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India's Information Technology Industry Powers Major Economic Growth - 2003-08-28

Information technology, or IT, has been helping drive the world economy for years now. But it is not just the industry giants of the West at the controls. Over the past decade, India has become a major player in some IT sectors, and the industry accounts for some 20 percent of India's foreign exchange earnings.

An impatient customer in the United States wants his phone line connected. So he calls the "help" number at the local phone company.

"My name is Sarah," answers someone. "I'll be assisting you with activation of this services."

What the customer does not realize is that he is not calling across town but half way around the world to India where Sarah, whose real name is Neelu Bhandari, does the job. It is all done with the touch of a keyboard.

Sarah works at the Daksh Services Company, in Gurgaon, a hub of information technology firms, about 20 kilometers southwest of New Delhi.

Daksh Chief Executive Officer Sanjeev Aggarwal says the company does work for some of the largest corporations in the United States and handles a variety of services, from simple computer help calls to payrolls and insurance claims.

"Our company, I would say, is a pioneer in business process outsourcing," said Sanjeev Aggarwal. "This cuts across three enterprise assets. First is customers. The second piece is the people. There's a payroll to be processed, there's 401-k retirement plans, etc. And the third piece is about the financial, like processing claims for a health care insurance fund. So, really touching customers, employees and money is where the entire world of BPO [business process outsourcing] works at."

Mr. Aggarwall says that BPO, or business processing outsourcing, was made possible by the information technology revolution.

"This telecom and Internet has enabled really is that you can actually have "virtual" workers all over the globe and you're not bogged down by distances, countries of origin or country of processing," he added.

Mr. Aggarwall says it's globalization at its best.

"It's helping you to optimize the global network, so just the way manufacturing 30 years back moved to efficient sources of supply," he said. "I think the same is happening to the knowledge sector now."

There has been some backlash to this outsourcing of jobs - complaints from the United States for example that jobs are being taken away from American workers and shifted to places such as India. Mr. Aggarwall says the concern is understandable but unwarranted. He says outsourcing can help foreign companies increase efficiency and reduce costs, which makes them more profitable. And, countries such as India generate employment, which translates into consumer spending, often on imported goods.

IT outsourcing in India began as simple help-desk phone services over a decade ago. The BPO sector, however, has grown into a major industry that employs around 150,000 people. While that is small in terms of India's population, industry analysts say there is tremendous potential for growth.

Kiran Karnick is president of India's National Association of Software and Service Companies, or NASSCOM. He says the industry now is reaching into the more sophisticated production of software packets and micro-chip design, with output worth $12 billion. Almost all of it is exported.

"Importantly also, this industry has done a great deal for India's image outside," Mr. Karnick said. "It's helped in indirect ways … in terms of helping other exporters because India is being recognized as a quality exporter of goods and services, which frankly wasn't the picture earlier."

Mr. Karnik projects that by 2008 the software and service sectors will be a $75 billion industry powering economic growth for India.

The industry has been a boon to India's young university graduates. The average age of employees at Daksh Service, for example, is 25. And, employees such as 23-year-old Neelu Bhandari, or Sarah, feel they have a future.

"It's an excellent job," she said. "I love it. I love to talk to different people, to a different kind of culture. ... I would like to see myself 10 years from now in this field because there are lots of growth opportunities. So, I would definitely like to be here in this industry even 10 years from now."

India produces two million English-speaking university graduates a year, in fields such as accounting, economics, commerce and engineering. They stand to benefit most directly from this growing business.

Swaminathan Iyer, consulting editor of the Economic Times newspaper says the information technology industry is providing a broader benefit for Indians, even in rural areas, as new Internet kiosks are set up every day, like phone booths that give access to the Internet.

"If you have an Internet kiosk within five miles of where you are, you go for a specific thing," he explained. "You'll find the farmers go there just to check out which of the different market centers is quoting what price for my product. You are then able to know those prices and then immediately able to hire a truck to take your produce to the place with the best price. … Anybody who thinks this is only benefiting a few international, jet-setting nerds is wrong."

Of course, there are large segments of the society that have yet to see any benefits from the IT revolution.

India is a country of one billion people. More than 40 percent of adults are illiterate and 80 percent live on two dollars a day or less. There are still crowded slum dwellings with open sewers and many men, women and children live and sleep by the side of the roads, sharing their space with cows, goats and stray dogs.

Most analysts believe, however, the benefits of technology eventually will help the economy and society at large.

"India is very lucky to have really got onto this bandwagon at a very early stage looking very strong and internationally competitive," said Swaminathan Iyer, Economics editor. "…This new IT revolution is not just helping a few guys getting employed, potentially it's employing everybody."

And, with the outsourcing service business firmly established and other technologies expanding, India has reason to look to the future with a good deal of optimism.