Friday, March 17, 2006

India needs skills to solve the 'Bangalore bug'
Raghuram Rajan and Arvind Subramanian
Financial Times

According to the authors, India may be facing a shortage of skilled labor. The authors point out that increasing wages in the Information Technology (IT) sectors have resulted in an exodus of managers from India's traditional manufacturing sectors, such as textiles and manufacturing. Because demand for skilled labor has increased at a compound annual growth rate of 23%, wages have dramatically risen, and other sectors have been unable to match these high salaries, which has caused migration of labor.

The growth of IT has also led to diverging fortunes for many states - while a select handful of states have benefited from increasing foreign investment, many of India's populous states have not seen much improvement in recent years. According to the authors, to ensure that India's states grow uniformly, the Indian Government must reform India's primary and secondary education systems and investment heavily in infrastructure development. The authors also recommend removing "the barriers that prevent foreigners and locals from starting new institutions, while improving accreditation procedures and disclosure standards." Following such policies will enable India's various sectors and states to grow at a more even pace, which is socially desirable.

No comments: