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Business Week on India’s Rise

November 30th, 2003 · No Comments

[via Reuben] Media coverage always comes in a flurry. A few years ago, China was the toast of the media. Now, it is India’s turn. Business Week has a cover story on what India’s rise means for the global economy:

Quietly but with breathtaking speed, India and its millions of world-class engineering, business, and medical graduates are becoming enmeshed in America’s New Economy in ways most of us barely imagine. “India has always had brilliant, educated people,” says tech-trend forecaster Paul Saffo of the Institute for the Future in Menlo Park, Calif. “Now Indians are taking the lead in colonizing cyberspace.”

This techno take-off is wonderful for India — but terrifying for many Americans. In fact, India’s emergence is fast turning into the latest Rorschach test on globalization. Many see India’s digital workers as bearers of new prosperity to a deserving nation and vital partners of Corporate America. Others see them as shock troops in the final assault on good-paying jobs. Howard Rubin, executive vice-president of Meta Group Inc., a Stamford (Conn.) information-technology consultant, notes that big U.S. companies are shedding 500 to 2,000 IT staffers at a time. “These people won’t get reabsorbed into the workforce until they get the right skills,” he says. Even Indian execs see the problem. “What happened in manufacturing is happening in services,” says Azim H. Premji, chairman of IT supplier Wipro Ltd. “That raises a lot of social issues for the U.S.”

But there’s also a far more positive view — that harnessing Indian brainpower will greatly boost American tech and services leadership by filling a big projected shortfall in skilled labor as baby boomers retire. That’s especially possible with smarter U.S. policy. Companies from GE Medical Systems to Cummins to Microsoft to enterprise-software firm PeopleSoft that are hiring in India say they aren’t laying off any U.S. engineers. Instead, by augmenting their U.S. R&D teams with the 260,000 engineers pumped out by Indian schools each year, they can afford to throw many more brains at a task and speed up product launches, develop more prototypes, and upgrade quality. A top electrical or chemical engineering grad from Indian Institutes of Technology (IITS) earns about $10,000 a year — roughly one-eighth of U.S. starting pay. Says Rajat Gupta, an IIT-Delhi grad and senior partner at consulting firm McKinsey & Co.: “Offshoring work will spur innovation, job creation, and dramatic increases in productivity that will be passed on to the consumer.”

Whether you regard the trend as disruptive or benefical, one thing is clear. Corporate America no longer feels it can afford to ignore India.

India’s IT workers sense an enormous opportunity. The country has long possessed some basics of a strong market-driven economy: private corporations, democratic government, Western accounting standards, an active stock market, widespread English use, and schools strong in computer science and math. But its bureaucracy suffocated industry with onerous controls and taxes, and the best scientific and business minds went to the U.S., where the 1.8 million Indian expatriates rank among the most successful immigrant groups.

Now, many talented Indians feel a sense of optimism India hasn’t experienced in decades.

There is little doubt that India has to change: “If India can turn into a fast-growth economy, it will be the first developing nation that used its brainpower, not natural resources or the raw muscle of factory labor, as the catalyst. And this huge country desperately needs China-style growth. For all its R&D labs, India remains visibly Third World. IT service exports employ less than 1% of the workforce. Per-capita income is just $460, and 300 million Indians subsist on $1 a day or less.”

Tags: Emerging Markets

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