No offshoring? No jobs for Americans, warns RBI
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No offshoring? No jobs for Americans, warns RBI

By SiliconIndia   |   Tuesday, 31 August 2004, 07:00 Hrs
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NEW DELHI: Barriers raised by the US to outsourcing would slowdown its economy and reduce the number of new jobs available to American workers.

Also outsourcing from India has seen reduction in costs by 40-60% for MNCs, whose productivity increased 20-150% and quality 3-8%, said the RBI annual report for 2004.

The RBI in its annual report also said that Indian Business Process Outsourcing (BPO) companies should go in for mergers and acquisitions in India and in other developed countries.

These companies also need to diversify their markets to other countries than depending only on US market, said RBI.

The report has quoted a study by Global Insight which revealed that the majority of job losses to offshore outsourcing between ‘00-03 occurred due to slowdown in the US and bursting of telecom and dotcom bubbles.

The US outsourcing from India has reduced costs by 40-60%, improves quality by 3-8% and increases productivity by 20-150%. India received only a faction of the value created by outsourcing – out of every $1.45-1.47 value created, $1.12-1.14 goes to the US and India receives only 33 cents.

A number of US companies are in favour of outsourcing to India purely on economic grounds. The report also said that more traditional industries like manufacturing, energy, transportation and retail sectors located in developed countries would be outsourced to developing countries in the near future.

The report said that the Indian BPO market should attain maturity through consolidation to withstand that the competitive threats particularly from emerging East Asian countries.

M&As would help companies to achieve cost efficiency and competitive price advantages. Indian companies need to continuously innovate and maintain its low-cost niche in order to compete with countries like China, Philippines, Malaysia, South Africa and Singapore.

The report added that India need to set up more foreign affiliates in the IT segment, besides attracting more FDI to undertake BPO activities in the country “which would pacify the protectionist reactions by developed countries.”


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