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How to sustain new white collar jobs

February 15, 2010 13:04 IST

It took India's IT-BPO sector just over a decade to grow more than 12 times, from $4 billion in 1998 to a shade under $50 billion in 2009.

Admittedly, the target set by the software service providers' body Nasscom was off by a year.

But given that the period saw two significant global economic recessions, this is no mean achievement. By contrast the outlook for 2020 is almost modest: a mere four-fold growth to $175 billion.

No one doubts the industry's ability to hit or even exceed those numbers; the bigger issue to consider is what this will mean for India and whether the policy environment is prepared for it.

For proponents of the pro-aam aadmi doctrine, this view may appear breathtakingly elitist.

After all, they may argue, the 2.2 million-odd people that the IT-BPO sector employs is minuscule compared to the quarter of the population that lives on less than a dollar a day and are surely more deserving of policy concerns.

This is certainly true, but it would be short-sighted to ignore the almost disproportionate impact that India's rise as back-office to the world has had on post-liberalisation economic growth.

The most visible signs lie in the glittering glass and concrete landscapes of cities that throve on expanding IT investment - Bangalore, Gurgaon, Hyderabad and Pune. But consider this: the IT-BPO industry now accounts for almost 6 per cent of gross domestic product. Its white collar employees make up nearly a third of private organised-sector employment.

These numbers are just part of the story. The steadily expanding incomes that these employees command are the other element that contribute significantly to the hyper-growth of industries catering to middle class demand - construction, retail, finance, telecom, consumer durables, automobiles and so on.

It is these businesses that became one of the engines of India's growth story.

But the multiplier effect of the IT-BPO boom goes way beyond this. True, there is no credible method of gauging the effect of indirect employment - Nasscom puts the number at 8 million - but the impact is easy to see.

Genpact's Pramod Bhasin, for instance, has long pointed to the spin-offs generated from the demand for transportation services, catering, security personnel, housing and so on that have also helped expand earnings for lower-income groups and invested them with spending power.

The virtuous circle created by such forward linkages is by now well established and is unlikely to abate anytime soon, with global corporations more acutely in need of cost-effective IT solutions.

India's IT-BPO boom is all the more remarkable because it has been achieved with minimal government help - bar a tax break that most large IT firms have outlived anyway.

Going forward, the challenge will be in strengthening the backward linkages so that this growth becomes sustainable. Education remains a huge question mark - with a serious shortfall in the engineering and English language skills - as does the quality of urban environments.

The consequence of this is already showing in the pace at which Indian IT companies are investing in countries like Philippines, China and Mexico, that offer more conducive operating environments.

Neither the Centre nor most state governments show a noticeable inclination to address these issues. In ignoring them, however, they're doing India a signal disfavour.

Business Standard
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