# **1. Introduction**

Insufficient supply of quality skills is one of the main impediments to further economic growth in India. The Indian economy grew more than 8% on average over the past 5 years, including the year of the unprecedented financial crisis in 2009. However, the skill shortage is still one of the major constraints in most industries in India (World Bank, 2009b).

IT, infrastructure and power sectors where engineers play a critical role are particularly in difficult situations when it comes to unmet demand for skills. For instance, the exporting IT sector reported lack of skills as the most serious obstacle for growth, and salaries rose 15% annually from 2003 to 2006 mainly due to the shortages of qualified workforce (World Bank, 2009). The road sector also faces severe shortages of qualified manpower. The sector needs to increase its hiring by at least 2-3 times of the 2008 level where 6,000 – 7,000 fresh engineers and diploma holders joined the road sector workforce (World Bank, 2008). In the power sector, the focus is also on shortages of qualified engineers. The sector needs more skills and knowledge at all levels of the workforce, particularly considering the growing concerns over environmental degradation and depletion of conventional energy sources (Ministry of Power, 2007). According to the widely quoted report by the National Association of Software and Services Companies (NASSCOM) and McKinsey in 2005, only 25% of the engineering education graduates are employable by a multinational company. Many employers give concrete examples on the lack of skills of the newly graduated hires, which the employers link to shortcomings in the education system. Box 1 provides one such case from a large ITES company.

The higher education system has responded to the increased demand for engineers by massively expanding production of engineers. The number of students enrolled increased 800 percent from 1998 to 2008, (MHRD, 2009). This quantitative expansion is widely perceived to have led to an average decline in the quality of the students entering, the teaching and, consequently, the quality of the graduating engineers (Jha et al. 2009).

Despite the gravity of the situation, little research has been conducted to identify the kinds of skills demanded by employers and measure in which skills graduates meet employers‘ expectation. There is an increasing demand for such information from teachers, administrators, and policy makers. For example, Government of India is implementing a program with World Bank co-finance, to improve quality of engineering education and increase learning outcomes of engineering education graduates. For this program and for other initiatives, it is critical to identify specific bottlenecks in skills demanded by employers, and provide detailed information and practical suggestions to overcome the skill shortages.

With this aim, an Employer Satisfaction Survey was carried out from September to November 2009 as part of preparation of the Second Phase of Technical Education Quality Improvement Program (TEQIP-II) initiated by the Government of India and financially supported by the World Bank. The survey was implemented by a joint team of the National Project Implementation Unit (NPIU), the Federation of Indian Chambers of 2