employability Gap', hosted by the two year startup NiceFit at the Centre for Organization Development. The topic is hot, with the economy grappling with shortage of skilled manpower as growth resumes. The focus was on the IT industry, as it is on of the largest sources of jobs in the organized sector. This industry has grown from $4b in 1998 (1% of GDP then) to 70b in 2010 (6% of GDP). It accounts for 16% of India's exports and exports 70% of its output. More than 2.3 million are directly employed (30% of them women) and another 9 million (4 x factor) are indirectly employed.

With growth kicking back in, the industry plans to hire 120,000 - 150,000 in the current fiscal year. If growth continues at the present rate of 20% per annum, the industry will employ a mind boggling 30 million by 2020! This year alone, AP's IT industry needs to hire 90,000 people to meet growth (20%) and attrition (10%). The obvious question is where will these future employees come from? India is witnessing a demographic dividend and will have several hundred million youth coming into the job market. But these statistics may not convey the true picture, as it is said that only 1 in 4 engineering graduates are actually employable today.

A closer look at the numbers in the Hyderabad region (AP state) show that there are 650 colleges graduating 250,000 engineers - 25% of India's output. AP also accounts for 30% of India's overall 3.5 million graduate output across streams. Of the engineering output, 25% get into campus jobs (yes, 1 in 4). Another 10-15% go for higher studies and 8 - 9% end up being self employed (some voluntarily, others due to lack of 'options'). That leaves a whopping more than 50% having nothing to do!

To sum, in the state of AP alone, there are 125,000 engineers (50% of the college output) without jobs while the local IT industry needs 90,000 people but can only hire 62,000 from colleges (25% of the output). This is a net shortfall of 30,000. If supply of talent cannot meet up with the demand, then the rosy growth story will not materialise.

The industry will be forced to ramp up in other geographies (China, Eastern Europe, Philippines etc). There will be more backward integration ie, industry will build its own education infrastructure. Infosys' Global Education Center is an example, 'graduating' 50000 people through its intense six month boot-camp over the last three years.

More in a subsequent post on what it takes to plug this 'Employability Gap'.