From Business Week


India’s talent shortages started appearing last year in technology and outsourcing, and attrition rates in those businesses today top 25% annually. Pay for qualified managers in tech has shot up as much as 30%, and now everyone, including big foreign companies, is scrambling. Even Genpact, India’s largest outsourcing shop and 40% owned by GE, has had to be innovative. It has set up a half-dozen storefronts in six cities to recruit workers for entry-level outsourcing jobs. The skill shortage “is the biggest challenge for our industry,” says Pramod Bhasin, chief executive of Genpact. So far, Genpact has hired 650 new staffers from the centers, but its turnover is still 30% a year.

As India’s domestic economy expands, the shortfalls are spreading beyond tech. Wages for semi-skilled workers in the textile factories of Coimbatore, for example, are up 10% this year, while supervisors’ salaries have risen by 20%. Pay in the banking industry is up 25% in the past year and has more than doubled in hot areas such as private equity. Airline pilots have seen wages rise 25%. Overall, Indian salaries will rise by 12.8%, compared with inflation of 5.5%, according to human resources consultancy Mercer, which warns that continued increases could hurt India’s economic revival.

While many industries are having trouble finding the right workers, they have so far muddled through by hiring less-skilled employees and training them. Private firms are starting to offer courses for everyone from flight attendants to engineers. More private colleges are springing up, and some 450,000 new students are enrolled in engineering schools this year, up from just 250,000 last year. “India has a huge educated workforce,” says Dominic Price, JPMorgan Chase & Co.’s (JPM ) chief in India. “As it gets equipped with new specialized skills, it will temper the current level of wage inflation.”


My view is this : Yes, we have talent shortage now. Supply (of skilled labour) is not meeting the demand. Its a supply side problem now.

However, the DEMAND WILL EASE. US economy is slowing down and capital spending will go down which will lead to demand for workers to go down too, atlease in IT services.