A new report called The Competition that Really Matters, which was released jointly by the Center for American Progress (a Washington DC think tank with close ties to the Obama administration) and the Center for the Next Generation, contends that America’s competitive position is being eroded by the emergence of skilled labor forces in India and China.

The report calls both countries among “our fiercest competitors for the jobs and thought leadership of the future.” Noting the investments China and India are making in improving their human capital, it recommends that the United States substantially increase the level of resources directed at primary and secondary education.

There is certainly a strong case to be made that the US educational system is in urgent need of overhaul. But the new report is reminiscent of Rising Above The Gathering Storm, a widely-publicized 2005 report that was written by an eminent group of US business and scientific leaders. It likewise warned that India and China were quickly acquiring a vast reservoir of low-wage but highly-trained brainpower that would inevitably sap America’s edge in innovation. One of the particular warning indicators it presented was that Chinese universities were churning out some 600,000 engineers a year and India 350,000, but U.S. institutions were only minting 70,000.

In similar fashion, The Competition that Really Matters advises that India “is already producing more students with bachelor’s degrees than is the United States. Over the last seven years, India has tripled its output of four-year degrees in engineering, computer science, and information technology.” It also notes that “seven times more children attend primary school in India than in the United States.”

But quality is really the issue here, rather than mind-boggling quantity. This point was amply underscored when Vivek Wadhwa and his colleagues at Duke University quickly debunked the alarming figures presented in the Rising Above The Gathering Storm report. The Duke study found that engineering numbers cited for China and India were significantly exaggerated since they included holders of associate degrees and vocational certificates along with recipients of bona fide four-year degrees. It concluded that:

“A comparison of like-to-like data suggests that the United States produces a highly significant number of engineers, computer scientists and information technology specialists, and remains competitive as a source of global engineering, computer science and information technology labor.”

Similar arguments also appeared in the Wall Street Journal and the Washington Post. Surprisingly, there is no reference to this policy debate in The Competition that Really Matters.

Contrary to the growing Western perception of the country as a technology powerhouse, the quality of Indian graduate education in critical technology fields lags significantly behind the United States and Europe. Concerns about the caliber of India’s legions of engineering graduates have mired New Delhi’s bid for full membership in the Washington Accord, which governs international recognition of foreign engineering degrees. Moreover, the country manages to produce a remarkably small number of PhDs in computer science each year. Indeed, Israel graduates approximately the same number as India despite the gargantuan population disparity. A senior government official in New Delhi a few years back acknowledged that India would never become a great power on the basis of such paltry numbers.

A parade of government officials and corporate leaders has acknowledged the serious disrepair of the Indian university system, including at the most elite schools. Incredibly, given the country’s high-tech image, the Infosys Science Foundation in 2009 was unable to find a worthy recipient for its inaugural prize honoring an Indian researcher in the field of engineering and computer science. And The Journal of the ACM, the world’s leading journal in the computer science field, for a number of years was unable to publish Indian submissions on quality grounds.

According to a widely-consulted scorecard compiled by Shanghai Jiao Tong University, only one Indian school – the Indian Institute of Science in Bangalore – is ranked in the top 500 of global universities – and then only in the bottom tiers. Research by the McKinsey Global Institute concludes that only a quarter of Indian engineering graduates are suited for employment by multinational companies. The rest are lacking in requisite technical knowledge, English-language capacity, and collaborative skills.

These findings are underscored in a new report by a British engineering organization. A forthcoming book by Rafiq Dossani also concludes that Indian engineers rank at the bottom when compared to their counterparts in the other BRIC nations.

As one official in the Prime Minister’s office recently acknowledged, “The stark reality is that our education system churns out people, but industry does not find them useful….The necessary development of skills is missing in our education.” This view is echoed by a report four years ago by a parliamentary committee, which observes that the employability of graduates of the country’s technical schools “remains a matter of serious concern.”

The resulting skills gap has fundamental implications for India’s success in the global economy. A 2009 World Bank report found that an acute deficit of civil engineering skills severely jeopardizes the country’s growth prospects. The number of civil engineering graduates from Indian universities will need to increase three-fold in order to make good on New Delhi’s ambitious plans to improve the nation’s decrepit infrastructure. And in order to expand the ramshackle energy sector, India has been forced to rely on tens of thousands of Chinese guest workers. As the chairman of the Central Electricity Authority admitted in a recent interview, “we don’t have that amount of skilled manpower in the country.”

