India's surging growth over the next few years will be capped by inadequate infrastructure, a severe skills shortage and poor governance, several executives gathered in the country's capital said this week.

High on the list of challenges listed by executives at the World Economic Forum's annual India Economic Summit was a skills shortage, as overseas companies have rushed to tap lower-cost talent at the same time local companies have ramped up employment to meet fast-growing domestic demand.

"The whole education-training space, to me, is an opportunity and challenge," General Electric's India chief executive, John Flannery, told Reuters on the sidelines of the event.

India's vaunted IT outsourcing sector, for example, has been forced to raise wages by 10 to 15 this year, in excess of headline annual inflation that stood at 8.58 in October.

"Here, I see insatiable need for skills in the marketplace. And I see the supply of that skilled labor is not up to the demand at this point," said Flannery, whose firm employs 13,000 people in Asia's third-largest economy.

The skills shortage spans all levels, from management to frontline operations, and all sectors, from IT to fast food.

"We have a billion people and we have a severe shortage of skilled manpower. So it's a paradox," Niren Chaudhary, who heads India operations For Yum Brands, owner of the KFC, Pizza Hut and Taco Bell chains, said on the sidelines of the WEF event.

"Finding the right quality and skilled manpower is a significant challenge, which multiplies exponentially the lower down you go into the organization," he said.

Only 25 of about 450,000 annual engineering graduates in India are directly employable by technology companies, said Avinash Vashistha, chief executive of Tholons, an investment advisory and management consultant firm.

Infrastructure, Graft
While companies are trying new ways to recruit and retain, including web-based tests that offer jobs immediately, the shortage is likely to worsen in coming years.

Hari Bhartia, co-chair of Jubilant Life Sciences and president of industry group Confederation of Indian Industries, said India's agricultural workforce of some 200 million will start to shrink.

"Going forward, people will move to manufacturing, services and other sectors. And that's where we'll have the biggest problem because only 10 of them go to college," he said.

Inadequate infrastructure will also curb growth in an Indian economy expanding at 8.5, executives said.

India plans to double infrastructure spending to $1 trillion in the five years starting in 2012 to cope with frequent blackouts, and potholed and traffic-clogged roads. However, red tape and implementation delays often lead to missed deadlines.

Poor governance, which has delayed projects across healthcare, education and infrastructure and produced a steady stream of corruption scandals, was also high on the list of challenges cited by executives.

"For me, the single answer is good governance, which means better efficiency, less corruption," said Rahul Bajaj, chairman of Bajaj Auto and a member of the Indian parliament.