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When US Ambassador David C. Mulford spoke of Indo-US relations witnessing the
beginning of “a transfor-mation” which would open opportunities for the United States and India that would have been unimaginable a few years ago, he was referring to the new high in the interaction between the governments of the two largest democracies. The rosy outlook, however, has been clouded by the outsourcing debate, which has been hogging the spotlight throughout the nation.
Had it come at any other time, the outsourcing issue would have been brushed aside but this being an election year in United States, things are different. There is talk all around that India has been eating away jobs in the US. Nothing could be further from the truth. Notwithstanding the hype that has been generated over the outsourcing debate, the fact is that most of the jobs, which have come to India, are in the “high-technology and professional services” sector. Data from the US Bureau of Labour Statistics reveal that the job losses that American presidential hopefuls are clamouring about are from the manufacturing and retail services, with which India has no connection.
Other figures from the US state that job growth has been poor. On the other hand, the Indian Economy, is on a high. Aided by a turnaround of the agriculture sector, the country’s GDP growth has shot up to 10.4 percent during the third quarter of the current financial year as against 8.4 percent growth registered during the second quarter of 2003-04, according to figures released by the Central Statistical Organisation (CSO).
It is no wonder that with such figures, India is the second fastest growing economy in the world and fourth largest in terms of Purchasing Power Parity (PPP). The forecast of the CSO far surpasses the GDP growth, projected by the Reserve Bank of India — between 7 percent and 7.5 percent in 2003-04 – and that of the Indian Finance Minister — between 7.5 percent and 8 percent — in the interim Budget recently placed in the Lok Sabha. The country will double the 4 percent growth it had in the last fiscal year, according to another CSO estimate released some time ago. That will be the fastest growth rate the country has seen in the last 15 years. This rate is slightly lower than China’s, which was 9.1 percent in 2003.
Though jobs have decreased in the US over the last three or four months, there has been a rise in computer-related jobs. In fact, the figure has increased since June last year by more than 150,000. The Information Technologies Association of America, has gone on record to state that only two percent of the 10 million computer-related jobs have gone abroad.
Whatever the hype – for or against outsourcing to India – some interesting figures have come up. Late last year reports quoting the American research firm Gartner stated that India had the capability to generate $13.8 billion in exports through outsourcing contracts by ’07. The firm also said that India’s revenue from offshore outsourcing would be more than 66 per cent of the global offshore outsourcing market. The global outsourcing market would be around $173 billion by 2007, of which $24.23 billion would be from offshore contracts.
One of the other points of controversy is wages. American companies, which have been outsourcing to India do so because Indian wages are low. But that is not the only reason. The most important reason for outsourcing is India’s highly qualified workers. A newspaper article in the United States has made some comparisions. Quoting industry sources, it mentions that a software engineer’s job with a salary of $80,000 a year in the US is worth only $20,000 in Bangalore. The article goes on to state that the low wages do not indicate that the Indian corporate sector is “deliberately depressing wages or that Indian high-tech workers are being forced to toil in Dickensian conditions”. The writer then mentions that “such wages are like manna for a tiny section of an Indian labour market long used to low incomes by world standards”. Remember, he writes, “India’s per capita income is still $490 annually”.
In a report brought out by McKinsey & Co. sometime ago, the cost savings of global corporations due to outsourcing range from 40-60 percent. Add to that the low cost of human resources. To add up to the savings of the multinationals, administrative expenses along with real estate costs in India are very low in comparision to the US and Canada. That is, perhaps, why one of every four global MNC IT giants outsource their requirements to India. Among them are IBM, Philips, Dell, Oracle, Hewlett-Packard, Cisco, Intel, Bosch, Siemens and GE, which have operations in Bangalore, Delhi and Mumbai. Outsourcing is not merely confined to IT and insurance. Banking too, has shifted to India with their call centres.
In a fast-changing global scenario, where every minute means money and where near-lightning speed communications have made differences between day and night operations almost irrelevant, the corporate sector throughout the world will naturally hunt out the best workers at the lowest possible price. No government, which believes in free trade – least of all the United States, can make laws to control such a practice. Economists and market analysts are now slowly getting around to the view that though outsourcing jobs – especially the high-tech ones — could cause problems on the job front, it will have a statutory effect in the long run. The belief is that inflation will be pegged and in turn prices will remain low for the masses. As for the fear that outsourcing to India could threaten the American economy, the people should look at the budget deficits and the dollar’s fall in the world markets. A small percentage of some high-tech jobs going away from the Americans can hardly be an issue.
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