IT can reduce regional disparities

Many critics think that India’s breakthrough in information technology (IT) is an elite phenomenon benefiting just a few cities. But I see IT becoming an unanticipated solution to a deep problem: growing regional disparities.

Traditional remedies — more cash and tax breaks for backward areas— have not worked. Thousands of crores invested in public sector projects in Bihar and Orissa have not brought prosperity. Pledges to invest in rural education, health and roads have proved an eyewash. Indeed, no teacher or doctor wants to serve in a remote tribal area.

Businessmen refuse to invest in backward states despite tax inducements because of lousy infrastructure, slothful and corrupt bureaucracies, and a poor work culture. Militant unions have killed industrial investment in Marxist states like West Bengal and Kerala. And so, investment and jobs have gone to a few rich, progressive states that have got even richer.

The good news is that IT companies may change this. IT-related businesses — software plus other outsourced services such as call centres, medical transcriptions, back-office work — will employ around one million people by the end of this fiscal year. That is tiny compared with the workforce of 400 million, not so tiny compared with the organised sector size of 30 million. Moreover, it is expanding so rapidly that IT-related jobs could quintiple to 5 million in 10-12 years. That may make IT the biggest employer of all.

Traditionally, job-creation has been attempted through new industries. But modern technology has slashed labour needs. In the decade 1994-2004, Tata Motors cut its workforce from 35,000 to 21,400, yet increased vehicle output from 129,400 to 311,500. Bajaj Auto cut its workforce from 24,000 to 10,500, yet increased vehicle production from one million to 2.4 million. More output, less jobs: that is the manufacturing scene.

By contrast, the IT industry is creating new jobs at breakneck speed. In the latest June-September quarter, three top IT companies (TCS, Infosys and Wipro) hired 14,000 new workers, virtually as much as the entire workforce of Bajaj Auto plus Maruti! IT sales are projected to rise 30-35% annually. If IT jobs rise a bit more slowly, by 20% annually, that means doubling employment every three-and-a-half years.

Frantic hiring in IT has created a serious shortage of skilled workers, a paradox in a country bedevilled by unemployment. IT companies find that workers they hire and train leave for better jobs within months or years. In the last quarter, Wipro and Satyam reported worker attrition of 18%, and Infosys of over 10%. So, they (and other IT companies) are moving to every part of India in search of English-speaking persons who can be trained to meet their inexhaustible needs.

They have penetrated the Marxist heartland of West Bengal and Kerala, where no manufacturing companies dare venture.

IT companies are less worried about militant unions since they create white-collar jobs, not blue-collar ones.

Besides, West Bengal has declared IT to be a public utility where strikes are forbidden. Kerala has welcomed the IT industry with open arms. After decades, these states are witnessing an explosion of new jobs.

The search for workers is now spreading to second-line cities all over India. To increase IT-related jobs from 850,000 to 5 million in a decade, companies cannot depend on big cities. They have to search every nook and cranny.

IT jobs are being created in places like Mangalore, Mysore, Shimla, Jaipur, Kanpur, Guwahati and Bhubaneshwar. Most new jobs will be in IT-enabled services, where skills required are not too high.

The question naturally arises, can IT conquer the slough of despond known as Bihar? After all, Bihar has plenty of educated people. Unlike manufacturing, IT can survive Bihar’s bad roads and infrastructure. But IT does require security. If workers get death threats from the mafia (as is the case with doctors today), no IT company will go to Bihar. On the other hand, many may go to unlikely places like Jharkand, Chattisgarh and Madhya Pradesh.

It would be foolish to claim that 5 million IT workers will end regional disparities. But every IT job creates three more jobs indirectly through transport, catering and maintenance services. Quite an impetus.

Besides, IT will create centres of excellence in the most backward states. The biggest spillover may be a strong work culture. For decades, government service has been the role model where you do no work and are unsackable. This has ruined the overall work culture.

But IT may soon create a new role model. IT workers in call centres and back-office outsourcing are highly disciplined. They strain for world-class standards in every department. They belong to a globalised business, and so bring a globalised work culture based on high productivity. If they can spread this new work culture to backward states, they will transform India.

What do you think?