Friday, February 23, 2007

Why outsourcing should be encouraged

There has been much speculation as to whether outsourcing is the "salvation". Salvation from what?Anyway, human thinking generally acknowledges that there are many paths to salvation. If salvation is social and economic development, then outsourcing is one more vehicle that can take India on that path.

The concern has been expressed that outsourcing of businesses processes to India by foreign organizations distorts the wage structure and takes away qualified personnel from potential domestic employers. Well, India has chosen the path of market economics and employers have to compete in the free market for services with other
employers. The published profit margins of Indian businesses are healthy. There is no reason why they should not be able to attract the employees they need. In employment, as in other business functions, the age of protectionism is under sentence of death.
Its not only in India that outsourcing has its critics. There is a groundswell of opinion in the USA and other Western countries too against the loss of jobs to India. This opposition is misconceived. The critics of outsourcing in the West overlook the fact that their countries do not have the manpower to cater to the growing demand for services. Traditionally, shortage of manpower has been met in the West through immigration. Outsourcing achieves the objective by exporting the jobs rather than importing the bodies, which in turn creates pressure on facilities and generates shrill opposition.

For countries like India, outsourcing helps prevents the migration of educated, qualified youth. The retention of these skills in the country (and the purchasing power which goes with it) is surely a beneficial factor.
The view has been expressed elsewhere in these columns that "... a nation will suffer if its best brains (engineering, scientific,academic, cultural, commercial, entrepreneurial) are not channeled to their natural calling.." Absolutely correct, but the answer surely lies in providing them with greater opportunities to exercise their "natural calling" rather than denying them the present opportunities that provide them with an alternative to choosing between emigration and underpaid employment at home.
If India doesn't mind exporting goods, it is hard to understand the aversion to exporting services to earn foreign exchange. Amidst all the euphoria about India's foreign exchange earnings, it is worth remembering that these are still a fraction of China's and that NRI remittances still account for more foreign exchange than India's entire IT exports.

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