The IT companies are miffed not because of the rising rupee, but because of rising costs in terms of salaries. If the rising rupee was not accompanied by sky rocketing salaries and un-bearable attrition, I'm sure they would be easily making a bundle.
When the US faces employment crunch, they just import more labor. India is not in a position to do that (who wants to migrate to a third world country?). The real solution is to produce more of qualified professionals. When there is more supply of engineers, technicians, college graduates, etc the costs will be contained and the jobs maintained in the long run. The government should be going out of its way to attract FDI in the education sector, instead of indulging in shenanigans about 'not-for-profit' institutions and 'job reservation in private sector'.
RE:Real issue is rising cost of employment
by Cricket s on Jul 29, 2007 10:42 PM Permalink
Improve the infrastructure and Simply move the jobs from cities to smaller towns. This is already started happening in India
RE:Real issue is rising cost of employment
by Loan Shark on Jul 29, 2007 11:33 PM Permalink
rising salaries are due to competition ... for long Infosys and wipro types have paid less and attracted the best ... now the spectrum has widened and the "best" has choices including a better paycheck. These companies have made a killing, some time to see a cut in profit to survive in this competitive world.
US does not have employment crunch. They just want to cut costs. The result is that today US software companies like IBM and Accenture are competing with sambhar drooling, unshaven programmers from Infosys and Satyam.
RE:Real issue is rising cost of employment
by T D on Jul 30, 2007 12:33 AM Permalink
Rising salaries are due to a tight labor pool; would the IT companies be hiking their compensation if the number of available IT professionals was growing at the same rate as the number of jobs?
The unemployment rate in the US is 4.5%, which is considered pretty tight. During the dot com boom, the rate was at 4%. Traditionally, the Fed expects the unemployment rate to be at or above 5%. Bernanke's reasons for not bringing down the interest rates are mostly about inflation fears driven by high capacity utilization in the labor pool aka tight labor market. Besides, Bil Gates wouldn't be testifying before the Congress to increase H1-B quota's if their only consideration is to cut labor cost, since labor in India is still cheaper than the U.S.
On the other hand, while the Indian Rupee appreciated by more than 10% in less than 6 months, the Chinese Yuan has appreciated by much less than 10% in over 2 years. One of the reasons, is that China has not really faced as bad inflation as India (they do have inflationary pressures, but it simply isn't as bad as what India faced early this year). One reason is that China has been able to supply ample amount of unskilled and in-experienced labor. Where they face labor shortage, they have seen jobs moving to other countries such as Vietnam.
Since India targets the higher end of the labor outsourcing market, it needs to constantly churn out well qualified labor. If India has to maintain its comparative advantage in this arena, it needs to
RE:RE:Real issue is rising cost of employment
by T D on Jul 30, 2007 12:50 AM Permalink
[continuing from my previous post due to char lmit ...]
If India has to maintain its comparative advantage in this arena, it needs to invest heavily in the education sector. We need to have a institution of the caliber of IIT/IIM in every state, each churning out far more students that what an IIT/IIM does today. Surely, the govt on its own will not be able to achieve it and we should endeavor to attract FDI from reputed Western universities, even if it is a for-profit endeavor.
In the long run, India is going to depend on imports to a significant degree, given our huge population and limited natural resources (India is roughly 11 times as dense as the US.) We are going to depend on the rest of the world for energy, food (see how we had to curb some food exports during the recent run in inflation? these are just signs of the times to come), industrial raw materials, machinery, you name it. The Indian Rupee cannot continue to be cheap. This means that our exporters will get hammered, if they cannot contain their costs. Either the exporters will need to move up the value chain (which requires a smarter labor pool) or they need an ample supply of skilled labor. Either way it is going to be crucial for India to generate massive amounts of skilled labor.
Surely, there is no escaping from FDI in the education sector, for the good of the nation.
