"Over USD 100 billion in revenue, accounting for around 7.5 per cent of national GDP, employing over 2.8 million people and creating a downstream spending effect of over USD 50 billion – this is the essence of the Indian IT industry."
All this, while saving up to USD 116 million annually for each Fortune 500 corporation working with Indian outsourcing service providers. These savings are reinvested to develop new products and new markets, to fuel growth and create jobs.
T K Kurien is the CEO of Wipro Technologies Limited. Previously, TK was the President of Wipro’s Eco Energy business and has also headed Wipro Consultancy Services, Wipro BPO and Wipro’s Healthcare & Life Sciences segment. Mr Kurien is a Chartered Accountant by qualification.
This growth and success would not have been possible without free trade which I believe has a larger connotation than lowered taxes and tariffs, and trade of goods and services across geographies. It also implies the free movement of market information, highly skilled professionals, capital and innovative business practices.
Knowledge-based industries flourish in a liberalised environment where information and talent flow towards centres offering the best rewards. The bottom line is an unambiguous net gain for businesses looking to use technology for efficiency purposes and the IT services sector which supports the former. To emphasise this, a study by McKinsey Consulting a few years ago estimated that for every dollar of corporate spending outsourced to India, the US gains USD 1.14 and India captures 0.33 cents.
However, recently countries are increasingly under pressure to create legislation to reform immigration, control outsourcing and increase insourcing, to save jobs. There is a real danger of policymakers increasing trade barriers in order to protect domestic industry across verticals and labour under the guise of anti-recessionary measures. But in a highly interdependent world this would be a recipe for disaster. This scrutiny ignores reality, where benefits to the global economy have been constantly demonstrated through creation of value, lower prices of products and services, rise in productivity and greater opportunity of entrepreneurship.
Higher taxes could offer protection to industries that compete with imports. But as other countries begin to react with their own barriers to imports, the revenue and job losses in export-based industries could far outweigh the gains from protectionism.
Today 60-70 per cent of the growth in the revenue of large American organisations comes from India and China. These are the growth markets of the present and future, so organisations cannot ignore them to remain competitive in the global market. To give an example of its importance, reverse innovation is becoming popular across businesses, whereby products and services are being developed at less than one fourth of the generic cost and launched in emerging markets, before being shipped to the West. On the other hand, developing countries need access to the best technologies and capital. It is clearly a win-win situation for both sides.
A little known fact is that Indian organisations are not just saving but also creating new jobs in the US. A dipstick survey of recent news announcements of the top 10 Indian IT players suggests that they plan to create thousands of jobs in the US in the next few years — ‘insourcing’ — as they expand their operations to where the customers are.
In the current uncertain economic times, this is a trend which buttresses the fact that free trade is a two-way street. Economic jingoism plays to the nationalistic interests of a country and that’s dangerous given today’s stressed global economy. The one truth that can guide us, should be: No business needs protection more than it needs opportunity.