NEW DELHI: The globalization of salaries and the repricing of the educated Indian middle class also means that India?s much talked about cost arbitrage in white-collared jobs and the services sector could be vanishing, a newspaper said. Mercer Human Resource Consulting and Hewitt Associates have predicted that India will experience one of the sharpest salary hikes in the world next year. An Assocham survey of universities says that starting salaries for new recruits have risen four-fold between ?00 and ?04, the Economic Times today said. A survey of technical professionals working with a global IT company shows that the annual salary gap between equivalent employees working in India and Singapore has narrowed down to around $10,000. That?s all very well. But experts say that with the reduction in cost arbitrage due to rising salaries, the country will have to search for new sources of competitive advantage. Interestingly, the answer may lie in the rise of an educated blue-collared workforce and the leveraging of a possible savings boom. According to a Deutsche Bank report, while Indian salaries are still far lower than western salaries, the cost arbitrage will disappear much before parity is achieved on the salary front. For one, operating in India entails several hidden costs, such as poor infrastructure and regulatory delays. Furthermore, urban India is becoming expensive, with real estate prices spiraling and hotel rooms here being among the most expensive in the world. Also, as the salary differentials of the global IT majors shows, the income gap between India and alternate locations such as Singapore is small, particularly after adjusting for factors like taxes and infrastructure, the paper said. According to Deutsche Bank, if Indian salaries and real estate costs keep rising at the same rate, it will soon be profitable to shift these same Indian professionals to other locations like Singapore or Dubai. While the ?white collar? revolution, which has both been a cause as well as an effect of India?s economic transformation over the past 15 years, may be in danger of running out of steam, it is felt that the new growth engine may be provided by the pool of newly-literate blue-collared workers who will enter the workforce. Deutsche Bank says that a silent primary education revolution is taking place in the country and it expects literacy levels in the country to rise to over 80 percent within the next decade, the paper said. With rising literacy levels, the country will have a new pool of human capital that fills the middle ground. It will significantly change the availability of blue-collar workers to employers as well as the type of consumers available to producers. This demographic shift, it is projected, will be accompanied by another major shift in the availability of low-cost capital. The Deutsche Bank report says that it is possible that India?s savings' rate could touch 35 percent of GDP by the middle of the next decade. If savings' rates rise, conditions will be ripe for a growth dynamic that is driven by mass mobilization of labor and capital. This, in turn, will feed the kind of large-scale manufacturing and mega-infrastructure projects that have driven growth in South East Asia and China. However, this growth, according to the report, is conditional on the country being able to remove systemic constraints such as poor infrastructure and archaic regulations, the paper said.