The prediction comes as multinationals such as Microsoft and JPMorgan increase their presence in the world's largest offshore services industry, adding to labour-market pressures caused by a widening mismatch between the supply and demand for technology talent.
The "war for talent" is one of the most striking signs of the success of India's offshore IT sector. It expanded by about 30 per cent from 2003 to 2005 and is expected to grow by at least 25 per cent a year over the next five years, sustaining the county's rapid economic growth. Labour shortages will pose a serious obstacle to India's ability to retain its lead in IT offshoring. The IT industry today employs 1m workers, but on its current growth path, it will need 2.3m IT workers by 2010. A recent report noted that only a quarter of engineering graduates were actually employable in the sector.
In the past week alone, Microsoft said it would add 3,000 jobs in India over 3-4 years, while JPMorgan revealed plans to recruit 4,500 graduates in India by 2007. India's IT leaders Tata Consultancy Services, Infosys Technologies and Wipro are scaling up their recruitment to about 1,000 young people a month.
A lack of office space in the main IT hubs of Bangalore, Hyderabad, Chennai, Mumbai and the New Delhi region is likely to be another obstacle to India maintaining its lead. The McKinsey report calls for an additional "five Gurgaons" (the call-centre capital of the country) and "5-7 Punes" (a mid-size engineering town near Mumbai).
In gridlocked Bangalore, IT companies have complained about the state government's failure to provide sufficient infrastructure to support their growth.
IT companies alone will fuel demand for a fifth of the forecast 1m international air journeys by Indians in 2010.
