The 25% curse

The new, new thing in the India Shining story is, ironically, the 25% curse. What is it?

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There has been much excitement about how the exports from India's IT industry (broadly defined to include BPO operations) are projected to grow to $60 billion by 2010; our exports were about $17 billion in the financial year 2004-05. The study which made these projections was done by McKinsey for the IT industry's cheerleader cum lobbying arm NASSCOM [You can read the press release here]. Almost all the major newspapers have talked about this study. Internationally, both the BusinessWeek (via Badri) and the Economist (via slashdot) have also covered this report.

At this point, it is good to remind ourselves that the same McKinsey-NASSCOM combination produced a report in the late nineties projecting a $50 billion IT industry by 2008. We are probably going to fall short of that target. The shortfall is due to the lower than the highly optimistic growth rates projected in the old study. There is nothing in the present report to indicate that it is not informed by the same enthusiasm and overoptimism. Having said that, I have to admit that there is nothing wrong in aiming high and falling (slightly) short.

The new study identifies important things that must be in place for ensuring such a scorching growth rate. All the usual culprits figure in this list: new office space, new 'integrated' townships, new roads; the Economist estimates that the new office space alone works out to creating a 'new Manhattan'!.

The second big story in the new study is in the projected manpower shortfall. It appears to me that this shortfall has been calculated by using (roughly) the same labour productivity as now. Since we have 0.7 million workers contributing to 17 billion, so we will need 2.3 million workers for $60 billion.

The gap is 1.6 million over five years. Considering that we produce over 400,000 tech graduates every year, this gap should be easy to plug, right? Wrong, says McKinsey. Why? Only 25 percent of our graduates have the necessary skills and conceptual background to contribute to the explosive IT growth that is ours to take.

This new figure of 25% has bigger things going for it; it is now going to be etched in our collective consciousness. It is going to be the 'new' conventional wisdom!

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This figure was not always 25%. Until recently, it was pegged at 40%: see the sidebar of this post from sometime ago.

Well, I like this 'new' wisdom. It shines a spotlight on a pet issue of mine here in this blog: quality of our higher education. Since our students deserve better, we can use all the support we can get. And, in terms of importance, nothing can be bigger than the booming chorus of McKinsey and NASSCOM! The Big Two are asking for a deregulation of the education sector, whatever that means (they don't give the details of what they want -- at least, not in the press release). While waiting for their specific demands, just keep this in mind: the 25% curse.