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For years, a pervasive narrative has dominated corporate discourse in India: a persistent “talent gap” and “employability crisis” blamed squarely on the nation’s higher education system. Holding a mirror to the corporate sector’s own actions, one can see that its critique of academia is fundamentally undermined by a strategic preference for short-term gains over the long-term, high-risk investments essential for a true knowledge-based economy. The onus to drive innovation and skill development must shift from a singular focus on educational reform to a shared mandate where India Inc. fulfills its own responsibility.
Twin Narratives
The prevailing public narrative from corporate leaders and industry bodies has consistently painted a picture of a national talent deficit. Reports such as the India Skills Report and others have repeatedly highlighted a significant chasm between the skills taught in academic institutions and the requirements of the modern workplace, with one report from 2023 finding that “barely half of Indian graduates are considered job-ready”. This perspective is amplified by the sheer volume of graduates entering the market—approximately 350,000 engineers and 2.5 million other university graduates annually—juxtaposed with persistent unemployment rates.2 Corporate leaders lament that graduates are not productive from “day one” and lack core competencies such as clear communication, critical thinking, problem-solving, and digital literacy, all of which are deemed essential for success in an increasingly complex global economy. While this critique appears to be a legitimate business concern, it is, in fact, a convenient distraction from India Inc.’s own strategic failures.
The central point of this analysis is that this corporate chorus of complaint is one-sided and deeply hypocritical. It conveniently deflects attention from a long-standing pattern of systemic underinvestment in the very areas—innovation and people—that would allow India to move up the global value chain.
The R&D Deficit: A Failure to Innovate
The corporate sector’s critique of academia’s research output is particularly ironic given its own demonstrably inadequate investment in R&D. Data from the Economic Survey 2023-24 and other reports paint a clear picture of stagnant ambition. India’s Gross Expenditure on Research and Development (GERD) as a percentage of GDP has remained low and stagnant for years, hovering between 0.64% and 0.66%. This figure stands in stark contrast to the investments made by global leaders who have built economies on innovation. The United States and China invest 3.47% and 2.41% of their GDP on R&D, respectively, while South Korea and Israel, both leading innovation hubs, invest 4.93% and 5.71%.
The primary reason for this national R&D deficit is not a lack of government effort but a profound and strategic underinvestment by the private sector. The Indian private sector contributes only around 36% of the country’s GERD. This is a fraction of the contribution seen in leading global economies, where private industry funds 70% to 77% of R&D. This shortfall is not accidental. It represents a strategic choice by companies that prioritize short-term returns over long-term, high-risk innovation. This pattern can be attributed to several systemic factors, including public market pressures and, historically, restrictive income tax laws that phased out R&D deductions, such as the 150% deduction under Section 35(2AB) of the IT Act. The lack of deep “risk capital” markets also deters companies from making significant, long-term investments in innovation.
This strategic preference for financial prudence over bold innovation explains the broader R&D and talent gaps. When the private sector fails to fund or collaborate with academic institutions, it limits the avenues for research and commercialization. The criticism that academia does not produce enough PhDs or high-quality research publications is thus deeply ironic, as the corporate sector provides neither the funding nor the incentives for this to happen. The “lab-to-land” time—the period it takes for technologies developed in research labs to reach society—is slow because the “land,” or industry, is not prepared or incentivized to accept the output from the “lab”. This systemic failure to invest in and integrate with the research ecosystem is a direct consequence of corporate India’s strategic choices, rendering its critique of academia’s research output fundamentally unmerited.
The Human Capital Conundrum: A Neglect of People
The corporate demand for graduates to be “productive from day one” is perhaps the most revealing symptom of this transactional approach to talent. This expectation reveals a mindset that views human capital as a ready-made commodity rather than a resource to be cultivated through investment. The data on corporate training and development expenditures confirms this perspective. Indian organizations have traditionally seen low investments in employee training, spending a minuscule 1-2% of their payroll on employee training and development. This is a stark contrast to the 8-10% of total employee spend budgeted by U.S. companies. While the corporate training market is projected to grow substantially, from $10.8 billion in 2024 to $37.8 billion by 2033, this growth is from a significantly low baseline.