It is true, as The Competition that Really Matters observes, that Prime Minister Manmohan Singh’s government has dramatically increased funding for primary and secondary education. But so far, more resources have not translated into better outcomes. India not only exhibits the lowest educational indicators in the Group of 20, its public education system scores poorly relative to the other BRIC countries and to other emerging market countries. The 2012-2013 Global Competitiveness Index newly issued by the World Economic Forum places India at 81st, out of 144 nations evaluated, in terms of the quality of primary education, 107th for secondary school enrollment, and 95th for tertiary education enrollment.

In spite of the recent infusion of more government resources, educational indicators remain profoundly disconcerting. According to results released earlier this year by the OECD’s Program for International Student Assessment, Indian eighth-graders scored second to last in a 75-nation ranking of writing and math skills. It is all the more disheartening that the Indian government selected students from Tamil Nadu and Himachal Pradesh to participate in the assessment, since these states are considered among the best in providing elementary schooling.

Although The Competition that Really Matters discusses US PISA scores as well as China’s “Shanghai Shock,” it omits any word about India’s failings.

Similarly, a recent survey released by Pratham, a widely-respected nongovernmental group working to improve educational outcomes for impoverished children, finds that half of the country’s fifth-graders were unable to read at a second-grade level. And despite talk about rising literacy rates, one recent study concluded that the official rates are significantly overstated.

The benchmarks to India used in The Competition that Really Matters conceal just as much as they reveal. Still, the report does exemplify how the imperative of responding to emerging global competition from China and India has become a common theme in U.S. policy circles. President Obama frequently stresses this point. In announcing a new public-private partnership on manufacturing innovation last month, for instance, he justified the initiative by saying it “will help make sure that manufacturing jobs of tomorrow take root not in places like China and India, but right here in the United States of America.”

In a campaign appearance three months ago, Obama argued that the US had to invest more in science and technology so as not to “cede new ideas to countries like China and India.”

Along the same lines, the president regularly refers to the prodigious output of brainpower from the two countries in exhorting the need for education reform in the United States. At a Democratic Party gathering last month, he maintained that unless America repaired its school system, "then we're not going to be able to compete with China or India or Brazil, who are very hungry and know that whichever country has the best workforce, the most highly skilled workforce, is going to be the country that succeeds economically.” And at a gathering in Las Vegas two years ago, he cautioned that if India is “producing more scientists and engineers than we are, we will not succeed.”

But if this argument, at least when it comes to India, is not supported by the data, why has it gained wide currency? My own theory has to do with the conflating of the Indian diaspora’s success in America with the strength of their homeland’s competitive position. The prominent role that India-born engineering and scientific talent plays in driving U.S. prosperity and innovation – most prominently in Silicon Valley – is a significant factor in this confusion.

So, too, is the swelling number of bright and diligent Indian students enrolled in American universities. Indeed, a bipartisan consensus has formed in Washington that the US needs to keep as many of these students in America as possible once they’ve completed their course work. As Obama put it in his January 2011 State of the Union address: “[Students] come here from abroad to study in our colleges and universities. But as soon as they obtain advanced degrees, we send them back home to compete against us. It makes no sense.”

But it should alert us that something is amiss at home when so many of India’s best and brightest choose to pursue their dreams and apply their talents elsewhere. India’s transformations over the past two decades no doubt command the world’s respect, though they should not blind us to the daunting challenges it still confronts, perhaps none more formidable than in the area of human capital development. The country’s prodigious demographic resources – it will in a decade or so overtake China as the world’s most populous country – could one day be the basis for India’s emergence as a full-fledged global power. But for now it remains an open question whether India has the capacity to distill raw potential into actual achievement.

(David J. Karl is president of the Asia Strategy Initiative, an analysis and advisory firm based in Los Angeles. He blogs on South Asia at Chanakya’s Notebook and can be followed on Twitter @davidjkarl.)