India is a good place to be a boss. A study by Hewitt Associates found that the differential between the average pay packet of top management and entry-level white-collar employees is about 19 times. In China, the differential is a more moderate 8-10 times and in rich countries, 9-15 times. Of course, entry-level salaries have gone up in India in white-collar jobs, especially in new economy sectors like retail, telecom, IT, biotech and financial services. Compensation for top managers has gone up even more because the shortage of skills and the talent crunch that defines white-collar employment is most acute for middle and top management. Plus, with more and more Indian companies venturing abroad, compensation of top and middle-level executives is often being matched with their international counterparts. There?s a school of thought that interprets big corporate pay packages as signifying some social evil. This thesis ignores laws of supply and demand. Demand is steadily increasing. Given current levels of economic activity and reasonable projections about the near future, India will need over 750 CEOs and over 5,000 functional leaders in the next couple of years. Industry estimates are that given the skilled labour supply, only about half of those posts will find suitable candidates.
Education is a problem, of course. India produces about 25 lakh college and university graduates each year, including 4 lakh engineers. But the number of graduates is small relative to the size of the population. About 10% of Indians receive any college training, compared to 50% in the United States and the quality of India?s higher education is often questionable. Nasscom found that only a quarter of the graduates produced each year are fit to be employed. This statistic is scary and it goes to the heart of India?s flawed higher education system. Nasscom has just submitted a report on creating 20 more Indian Institutes of Information Technology (IIITs). But IIITs are geared to produce basic skills, while India now needs radical big thinking in IT; otherwise it will not move up the value chain. One of the biggest problems is quality faculty. No good teachers means no good students. If education was rational, teachers? pay would have jumped just like managers?. And teachers, like managers, would have been recruited from abroad.