Outsourcing equals Globalisation
India's IT market has grown from $1.73 billion in
1994-95 to $16.5 billion in 2002-03. The country's software exports grew at
26 to 28 per cent during the current fiscal year ending March 2004. As if in response
to this striking growth, we are suddenly hearing anti-globalisation noises from
the West. Legislation has been introduced in the US seeking a clamp down on
such outsourcing.
This attempt to ban outsourcing may also be a sign of
weakening American confidence in the strength of its dollar. The US has been
running up a higher and higher deficit which has crossed half a trillion
dollars this year. Earlier, this was being financed by at- tracting global
currency reserves. The central banks of nations the world over were keeping
their cur rency
reserves in dollars, thereby fuelling the demand for that currency. But with
the weakening of the dollar, this could change.
Experts in the US realise, how ever, that banning
outsourcing can be no solution to the economic and employment crises the nation
is facing. Even Alan Greenspan, the chairman of the Federal Reserve, has
pointed out that efforts to protect US jobs through legislation could end up
damaging the economy. He has stated that if the US opts to erect walls against
foreign trade and even discourage job-displacing innovation, it could slow the
pace of its economic growth markedly. In any case, US companies have little
choice. If they don't cut costs by outsourcing they will rapidly become uncompetitive, vis-a-vis companies that do, which will result in many more US jobs
being lost as an increasing number of these companies will be forced to shut
down.
The world outsourcing market is estimated to be about
$5 trillion in 2002 according to the - Outsourcing Research Council. Nearly 20
per cent of the total business is constituted by the IT E and ITES market,
which is growing at about 15 per cent per annum. Of this, India receives only
about 2 per cent of the work generated. This indicates the huge ■ potential it
has of future growth. However, in a simultaneous reverse process, some of the
best and biggest of Indian companies are outsourcing strategic IT functions to
global companies.
Strategic outsourcing is, in fact, the fastest growing
segment in the Indian IT markets as seen from the series of deals announced in
the last few days. A notable deal struck in the recent past is that between Hewlett-Packard
and Bank of India for over Rs 680 crores. It is also clear that global vendors
have es- established their expertise and experience, in handling the long-term,
complex outsourcing needs of Indian companies to enable business transformation.
It is no coincidence that Indian companies are opting for strategic outsourcing
at a time when the BPO phenomenon is at its peak. Indian non-IT companies are
taking to outsourcing as they are on the lookout for vendors with the best
domain knowledge. In simple terms, this is just another manifestation of
globalisation.
Several high-profile visitors from the US have told us
that India is one of the most closed economies in the world. This is partly
an attempt to legitimise anti-outsourcing legislation in their country. The
conventional test for gauging openness is tariff structures, on which India
scores well as per WTO standards.
Americans were earlier in a position to win competition and control the economies of other nations through monetary policies devised by multilateral agencies like the IMF and the World Bank. When international trade agreements were extended to the agriculture and services sectors, developed nations were not very comfortable since they started losing out to the competition. At that point, they started taking recourse to anti-liberalisation measures like banning outsourcing. But there is a huge contradiction here. The US economy is based on accessing world markets. One cannot ban outsourcing of business process while continuing to access world markets.
The US cannot
ban outsourcing while continuing to access world markets
The author is member, Central Economic cell, BJP
