Securities and Exchange Board of India
2.18What could all this mean in terms of employment generation within India? There is probably no industry as employment intensive in productivity and numbers as high technology. In US venture funded companies have grown jobs by 40% per annum since 1992. Conversely Fortune 500 jobs shrank by 2.5% per annum during the same period. 60% of the jobs created by venture funded companies were engineers/skilled jobs. Further in 62% of the venture funded companies, stock options covered 100% of the employees. India today produces over 60000 new computer science graduates annually and over 2 lakh more enroll annually in computer training institutes. Besides, about 200,000 engineering graduates come out from engineering colleges in addition to the substantial number of persons doing diploma and certificate courses in technology related areas. By contrast, in Taiwan, the total number of engineering graduates is around 50000 and in US it is 30000 per annum. According to available estimates there are about 3,50,000 unfilled jobs of computer scientists in the US with the growth rate of 100,000 job requirement each year. Achieving even a reasonable fraction of US scale of development in information technology and other knowledge based areas, there is going to be a big employment generation in India. Additionally, given India’s lower labour cost, the potential for employment is even larger than what appears from these estimates.
2.19It also needs to be noted that with other areas of business and industry getting more and more technology oriented, there will be requirement of jobs all around. Indications are already emerging, as firms in India which are being outsourced by foreign organisations to provide services are recruiting hundreds of employees within one year of their existence. Several such firms are getting located around Delhi, Bangalore and Hyderabad. With proper venture capital support, there can be a phenomenal increase in start-up enterprises which would generate further employment potential.
2.20Given the right environment, large flows of risk finance and venture capital can flow into the country. Apart from the foreign investment, substantial venture capital is likely to come from overseas Indian community in Silicon Valley. This is particularly so as some of the Indian technocrat entrepreneurs in Silicon Valley have strong Indian linkages at professional level and are enthused to invest in India. There are at least 300 such entrepreneurs with individual wealth exceeding $5 million and total wealth of about $25 US billion. Another 1000 are believed to have wealth in the range of $ 1-5 million. Currently, about 20% of their wealth is reinvested in new ventures which will rise as vesting schedules mature. The risk capital with Indian entrepreneurs is around $6 billion and even if 15% to 20% comes to India annually, there is a ready pool of around $1 billion available for annual venture capital investment in India. Further, larger venture capital firms in the United States with a combined corpus of around US$ 35 billion have reportedly set aside upto 20% of their funds for investment offshore. India along with Ireland and Taiwan, is a favoured destination for
Report of K B Chandrasekhar Committee on Venture Capital15