India seen as third largest IT, BPO industry

Thursday, 18 September 2003, 19:30 IST
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NEW YORK: Speaking at a luncheon by the India-America Chamber of Commerce in New York, Kumar Mahadeva, chairman and chief executive of Cognizant Technologies, said India will be the principal beneficiary of BPO from the U.S. "India's IT and BPO sectors will be the third largest in the world by 2008 after the U.S. and Japan, although it is only scratching the surface today with a two percent market share," he said. The contribution of these two sectors to India's gross domestic product (GDP) will increase from the current level of two percent to seven percent in 2008 and their share in exports will increase from 20 percent to 50 percent, he said. "The political side of BPO is certainly heating up," he said. "But if you look at long-term projection, the skilled worker gap in the U.S. will reach 14 million by 2020," he said in his talk on "The Next Wave of Globalisation: Business Process Outsourcing". Those present included Consul General of India in New York Pramathesh Rath and Deputy Consul Ashok Tomar as special guests. Mahadeva said the main reason for the backlash against BPO was that economic recovery in the U.S. had not translated into more jobs. "It is also the 'silly season' right now in Washington, D.C., with the presidential election, then Senate, the House, and many of the governors and state houses. Jobs, therefore, are certainly a major issue," he said. Yet, one cannot shy away from the fact that the baby boomer generation in the U.S. is retiring and that the next wave of knowledge workers will be much smaller, he said. To an extent, Mahadeva also blamed some Indian companies for some of the protectionist measures proposed by the U.S. "The L-1 visas are under scrutiny. The abuse by some India-centric companies has spawned some negative press about L-1 visa misuse," he said. One of the outcomes has been the decision to restrict the number of H1-B visas to the original level of 65,000 with effect from October 1, from 165,000 earlier, he added. Mahadeva, nevertheless, was hopeful that the some of the positive aspects of BPO would eventually outweigh the protectionist measures that are being proposed now. "There has been a dramatic productivity growth in the U.S. because of BPO. The U.S. banking and financial services have saved $8 billion in four years from off-shoring," he said. "According to McKinsey Global Institute, in terms of additional GDP, every $1 that is outsourced off shore produces incremental GDP of $12 to $14 in the U.S.," he added. In his introductory remarks, Rajiv Khanna, president of the chamber, said the strong relationship that was seen in the manufacturing sector between China and the U.S. is now being witnessed between India and the U.S. "In the last financial year, India exported services of $8.5 billion to the U.S. This gave the U.S. a cost saving of $10-$11 billion, which was invested by U.S. companies, leading to more jobs, or distributed as dividends and bonuses, increasing consumer spending and investment," he said.
Source: IANS