For both its critics and advocates, foreign investment has usually meant industrial investment. This is a narrow, increasingly obsolete approach in a world which is inexorably shifting from manufacturing to services, in both rich and poor countries. In India, the share of services in GNP is almost double that of manufacturing, and still rising.
Without playing down the importance of manufacturing, we must persuade foreign companies to use India as a global services centre. This concept must not be confused with attracting foreign investment in services like banking or insurance. That may be desirable for other reasons altogether, like improved competition and technology. What I wish to stress in this article is something quite different-the use of cheap Indian clerical skills by foreign companies to service their operations in other countries.
A decade ago, an American company would use American clerks in an American’office. New technology in satellites, telecom and computers has changed all that. No longer need clerks enter information in dog-eared legers, carry stacks of documents between offices, or be physically close to their supervisors. Companies in all countries increasingly use. computer networks providing instant access to all files to everybody with a computer terminal, ensuring that any updating or new information instantly appears on all screens.
With improving global communications using satellites, such office networks can spread across the globe, and have already started doing so. A supervisor in Chicago can have clerks in London and Hong Kong, and they can communicate faster and more comprehensively than three such people in a traditional office building in New Delhi.
SUPER-BABUS: This has revolutionised clerical work. The traditional Indian babu (clerk) is used to pushing paper laboriously between tea- breaks, saying it will take weeks to trace this file or that document, and asking for speed-money to move files. But the people manning computer networks are a new breed of super-babus, skilled and computer-literate.
They have a completely different work culture from the traditional babu, since they operate a high-tech system geared to high speed communication. They are in fact executives, not clerks.
India needs to create appropriate conditions for foreign companies to train and employ millions of super-babus to do their global clerical work. Modem technology ensures that routine tasks, requiring no managerial decisions, can be done anywhere in the world, with no loss of control or convenience to supervisors. Global credit-card companies, for instance, deal with enormous quantities of bills, reminders and transfers. Why not create conditions where they get their global load of such work done by Indian super-babus? Why not get cheap, skilled Indian labour to handle the huge clerical load of every large foreign company in the world ? Why not persuade them to set up massive super-babu centres in Indian (Cities linked by satellite to the rest of the world?
FEWER JOBS: Manufacturing is getting progressively mechanised, and yields fewer and fewer jobs the world over. Foreign investment in manufacturing will yield far fewer jobs than it would have 20 years ago. The auto industry was once regarded worldwide as a big employer, but Maruti Udyog’s labour costs are only 1.6 per cent of its total costs, thanks to modem technology. India’s comparative advantage lies in cheap labour, but this is eroding steadily as the labour content of manufacturing falls. So India needs to pay far more attention to labour-intensive services.
Becoming the super-babu of the world is easier said than done, and will require purposive action on several fronts. It means ensuring that non-labour costs are as low as anywhere else in. the world, and this means exempting such units from import duties on computers and other hardware. It means world class telecom services with telephones available on demand, high-quality reception, satellite links for global communication, competitive telecom rates in place of the monopolistic rates charged by Videsh Sanchar Nigam, and lines which do not go, dead the moment it rains (as is the case in many cities today).
Multinationals will suffer significant costs in relocating to India. They will have to pay substantial compensation to retrench clerks in their existing centres, and invest considerable sums in opening new ones ‘in India. They will find this worthwhile only if they really save enormous sums on labour costs without any loss of efficiency. They will have to be convinced that local laws and conditions will not suddenly be changed to their disadvantage. Their saving in wage costs will undoubtedly -be large-even if they pay Rs 15,QOO a month for skilled super-babus, that is just one-sixth the US clerical wage. But foreigners will have to be convinced that government policies will remain market-friendly, and that communications infrastructure will become world class.
Will foreign companies move service activities to India when trade union power is often misused, and Section V-B of the Industrial Disputes Act makes it virtually impossible to retrench workers or close down units ? This should not be a problem, because the super-babus will be executives, not workers. Even if some courts give a different interpretation, that will not mattter. It is a little-known fact that Section V-B applies only to manufacturing units, not services. India needs to publicise this as widely as possible. Our labour laws make India far more attractive to investors for services than manufacturing.