Education in India

The Indian education system plays a critical role in helping India maintain its position as one of the top offshore outsourcing destinations. Along with salary costs, most western firms cite the availability of skilled resources as one of the top drivers in selecting an outsourcing location. The education system in India has a long history and has a number of strong points, but it is straining under high demand for skilled workers.

The importance of the education system is obvious for companies locating long-term outsourcing operations in India. Assuming a 5-10+ year time horizon, outsourcing investments will clearly reap the benefits of any improvements in education. While not as obvious, shorter term projects are also impacted by developments in education. India has experienced massive wage inflation over the past few years and it is the ability of the national system to graduate large volumes of well trained new workers that will keep wages in check. All projects, short and long-term, will see a direct cost impact if the education system does not improve.

Overview of Education in India

India has a long history of organized education that goes back thousands of years. Prior to British colonization, India had a well developed regional system. Much of this was uprooted and replaced with a more western structure and content. While much was lost in the transition, India emerged with a massive education system including a world class set of universities, including the famous Indian Institutes of Technology (IIT).

India is currently making enormous strides in educating its population. The country is in the process of making huge commitments in providing its people, including females and the rural population, full access to a formal education. It is also entering the third year of a program that will hopefully increase enrollment in state-run universities by 50 percent. Furthermore, large numbers of those receiving a post-secondary education in other countries are flocking home with growing opportunities and more competitive wages.

The Indian Education System is comprised of six stages: nursery, primary, secondary, higher secondary, graduation & post-graduation. Schooling prior to university lasts 12 years. Some students go into a different stream after secondary school for 3 years of technical education—referred to as Polytechnics. Education is heavily subsidized by the Indian government, though there is a move to make higher education partially self-financing.

The government is committed to ensuring universal elementary education for all children 6-14 years of age. In 2006-7, an estimated 93% of children in this age group were enrolled in school. While availability of primary and upper primary schools has been augmented to a considerable extent, access to education at higher levels remains an issue in rural areas (especially for girls). The Government of India aims to increase this to 100% by the end of the decade. Government high schools usually teach in the regional language; however, urban and suburban schools generally teach in English.

There are several thousand colleges, affiliated with universities, providing undergraduate science, agriculture, commerce and humanities courses in India. Among these, the best also offer post-graduate courses and some offer facilities for research and doctoral studies.

Higher Education in India provides an opportunity to specialize in a field and includes Technical Schools. There has also been an effort to increase attendance in vocational high schools and raise standards at the nation's ITIs - Industrial Training Institutes. In 2008, it was estimated that over a million students completed vocational training through the Craft Training and Apprentice Training Schemes. Annual enrolment in high school level vocational programs (at vocational high schools, ITIs and private vocational institutes) is now approaching 3 million.

In addition to the state universities, there is a network of institutions that provide opportunities for advanced learning and research leading up to a Ph.D. in various branches of science, technology and agriculture. Several have won international recognition. The Indian Institutes of Technology at Mumbai and Delhi were placed among the world’s leading science and technology centers.

The table below illustrates that India contains a virtual army of residents who hold a post-secondary degree.

Challenges to India's Education System

The key challenge to India’s education system is not the quantity but the quality of graduates. Universities and technical schools vary greatly. The select India Institutes of Technology produce graduates on a par with any major technical university around the globe. However, the 13 IITs only graduate about 5,000 students a year. The rest of university graduates attend schools where good facilities and teachers are in short supply.

A prominent NASSCOM-McKinsey study concluded that only a quarter of technical graduates and only 10-15% of general college graduates are suitable for employment in the offshore IT and BPO industries. In response, the large IT and BPO firms have set up massive supplementary training programs. For example, Infosys has set up “Infosys U” which trains many of their new employees every year, adding a cost of $5,000+ per employee.

For now, companies are “making do” with the national education system, but over the longer term, the system needs significant upgrades. US & European firms in or planning long-term outsourcing deals in India need to keep an eye on developments in the sector. Progress in education means continued low-cost, high-skilled resources in India, but stagnation will reignite wage inflation and lead to further scarcity of managers and higher skill workers.

References and Resources
Indian Census
BBC News - India's Faltering Education System
Time - India's Eduction Crisis 101
Times Higher Education - The Innovators and Educators
NASSCOM-McKinsey - Extending India's Leadership of the Global IT and BPO Industries