Atanu Dey On India's Development

India’s Desperate Talent Search

Ramesh Menon’s article “India’s Talent Crunch” in DNA makes shocking reading but is news only if one has not been in touch with the reality of the desperate situation that employers face in India in their search for employable people.

Sam Pitroda, chairman of the National Knowledge Commission says that of the 90,000 MBAs that come out every year, only around 10,000 are worth employing. Kiran Karnik, former NASSCOM president, puts the blame at the door of India’s education system, saying that only 25 per cent of the country’s engineering graduates deserve jobs. No wonder companies today have to invest heavily in training fresh graduates, helping them to unlearn and pick up skills. As there are dramatic changes in politics and business as well as international scenarios, there is a need to keep updating the syllabus almost every year. Manohar Chellani, Secretary General, Education Promotion Society for India, New Delhi, points out that there is tremendous scope for improving the quality of education in India, and delay in doing it will cost us heavily.

The National Knowledge Commission has said that India will have to bring in education reforms if it has to emerge as the workforce of the world. India today needs at least 1,500 universities, but has only 370. There are more than 550 million young people in need of education but do not have educational institutes to go to. India also needs around 1,500 IITs, 1,500 management institutes, and 1,500 medical schools. A million good schools are also required. All that the present education minister, Arjun Singh, has done in his tenure is to fool around with reservations and suggest that Rahul Gandhi be made prime minister.

Though the IT industry needs 3.5 lakh engineers a year, only 1.5 lakh are available. This could lead to a shortage of over five lakh engineers in the next few years. A recent Nasscom-Crisil report says that the IT industry is expected to create about 11 million jobs by 2010. In another two years, the II sector would need half a million professionals. Presently, it employs over 350,000 but is short of around 90,000 workers. In another year, the shortfall is expected to cross 200,000. In 2007, the job market was vibrant. 2008 promises to be better as India goes on to vitalise its various sectors, which require over 1,000 CEOs across industries.

Read the whole article. Here’s the puzzle: Why is it that the writer, a documentary film maker, is alarmed by the situation that apparently the honorable education minister never seems to lose any sleep over? Actually, most dispassionate observers of the Indian economy invariably point to the disaster which is the Indian education system as the greatest obstacle to India’s development. What needs to be done to fix the education system is also fairly well-understood. The problem does not have the complexity of quantum mechanics or brain surgery. The solution to the problem is certainly as well-known as the problem itself. So what is it about the problem and its solution that evade the sainted policy makers of the Indian government? What is it that they don’t understand?

Upton Sinclair had noted that it is difficult to get a man to understand something when his job depends on not understanding it. That is a specific instance of the more general principle that economists consider to be a fundamental truth about human behavior: “Incentives matter.” The system does not provide the policy makers an incentive to improve the educational system. Conversely, they have an incentive to keep the system dysfunctional. Given the current structure of incentives, they would lose whatever advantage their gain from the existing system.

The demand for education is overwhelming and urgent. In any system in which demand outstrips supply massively, rationing of the limited supply is the only option. Those who control the rationing system gain tremendously. The Indian education system is a victim of vote bank politics. If the supply were to expand to meet the demand, those in charge of handing out quotas and reservations would suddenly find themselves without the levers that not only give them political leverage but also allow them to extract huge rents that arise from a monopolistic control of the system.

There’s a follow up puzzle. It is widely reported that India is a democracy. If democracy means anything at all, it surely means that the people are in control and are the principals, and that the political leaders and policymakers are the agents that implement the will of the people.

Does the Indian population have a definite will to have a good education system? One could cynically note that they have gone through the same educational system and therefore perhaps are not fully equipped to even understand what’s wrong with it. If we don’t take that unkind stance, then we could conclude that the will exists but that will is not communicated to the policy makers. Perhaps if the people expressed their preference for a good education system, the policy makers will deliver. But the situation could be worse. It could be that the people prefer a good system, and effectively communicate that preference, but in the end the policymakers simply ignore the will of the people. Ignoring the will of the people is something that comes rather naturally to rulers of an imperial bent of mind.

So here’s my conjecture. I think that it is an unholy mix of unfortunate factors: the people only weakly understand what the problem is; they articulate that understanding imperfectly; that articulation is imperfectly communicated to the policy makers; and, the policy makers choose to ignore what is good for the country because it helps them in their narrow interests.

Final question: will we be able to get out of this whole sorry scheme and if so how?

My feeling is that the market forces will become overwhelming and change the situation. The solution will not be bottom-up from the people but top-down from the corporations. They have an incentive to have productive workers because it adds to their bottom line. The Indian industry will drive policy change. My guess would be that within the next decade we will see a massive overhaul of the education system.

I am very optimistic.

So that’s it for now from JP’s hangout in Edison NJ. The weather is nice and sunny.


  1. perhaps your optimism is the direct result of being in a nice “hangout joint” :-))

    Remember that the Raul Mainos of the world have every incentive to keep education as it is (despite his public statement to the contrary).
    It is the only way genetically endowed, but otherwise vacuous folk like him will do “india discovery” darshans and get voted into power.

    After all, if people really get an education, without their blinkers (a.k.a. indian history), wont they vote Raul and his ilk out of power?


  2. AGWorld, I agree that my optimism may have something to do with JP’s adda being a very conducive place to hang out at.

    I cannot disagree with about Raul Maino’s incentives. That’s just the way it is . . .

  3. I dont understand what stops industry from involving themselves with education institutes. IT companies always complain about quality of students and spend lot of money on 2-3 months initial training which (when i attended) was a mere paid vacation. They can divert that focus to education institutes; help in preparation of syllabus, provide training on latest tools and technologies and i am sure there is a very feasible business case for them.

    I had a totally different experience when i did my masters at CMU. I worked on various assignments directly working with industry. My final project was to suggest pricing for a product for a startup and the company brought their investors to our presentation. I am sure that model can be easily replicated in India without any change in govt policies.

  4. Am not sure I share your optimism about industry driving education. Maybe in the IT and a few other ‘directly employable’ sectors where it doesn’t take much to train.

    But what about fundamental research areas which are the foundation for any progress? Who would take the initiative in correcting basic education (where the real problem lies) where the returns are not forthcoming or immediately apparent?

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  6. I am quite pessimistic in this regard.

    Just let Mayawati become the Prime Minister, and we will have a wonderful india of her dreams.

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