x Abu Dhabi, UAEWednesday 26 July 2017

India's chronic manpower shortage

For many in the West, the outsourcing of back-office functions to India is the end of the story, but on the other side is a world of corporate rivalries, job hopping by workers and even resume rigging.

Infosys employees undergo training at the company's campus in Mysore.
Infosys employees undergo training at the company's campus in Mysore.

Across western economies, the name of Bangalore - India's showcase technology city and the world's back office - is frequently used as a verb.

"To get Bangalored" is a phrase uttered, often pejoratively, to describe the shipping of high-paying white-collar jobs to low-cost Indian call centres or technology parks.

In recent years, outsourcing of thousands of jobs to India has prompted criticism from figures including Barack Obama, the US president, who has implored US companies to "say no to Bangalore, yes to Buffalo".

While India is perceived globally as a monster devouring western jobs, in reality it faces an intractable skills shortage that bedevils economic progress.

How is that possible, baffled observers wonder, in a country blessed with a demographic dividend and an abundance of labour? Two-thirds of India's 1.21 billion people are below the age of 35. India's colleges disgorge more than 750,000 science and engineering graduates every year. But the National Association of Software and Services Companies (Nasscom), an industry lobby group in New Delhi, estimates that only 26 per cent of those graduates are fit for employment in India's US$60 billion (Dh220.37bn) technology sector.

"India has more than a billion people and it still faces a chronic shortage of manpower," says the head of human resources at a leading software giant. The executive did not wish to be named as the company does not officially speak to the media in the run-up to the release of its quarterly financial report, expected this month. "It's a paradox like being stuck at sea - there's water everywhere but you could still die of thirst."

The technology and market research company Forrester said this month the US technology market - which makes up the largest client base for Indian tech companies, contributing more than half of their earnings - is expected to expand 8 per cent this year, exceeding the 7.4 per cent projected earlier.

A poll of technology analysts conducted by Reuters says India's top-three tech companies - Tata Technology Services, Wipro and Infosys - are expected to post profit growth of between 14 and 22 per cent for the quarter that ended on March 31.

Such dynamic growth is expected to increase an already rapacious demand for highly skilled workers. The Grant Thornton International Business Report, a quarterly survey of global companies released this month, said 64 per cent of Indian businesses expected to increase their workforce this year, the highest among the 39 economies surveyed. But 51 per cent said the paucity of skilled labour would retard their growth this year - a 30 per cent increase from last year.

The Associated Chambers of Commerce and Industry (Assocham) estimates that 10 million to 15 million jobs requiring highly skilled workers will be generated by India's services sector this year. If the demand is not met, Assocham warns, an economic slowdown could result.

At the heart of the problem, analysts say, is India's education system, which emphasises and rewards rote learning rather than encouraging students to acquire practical and job-oriented knowledge.

A survey of 150 companies conducted jointly by the World Bank and the Federation of Indian Chambers of Commerce and Industry in 2008 revealed that 64 per cent of all employers were "somewhat to not-at-all" satisfied with the skills that engineering graduates brought to the table.

"Graduates have to learn to formulate, analyse and solve real-life problems using standard engineering techniques," Hiroshi Saeki, a World Bank analyst who conducted the survey, said at the time.

Most companies in recent years have hired workers who lack adequate skills but are trainable.

Nasscom says an average technology company invests 16 weeks in training one employee - in technical and job management skills - which costs 2 per cent of all industry revenues. In 2009, Nasscom estimated that about half a dozen top companies spent $450 million to train about 130,000 engineers they had recruited.

But retaining skilled labour is also a gargantuan challenge. Assocham says the outsourcing sector has seen an attrition rate of 65 per cent in the past two years, with employees switching jobs frequently in search of better pay. High attrition leads to large losses at companies that invest heavily in training their workers.

As companies in the outsourcing field try to retain talent, salaries are expected to grow by 30 to 40 per cent this year, Nasscom says, eroding the sector's overall cost advantage.

"The growing trend of job switching might prove to be fatal for the survival and growth of India's [outsourcing] sector," DS Rawat, Assocham's secretary general, said last week. "This could hamper India's rapid ascension in the long run."

Amid the growing competition for high-paying jobs in a shrinking talent pool, companies are also battling growing instances of "resume fraud". Applicants pad their resumes with false or exaggerated credentials to improve their job prospects, prompting an additional expense for human resources departments: hiring detective agencies to investigate candidates' backgrounds.

"Given India's growing economy and intense competition in the job market, a number of candidates resort to embellishment of their CVs in the hope of increasing their chances of getting selected for a particular vacancy," says Wayne Tollemache, the executive managing director at First Advantage, a global background verification company with 1,600 clients across the Asia-Pacific region.

The company conducts 9 million background checks annually for various sectors, including technology, manufacturing, healthcare and retail.

In the quarter ending on March 31, about 10 per cent of resumes of Indian candidates investigated by the company revealed some form of discrepancy. About three quarters of cases of irregularity involved information pertaining to the previous job - false employment status, exaggerated work experience, and inflated designation and salary.

"The reality is that the organisation's reputation is at stake in case they hire someone with a questionable background," Mr Tollemache says. "Its brand equity and value can be adversely impacted if it does not do enough due diligence to recruit the right candidate."