The available data, though somewhat dated, paints a telling picture of this neglect. In 2011, Indian organizations spent an average of US$331 per employee on training. While this may have aligned with a specific set of benchmarks at the time, it pales in comparison to more recent U.S. figures, which, despite a significant drop, still averaged $774 per learner in 2024.The low spending is often justified by a high employee churn rate, with some IT companies reporting turnover as high as 25%. However, this corporate justification is a self-fulfilling prophecy. Low investment in training leads to a lack of employee engagement and a slower pace of skill development, which in turn fuels high attrition. The companies then cite this very turnover as a reason to not invest more, creating a vicious cycle of neglect and talent stagnation. A NASSCOM report from a previous decade highlighted that the Indian IT industry was spending $0.75 billion annually just to retrain fresh graduates to make them employable, lamenting that this money could have been invested in creating new jobs. This demonstrates a deeply inefficient and reactive approach to talent management.
The Unraveling of the Narrative
The “skills gap” is not a problem created solely by academic institutions but is a dual-sided issue. The corporate sector’s underinvestment in both R&D and training is a massive and often ignored variable in this equation. The root cause of both failures is a common strategic choice: a preference for short-term gains over long-term strategic investments. The “hoarding cash” critique is not about literal cash piles but about the misallocation of capital—a reluctance to deploy resources toward high-risk, long-term endeavors like cutting-edge research and comprehensive human capital development. This is a business model that favors outsourcing, cost-cutting, and short-term efficiency over innovation and talent cultivation.
By loudly and consistently blaming academia for a “skills gap,” corporations shift the burden of responsibility and the cost of talent development away from themselves and onto the public education system. This creates a false narrative that allows them to maintain their low-investment, high-churn, and low-innovation business models without public scrutiny. The corporate narrative is not a true reflection of the problem; it is a carefully constructed strategy to deflect accountability for their own systemic inadequacies. The criticism of graduates not being “productive from day one” is the most direct articulation of this strategy, as it frames a company’s own responsibility to train and develop its workforce as a failure of the education system, a cost to be avoided rather than an investment to be made.
Beyond Blame: A Call for Shared Responsibility
While the corporate narrative has been flawed, it is important to acknowledge that the government and academic institutions are not idle. They are actively trying to bridge the gap and create a more robust ecosystem for talent and innovation. The National Education Policy (NEP) 2020, for example, is a landmark reform designed to transform India into a global knowledge superpower. It introduces multidisciplinary education, vocational integration, and mandatory internships to better align education with industry needs. Government initiatives like the Skill India Mission and the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) aim to improve workforce skills and encourage industry-relevant training. Institutions are forging partnerships with private corporations to embed industry-specific skills into curricula and provide practical experience to students.
However, the policy momentum and government initiatives are not enough. While government spending on infrastructure is influencing corporate capital expenditure plans, the same enthusiasm is not seen in corporate investment in R&D or training. This creates a new bottleneck: the government is creating a supportive ecosystem and providing the policy levers, but the private sector’s apathetic response is proving to be the new challenge. The onus has now shifted entirely to the private sector to participate fully and leverage these opportunities. A path forward requires a new model of shared responsibility, where companies move beyond viewing academia as a mere “supplier of pre-trained talent” and instead engage as a co-investor and research partner. This requires policy changes that could re-incentivize long-term investment, such as reintroducing attractive tax deductions for corporate R&D and philanthropic contributions to research institutions, as was previously suggested by government assessments.
Conclusion: A New Mandate for India Inc.
The corporate narrative of an “inadequate graduate” is a flawed one, as it fails to account for the “inadequate critic” in the form of corporate India. The data on R&D and training expenditure provides irrefutable evidence that India Inc. is not holding up its end of the bargain. Its strategic choices to underinvest in innovation and human capital have created a self-perpetuating cycle of talent deficit and low-value business models. By blaming the education system, corporations have successfully externalized the costs and responsibilities of talent development, all while maintaining their focus on short-term gains.
The future of India’s economic progress is not just in the hands of its youth or its educational institutions. To truly unlock its potential and become a global leader, India Inc. must lead by example—by fundamentally shifting its strategy from a transactional to an investment-oriented approach. The time for criticism from the sidelines is over. The moral and economic mandate is clear: for India to succeed, its corporate sector must finally invest in the innovation and people it so desperately claims to need.
