Pay hike will mar BPO growth

By agencies   |   Wednesday, 20 April 2005, 07:00 Hrs
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BANGALORE: Wage inflation will continue to erode competitiveness of Indian business process outsourcing (BPO) industry, according to leading management consultant and research firm McKinsey & Co.

"The trend of wage inflation is really troubling. This will continue to erode Indian competitiveness. Historically, Indian wages have grown substantially faster than U.S.," McKinsey & Co consultant Jayant Sinha said.

Sinha, speaking on the sidelines of `Global Off shoring Outsourcing Summit 2005' organized by Indo-American Chamber of Commerce, said the wage inflation has been estimated at 10 to 15 percent in last five years and the trend signals a moderate growth in wage inflation.

"With increased wage inflation, prices are going to rise. This will pose a threat to India, which is known as a destination of low-cost and high skilled talent pool," he said.

He said Indian companies should address wage inflation immediately and carefully, as it would adversely affect competitiveness.

"Moreover, all major off shoring destinations, including India, are facing imminent talent shortage. Private-public partnership is necessary to bridge this emerging talent gap," Sinha said.

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