India’s Services Path

[via India Stock Blog] Stephen Roach writes:

Lacking in saving and investment and the infrastructure and industrial capacity that such flows would support India has had no choice but to turn to services as the sustenance of economic growth and development. Consequently, unlike Chinas deliberate focus on manufacturing, Indias services bias has emerged partly by default hence the accidental aspect of this strategy noted above. The good news for India, however, is that its services-based approach has played to many of its greatest strengths especially in the new IT-enabled service sector. Drawing heavily on its deep and high-quality stock of human capital, IT competence, and English-language skills, companies such as TCS, Infosys, Wipro, and now Genpact are all leading-edge players in the integrated systems solutions business setting the pace in one of the worlds fasting growing and most dynamic industries. In terms of it absolute size, Indias IT-enabled service sector is small accounting for only 5% of the overall Indian GDP growth in 2003, according to Chetan Ahya, our India economist. But this sector is on a pace to double its growth contribution over the next five years underscoring the increasingly powerful potential of Indias new services.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.