DG: You have seen the books that have come out. People talk about a limitless pool of talent in India. I get the sense that very few people who are getting a college education in India right now are internationally competitive. So how big is the talent pool really?

RV: I think there are lots of numbers floating around, but the central story is one of a huge dichotomy or paradox. So on one hand, apparently 15 million people are entering the workforce or potentially entering the workforce every year. Now if you look at just the engineering students, which is the group that is relevant to companies like us, that number tends to be about 400,000.

A couple of years ago McKinsey did a study and for the first time calibrated this issue, and they said only one out of four of these graduating engineers is directly employable straight out of college. The rest need some remedial training for anywhere from three months to six months before they can be productive."

So that's the real problem. The numbers in aggregate look astonishingly healthy, but when you actually start adding on a dimension of quality, there is actually a substantial challenge. And it's true not just for high end engineering jobs. It's true as much when you talk about vocational skills. And then as you look at middle management and senior management, I think there is an extraordinary amount of pressure on that pool as well. Clearly this is reflected in two sets of statistics one around the kind of attrition and turnover you see at companies and the second is on the kind of wage inflation that you see. In many many categories of skills you will see a 15% compound annual growth rate, which is hard to sustain.

Why did I call it a paradox? Because on the one hand you have this huge pool of people who are all desperate to enter the workforce and gain employment and on the other hand industry is really starving to find the right kinds of talent. we got this massive amount of pressure building up. I think this is impacting the smaller technology players who don't have the brand. They don't necessarily have the ability to put together the kind of compensation work environments and growth opportunities. But the people who are the biggest victims of this whole process actually are traditional economy companies, because they are losing their workforce to these high growth sectors.

DG: In the schools I visited, I saw a whole generation that will be better educated than their parents, but won't be prepared to participate in a meaningful way to participate in the economic changes taking place in India. What's your assessment?

RV: That's the fear, but it need not be so. Your statement implies that there won't be an intervention or two that will change that course.

If you are talking about primary education we are talking about more than a million schools, five and a half million teachers, 200 million kids going through that.
and the vast majority is still public or government schools. the challenge here is the infrastructure is largely not adequate. You've got huge problems around teacher quality as well as teacher absenteeism and lack of accountability, which is why you find very substantial rates of drop off after the fourth grade, sixth grade, tenth grade. So we are losing too much of our talent along the way.

Then you look at higher education. I believe we are talking about 180 universities. Ten thousand colleges. So it is a vast, vast system, probably the second largest, if not the largest in the world. The critical issue is common -- lack of good teachers and lack of good accountability.

Now the government is trying, to be fair to do a lot. They've raised spending on education for three and a half GDP, now there is a one percent educational assessed on every transaction. I think we are headed to four or five percent of GDP if not more. The big sort of hope is that the private sector can play a much bigger role in education. both in the form of private schools and colleges as well as companies, whether Indian companies or global companies playing a much more involved role around the whole talent issue.

So do we have a huge crisis? Absolutely so. And things are likely to get more severe before they get better, but the promise is there that in about five years, we would have dramatically expanded both the capacity of the educational system and addressed some of the quality issues.

DG: Will this relieve the talent shortage?

RV: If you look at leading companies who recruit large numbers of people every year. What they're beginning to do now is think about going to second and third-tier colleges, look at sections of students who they formally would not have looked at, and then setting up very, very good screening processes. So they hire people not for their qualifications or their grades, but actually their ability to learn. And then set up very large, in house training programs to compensate for these kinds of inadequacies.

It's going to be a long time before the education system can be transformed to cope with this. And each individual companies efforts are very expensive both in terms of screening and training. So [Microsoft India] said, listen. Is there a technology solution to this? And what we have come up with is something very interesting which we are about to announce. We said let's appeal to individual initiative, because that's what we have in spades. We have really smart people who have the drive and ambition to be really successful. The system doesn't always support their aspirations. So we said listen, supposing I'm a kid in a fourth tier educational institution, but I have this dream of working for microsoft. I want to be a software architect. But I don't know where to begin. By the time I get out and apply, I am going to be found unsuitable. So right from the first year, can I go to a website. Find the industry and the kind of job and test myself, assess myself and find my skill gaps. And they can be technical requirements. It could be spoken and communication skills or any set of combinations of these things. So how do I assess my skill gap. And how can I get guidance from this service that tells me where I can go online and off-line, so I have four years to use my own initiative to address these skill gaps. At the end of it, I take an exam. I get a certification that is then recognized by a large set of employers as fitness for employment. So we are building this solution and we are piloting it first in the IT industry and after that we'll look at the financial services, manufacturing and so forth.

DG: There is this promising future for India and yet, there are so many obvious challenges for India. We hear about India boom, we hear India overheating? Which is it?

RV: I think It's both. Clearly, I am a huge optimist about India, because I gave up a wonderful life in the U.S. I think ours is the first generation that believes in our lifetime India could be a developed nation. That sense of possibility wasn't there five years and ten years ago. And that's because for the first time, there's confidence, there's pride as Indian institutions have become globally successful. So people believe we can do it.