The Economist says Indian IT and Services set to triple in next five years

The Economist this week has an interesting article about the status and projections for the Indian IT and services sector. It bases it article on the studies by NASSCOM and McKinsey and projects that the current 17 billion market is to grow 3.5 times in the next five years. I do not know much about the current statistics from the industries, but at least two issues on the article is worth commenting.

The greatest impediment to this growth, according to The Economist is the dwindling supply of qualified manpower. It says;

… It also has, among these countries, by far, the largest pool of employable people—those with the necessary language and technical skills. On this measure, India, which produces 2.5m graduates a year, 250,000 of whom are engineers, has 28% of the global available workforce, compared with 11% in China.

Yet the supply of talent may be the biggest constraint on the Indian industrial growth. On these latest projections, the number of people working in IT and business-process exports in India will increase from about 700,000 now to 2.3m by 2010. But on today’s estimates only 1.05m suitably qualified people will graduate from college between now and then, so there will be a shortfall of nearly 500,000, with business-processing the worst affected. McKinsey’s Jayant Sinha believes the education system can be fixed in time to plug the gap.

A great number of these Engineers are currently working well below their potential. An engineering graduate from the Regional Engineering College now works in the customer service for HP or Dell answering calls about the delay in processing their order or going through the protocol of asking questions about “Do you see the icon for Control Panel, Sir?” You do not need an engineer to ask this dumb questions. So, even if there is going to be short fall in university output the market will readjust to supply ‘horses for the courses’. The real Engineers can take up the real job. I do not think India will have manpower shortage in any sector for another 25 years, at least. (That said, our universities have to tighten up their bolts on curriculum to create ‘real engineers’ – a long way to go, but not impossible. This, I hope, will have on market demand rather than any grand visionary plan in India’s university system).

A bigger worry, he says, is India’s creaking urban infrastructure. IT firms in Bangalore, for example, are in revolt against the local government for its neglect of basic amenities. Yet India’s IT and business-process industries will need about 14m square metres (150m square feet) of office space by 2010: “a new Manhattan”.

This is the real challenge. There is no escape from this and we need grand visions here in planning. Mumbai and Chennai are ravaged by recent floods and I understand even the existing substandard infrastructure is now broken in these places. Bangalore does not need any natural disaster, they have it in for the form of lethargic politicians. Unless India wakes up in this, the IT dreams will fade away.

{Some more blogs on this issue by my friends; Badri and Abi (Nanopolitan)}

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