India’s largest information technology company Tata Consultancy Services (TCS) has handed out the pink slip to 500 people. IBM India is reported to have shown several people the door after having introduced stringent new performance standards. TCS has cut the variable pay of its employees. Other companies are paring perks. Suddenly, the whole IT industry seems to be in despair.

The reason for this gloom and doom prognosis is the appreciation of the rupee against the dollar. Most Indian IT companies bill in dollars and spend in rupees. A cheaper dollar means that you earn less and your profits are affected. The stock markets have hammered down software share prices and the media has joined in the IT bashing.

If you look more closely at the numbers, however, the picture is different. If TCS has asked 500 people to leave, it is a scant 0.5 per cent of its 1,00,000 plus workforce. For IBM India, the 200 allegedly sieved out is an even smaller percentage of its 73,000 staff strength. For both these companies, these are normal performance-related departures.

This is really a drop in the bucket compared to the bigger problem — attrition. IT companies aren’t sacking people; they are trying their best to hold them back. At TCS, the attrition rate over the past year was 11.5 per cent, among the lowest in the industry. Do the numbers. You will find this is 10,000 plus people on the move. In some companies, the attrition rate is 50 per cent plus. In business process outsourcing (BPO) outfits, it has even touched 100 per cent. (That doesn’t mean everybody leaves. It could be that 50 per cent continue. But the other 50 per cent gets replaced twice during the year.)

The brouhaha being created by the media about pink slips and salary cuts hides the real problem — the lack of suitable talent. Larsen & Toubro (L&T) chairman A.M. Naik recently lashed out at the IT sector for hijacking engineers when all they required were BCom graduates. Now the IT sector is feeling the pinch as the supply of engineers is running out, thanks partly to companies like L&T offering them more attractive salaries and opportunities.

India has an enormous number of educated unemployed. So why are we facing such a big problem here? The answer is that most of these unemployed don’t have the necessary skill. The people who are facing the axe at IT companies are also skills challenged. The surprise the media is exhibiting is because of the Indian mindset — a job is for life; if you are actually good at your job, it is a bonus for the company.

“The mismatch between skill levels and occupation structure in India is quite stark,” says a recent report by TeamLease Services, titled The Youth Unemployability Crisis. “Where, on the one hand, 93 per cent of the population (15-29 age group) receive no vocational training, a huge 91 per cent employed according to principal activity status are employed in ‘skill-based’ jobs.”

The report concludes that India must convert demographic challenges to opportunities; realign the HR regime; focus on continuous skill enhancement; evolve public-private partnerships; improve information sharing on the quality of educational institutions; and assign responsibilities, rewards and punishments to all in the educational regime.

The IT sector, where attrition levels are so high, has actually been proactive. Several companies have set up in-house training colleges. The National Association of Software & Service Companies (Nasscom) has proposed a chain of finishing schools for job seekers in this area. And further education for their staff is at the top of the agenda of most IT sector CEOs. They are wielding pruning shears only after the laggards show their inability to learn.

AN UNSUITABLE BOY

Youth unemployability is a bigger crisis than unemployment

• 53 per cent of employed youth suffer some degree of skill deprivation while only eight per cent of youth are unemployed.

• 57 per cent of India’s youth suffer some degree of unemploy- ability.

• The 82.5 million unemployable youth fall in three skill repair buckets:

Last mile repair (time needed for remedial action less than 0.5 years) 5.3 million.

Interventional repair (0.5-1 year) 21.9 million.

Structural repair (1-2 years) 55.4 million.

• Repairing this skill deficit needs Rs 4,90,000 crore over two years.

(Source: India Labour Report 2007, The Youth Unemployability Crisis, TeamLease Services)