US Outsourcing Risks – An Indian Perspective

President Obama and Prime Minister Singh

Last week President Barack Obama’s visit to India was a much talked about event worldwide as it indicated India’s growing strategic importance to US. President Obama came to India after swallowing the bitter pill of defeat of Democrats in mid-term poll. The US economy is suffering due to high level of corporate frauds, failure of corporate governance, double-digit unemployment percentages, state and country deficits. US President came looking for support from India to boost its economy and reduce unemployment figures.

India’s recent economic success has caught world’s imagination. Since it is a democratic nation, it can also be a good punching bag.

As India’s strategy in Information Technology Enabled Services (ITES) industry succeeded American’s cry for outsourcing jobs to India has become loud. As President Obama said “back home they have a perception problem: his countrymen largely see India as the land of call centers and back offices that cost American jobs.” He didn’t mention though that he has in his many speeches himself contributed to building this image of India. Indian companies are facing backlash as this has become an emotionally sensitive issue with the Americans.

Indians can empathize with Americans as no employee likes losing the financial security a job provides to him/her and the family. Indians have grown up seeing scarcity of financial resources, lack of jobs, and a country ridden in debts.  The present status is improved, but still far behind America. Here are some facts mentioned in the Central Intelligence Agency (CIA) – The World Fact Book site.

1)      Population of US is 310 million and India’s population is 1.17 billion per July 2010 estimates.

2)      Gross Domestic Product (GDP) of US is US$ 14.14 trillion and India is US$ 1.236 trillion. According to purchasing power parity India’s GDP is US$ 3.680 trillion. These are 2009 estimates.

3)      Per capita GDP of US is $46,400 and India’s is $3,100 as per 2009 estimates.

4)      Twenty five percent (25%) of Indian population is below poverty line as per 2007 estimates. This is approximately equal to the total population of US.

While Americans are viewing their current state as deteriorating, Indians are viewing theirs as progress. This indicates the disparity in world income and development. India has gained tremendous ground and come a long way from its independence in 1947. India still has a long way to reach a developed country status. It will take another 10-20 years of hard work

An extract from President Obama’s speech in Indian parliament highlighting the point above – “This is the sturdy foundation upon which you have built ever since that stroke of midnight when the tricolor was raised over a free and independent India. And despite the skeptics who said that this country was simply too poor, too vast, too diverse to succeed, you surmounted overwhelming odds and became a model to the world.

Instead of slipping into starvation, you launched a Green Revolution that fed millions. Instead of becoming dependent on commodities and exports, you invested in science and technology and in your greatest resource-the Indian people. And the world sees the results, from the supercomputers you build to the Indian flag that you put on the moon.”

All countries for their growth leverage their assets in the global market. India’s asset is its urban English-speaking highly qualified population. In urban India, most Indians are trilingual; they speak the national language Hindi, their mother tongue or regional language and English. The second aspect is the focus on studies. Indian middle class parents consider providing a sound education to their children as a ticket to success. The focus on graduation and professional courses is high in India. Leveraging the languages skill and qualifications of Indians in the global market, has resulted in India’s economic growth and global recognition.    

It hurts Indian sentiments when the world holds grudges against India for its success. As Prime Minister Manmohan Singh said “India is not in the business of stealing jobs from US”. Here are some facts which give the Indian viewpoint. The points mentioned below are summarized from various articles of Economic Times:

1)      US unemployment rates in IT sector where the jobs are said to be outsourced to India, is relatively low in comparison to other sectors.

2)      Indian annual IT exports to US is US$ 36 billion. China exported goods and services nearly equal to the same amount in August month alone.

3)      According to NASSCOM reports Philippines is set to overtake India as the world’s back office for voice-based customer support and sales in 2010.

India is facilitating US economy and this was reiterated by President Obama during his speeches in India. According to Indian business chambers Indian investment in USA has increased which has resulted in creating 300,000 new jobs in US during recession. India is the third fastest growing foreign investor in the US. During President Obama’s visit US $10 billion business deals were signed by Indian government and organizations which would create 50,000 jobs in US.

Both countries are democracies hence they can easily collaborate as partners by removing negative perceptions about each other. US and India should plan on building strategic relationships for mutual growth. Instead of attempting to protect their turfs, they should open their markets to each other for economic benefits. Let us look ahead for better relationships between the countries.

Do you think US and India can develop stronger relationship? Will this benefit both the countries? Please share your opinion.