Skilled labour, jobs shortage in India, says The Economist survey

India is subject to a strange dichotomy "" it neither has sufficient jobs nor enough skilled workers. This makes the country's labour force its biggest challenge, says The Economist's survey of business in India.

"Indian business has created a lot of impact on the international business community. India is virtually an international preoccupation...so this survey was a natural exercise for us as we wanted to enlighten the global community on the business situation of India," said Simon Long, South Asia bureau chief of The Economist and author of the survey.

Even though the survey, which was released today, was bullish on the nation's economy and the demographic dividend in terms of a young population and skilled personnel, it indicated an insufficient pool of qualified talent and investments in infrastructure and education.

"The policy prescriptions that emerge out of this survey are that the government needs to focus on making labour laws less restrictive and ensuring basic education. It is a paradox that despite being a labour-surplus country, Indian manufacturing is capital-intensive...this paradox can be resolved if the government makes its labour laws flexible", explained Long.

He added that talent crunch would be a problem as it could affect productivity. According to the survey, it was not only the IT sector but others like retail, hospitality and manufacturing that were reeling under shortage of manpower.

India needed to work on its low-cost manufacturing sector "" a lesson it could learn from China "" as that alone would enable it to provide employment to the 70 million people that would join the labour force in India in the next five years.

"Currently, 260 million people live on less than one dollar a day. India needs to help those leaving the farm and replicate in basic industry, what it has achieved in it," said the survey.

Long, who has been working on India surveys over the past three years made an interesting observation. He said three years ago, China was seen as a threat by India.

A year ago, it began to be viewed as a business opportunity. An inclusive growth outlook had come to stay, by which both India and China were seen as partners.

The survey offered opinions about changes needed in bureaucracy, infrastructure and education to help India realise its business potential.

Commenting on the government's reservation policy, Long said, "Given the survey's concern about quality and availability of well educated people, I would be worried about it (reservation policy).I hope the quality doesn't get compromised as the number of seats are increased."