India must make a huge push in education and infrastructure to ensure it is not overtaken by China as a global outsourcing destination, a top industry body warned on Tuesday.
China is unlikely to surpass India "in any significant manner over the next three to five years," said Kiran Karnik, president of the National Association of Software and Services Companies, or Nasscom.
"When I look in the rear view mirror, I don't see anyone there yet but I know they are out there and that they can move very fast... China must not be ignored," Karnik told reporters in New Delhi. China, the only other country with a population of over one billion people, has come a long way in establishing itself as a destination for information technology sourcing with government and industry working towards increasing the talent pool and improving the regulatory environment, Karnik said.
"While India continues to be the most favoured destination by far" for global business process outsourcing, "we need to ensure we maintain this position in the years to come," he said. "This will require a favourable policy and tax environment, a huge thrust in education and human resources and vastly better infrastructure," Karnik said.
The Asian Development Bank last month noted that education in India was lagging seriously behind its rapid economic growth with only 12,000 training and vocational institutes, compared to half a million in China.
India, which has the largest pool of English-speaking graduates outside the United States, who are willing to work for salaries far less than those paid in the West, has become a world leader in IT outsourcing as Western firms have sought to cut costs by moving many of their operations overseas.
Outsourcing has been vital in helping drive India's economic boom. India's IT software and services revenues totalled 30.2 billion dollars in 2006, up from 5.8 billion dollars in 2000, with growth being driven by exports.
China trails far behind with IT software and services revenues totalling 12.2 billion dollars in 2006, but that is up from just 2.4 billion in 2000, Nasscom said, with growth still driven by its domestic market. "We know China is moving ahead very rapidly" thanks to its "systematic and planned approach to rapidly developing key sectors of its economy," its substantial domestic market and sizeable educated workforce, Karnik said.
"They are learning English at breakneck speed," he added. The government in Beijing is extremely keen on promoting information technology and business process outsourcing, Nasscom added in a report on China's IT software and services industry.
Leading Chinese firms have reported average growth rates of 40 to 50 percent over the past few years and are beginning to receive a steady stream of business enquiries from Western customers, the report said. India's outsourcing success has brought growing competition not only from China but from other nations including South Africa, Vietnam, South Korea and Mexico.
Karnik said the two Asian giants could learn from the experiences of the other, with infrastructure development strong in China and standardisation of quality a key asset in India.
Even if China catches up significantly, Karnik said he believed it would not hurt India in a major way. "The global outsourcing phenomenon will only grow. There's going to be so much demand the only constraints will be supply-side constraints, not market share constraints," he predicted.
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