Sunil Jain: Shanghai surprise

RATIONAL EXPECTATIONS

Being a party pooper is an awful thing, especially at the beginning of a new year, but if there's one new-year resolution we have to make, it's that we'll be less full of ourselves over the year.

Much of last year's been spent bragging on India's role as the back-office of the world, and there's now talk of how the country's going to be the "laboratory of the world" as opposed to China's "factory of the world" (a phraseology I owe to Ajai Shukla of NDTV) now that we've finally got a products-patent regime in place and given how it's around ten to twelve times cheaper to develop new drugs in India in comparison with the US and to test them on both people as well as lab rats""interestingly, while transgenic mice cost $350 apiece in the US, Nicholas Piramal has just started work on developing them here and plans to sell them at $35 apiece!

While there's no doubt India's a great story, it's useful to keep a few things in mind. In the software sector, from where all this talk of India being a knowledge superpower began, growth has begun to flag.

In 2003, according to consulting firm SKOCH, software exports grew only 11 per cent, as compared to BPO operations, which grew 62 per cent. In 2004, says SKOCH, the situation may be worse.

While BPO operations aren't something to be scoffed at, considering we earned Rs 16,000 crore from them in 2003 (as compared to Rs 32,000 crore from software), the fact is they're less knowledge-intensive than software.

Worse, as a Nasscom-KPMG report points out, Chinese salaries are a fourth lower than India's, and the way Indian salaries are rising, the sector's growth could get affected.

Indeed, between 2000-01 and 2002-03, salaries in the sector rose a whopping 65 per cent while billing rates fell 30""40 per cent. The crux of the problem is the severe shortage of trained manpower""the Nasscom-KPMG report projects a shortfall equal to a fourth of total demand in the next 4""5 years.

Naturally, this problem of manpower availability affects everyone""Swati Piramal of Nicholas Piramal says while there is no shortage of people at an entry/middle level, recruiting top-end talent has become a serious problem.

It is also true that India has become a favoured R&D centre and captive units of MNCs do R&D business of around $1.5 billion out of India""according to consulting firm Evalueserve, Indian arms of MNCs are increasingly filing a larger proportion of company-wide patents and this was up to 11 per cent in the case of Intel, 30 per cent in the case of Texas Instruments, and 50 per cent in the case of Cisco Systems in 2002. But surely the shortage of manpower will hit this as well?

(By the way, I'm not even talking of the huge challenges pharmaceutical companies will face in terms of the failures of drugs they develop, but we've seen some pretty big setbacks in the case of both Dr Reddy's Laboratories as well as Ranbaxy's anti-diabetes and anti-prostrate-enlargement drugs whose development had to be stopped after they failed to make the grade in terms of safety or efficacy. This is not to say the companies don't have other drugs in the pipeline, just that the road ahead is long and tortuous.)

With over 45 million graduates today, India is a lot better placed than most countries in terms of the stock. What's a matter of concern is the quality of these graduates.

According to the committee headed by former ISRO chief U R Rao last year, the shortage in terms of teachers with a Ph D in the engineering field is around 70 per cent!

While 10,117 teachers with a Ph D were required for engineering colleges in the country in 1990-93, there was a total of 6,752, or there was a shortage of around a third. In 2002-05, the demand is for 38,957 teachers while the availability is a mere 12,772.

Not surprisingly, just three Indian universities figure in the ratings of the world's top 500 universities done last fortnight by the Shanghai Jiao Tong University""Indian Institute of Science at 215, IIT Kharagpur at 421 and the University of Calcutta at the 461st place.

The ranking takes into account criteria like the number of Nobel laureates on the science and economics faculties/alumni, the number of articles published by faculty members in Nature and Science or articles in the expanded Science Citation Index and Social Science Citation Index.

Even if you forget the Nobel laureates (or Field medallists for maths), of which we have few, the Indian Institute of Science scores 12.4 on "highly cited researchers", 11.5 on Nature and Science articles and 34.2 on the Science Citation Index (Harvard is taken as the reference with a score of 100 on each criterion).

Kharagpur scores 12.4 on the first criterion, 5.1 on the second and 24.3 on the last. Calcutta University is zero on the first two criterion and 15.1 on the last, but scores 15.4 on alumni with Nobel/Field awards. In contrast, China has 16 universities on the list.

The World Bank's knowledge economy index (KEI) for 121 countries is even more depressing. While China has gone up on the education index from 3.48 in 1995 to 3.74 for the most recent year, India's score has fallen from 2.38 to 2.33.

To put this in perspective, while India's enrolment in secondary education has risen from 44 per cent in 1990 to almost 49 per cent in 2000, that for China has risen from under 50 per cent to around 70 per cent.

India's relative decline on the KEI, which takes into account parameters like the economic incentives regime or the information infrastructure, is even more dramatic""while China has grown from 2.86 to 3.80, India has fallen from 2.75 to 2.72.

Now it is possible to argue, especially in this season of miracles, none of this really matters, that India will continue to forge ahead. In which case, Happy New Year! If not, remember the new year resolution.