Home India 2009 India‘s knowledge economy

India‘s knowledge economy

by david.nunes
Author's PictureIssue:India 2009
Article no.:13
Topic:India‘s knowledge economy
Author:Venkat Kedlaya
Title:Managing Director
Organisation:Convergent Communications India Pvt. Ltd
PDF size:264KB

About author

Venkat Kedlaya is the Managing Director of Convergent Communications India; he has over 33 years of experience in technology ranging from office automation to communications and information technology. Previously, Mr Kedlaya served as General Manager of the Networking Division in South Asia of Motorola’s Information Systems Group. At Motorola Hong Kong he was Director of the Transmission Products Group, responsible for the business in Asia Pacific and helped to start Motorola first JV in India. Mr Kedlaya was also Motorola’s General Manager for their two-way radio manufacturing facility in Bangalore. Prior to Motorola, he worked for Modi Xerox, with a stint at Rank Xerox UK. Venkat Kedlaya is the past President of Bangalore Chamber of Industry and Commerce and is a member of the National Executive Council of Manufacturers Association of Information Technology. He is also the Chairman of MAIT for the Southern Region. Venkat Kedlaya is a postgraduate of IIT Bombay and attended management courses in Ashridge UK and Greensboro, USA.

Article abstract

India’s economy is world famous for its spectacular growth in the last decade driven largely by call centres and business process outsourcing (BPO). In recent years KPO, knowledge process outsourcing, higher value, highly skilled technical services including R&D has increasingly shifted to India. India’s skilled manpower, entrepreneurship and government policies that combined regulatory laissez faire with financial stimulus all worked together to fuel this exceptional Indian phenomenon. Some 55 per cent of India’s GDP is now derived from the services sector.

Full Article

India has earned the attention of the world as a premier destination for service outsourcing over the last ten years. The industry that was driven largely by Y2K projects and outsourced call centres has now grown to be a major centre for product design, research, KPO (Knowledge Process Outsourcing) and the like. Recently, Warner Brothers said that they would like to use India for outsourcing some of their movie-making activities. The transformation from a pure outsourcing country to a value-added services centre was due in good part to the availability of India’s highly skilled manpower, but was due to an even larger extent to the entrepreneurship of Indian businessmen and to the government that mostly maintained a hands-off attitude so the sector could develop freely. Businesses could be set up with very few approvals and get going with even fewer restrictions. Today IT has more than 70 thousand employees in a country that it left in the late 70s due to a Government regulation. To its credit, the Government did provide incentives for the industry. Some of the Indian IT companies are now global companies and quite a few companies now serve customers in Europe and Asia as well as the US, but the down turn in the west has affected India as well and the industry is bracing itself to meet the challenges of a slowdown or recession. Nevertheless, many see an opportunity in these times of adversity and larger companies have adjusted their plans to factor the loss of business due to the slowdown and bankruptcies such as Lehman Brothers and Nortel, to name a few. India, today, with its large services economy is a country that is vastly different than it was in the past. Agriculture continues to be the dominant provider of employment, but its contribution to GDP is less than 20 per cent, while the services sector currently contributes almost 55 per cent. In addition to business process outsourcing (BPO), and software services, India is doing a lot of work in the areas of product design, clinical research, engineering services and testing services. The software and BPO industry has helped by generating direct indirect employment for a great number of people. The growth in the mobile telephony industry and the auto industry has had a major influence upon the growth of the services sector and the consequent growth in per capita income. Opportunities While the west is struggling with recession and adopting strategies to end it, India expects to grow, albeit at a slower, more modest, rate of six to seven per cent. Some of this growth will come from the continued investment in infrastructure projects like power and transport and urban renewal. There is also a plan to pump in money into sectors like e-governance and rural connectivity. This is an opportunity for ICT industry to manage the down turn with modest growth rates as well as opportunity for Indian economy to take advantage of ICT capabilities, which so far has mainly been helping businesses in countries with a developed economy. True, there have been pilot projects extending the benefits of connectivity in urban areas like Bangalore, Delhi and Hyderabad, but the same sort of projects can now be extended to a large number of cities. The government’s USO Fund – the Universal Services Obligation Fund – is meant to provide rural connectivity. The government will provide financial support for projects that will offer telecom and broadband services in rural areas. However, the money here is lying unused. BSNL, the state owned Telecom provider, has been trying to get these funds allocated, but the Department of Telecom has other ideas. The fund has asked agencies and businesses to submit proposals and many expect that niche operators will be allowed to use the funds to extend ICT to rural areas. Niche operators essentially operate in small regions such as a district and offer mobile and broadband services. Neither MVNOs nor niche operators own spectrum or have their own infrastructure. They lease capacity from national operators on a wholesale basis and then resell it to end users under their own brand TRAI, the Telecom Regulatory Authority of India had earlier proposed instituting this new category for promoting rural telephony. With funds in excess of US$3 billion, this is an area for growth in infrastructure spending. The new infrastructure will eventually help create new opportunities for rural folk and strengthen the agricultural sector by using ICT in such areas as crop management and marketing. It will also bring quality distance education and entertainment over broadband to people in rural regions. The TRAI had suggested permitting niche operators to operate in districts where rural teledensity is below one per cent. TRAI had said that niche operators should be eligible for subsidies from the Universal Service Obligation (USO) fund on the same terms as those available to the other access providers. Niche operators could also be spared from spectrum charges. The government has also earmarked about US$2 billion for e-governance projects. This fund is to be used by states for implementing e-governance projects that help citizens get services transparently and speedily, without having to deal with bureaucracy or even bribery. Jobs in the software industry have been among the most sought after careers in India. Collegiate education has fully exploited this and many colleges now offer a variety of courses in technology. Many have entered into agreements with international institutes, but FDI (foreign direct investment) in the education sector is not permitted. This is a sector that is expected to grow significantly, especially for development of higher skills. The government is also investing in education. Besides increasing admissions to their highly acclaimed IITs (institutes of information technology), for political reasons there are plans to develop new IITs and new management institutes on the model of IIMs. In the short term, there is critical shortage of personnel to staff these expansions – that, itself, is a challenge and opportunity both for Indians and for those who want to move to India to take up jobs. Challenges India continues to lag in terms of product ownership as can be seen from low levels of patents and intellectual property rights claims coming out of the country – probably only one per cent of Japan’s contributions but India is getting there slowly. A lot of technologically skilled work is now being performed in India in collaboration with the developed world. Products and services developed in India and made for the world market are not yet common in India. Industry – academic collaboration is increasing, but not adequate. The rush to the software sector has certainly adversely impacted the availability of talent in basic and applied research. The government has recognized this and has initiated a few steps, including providing financial support to help top-level institutes acquire new facilities and providing attractive scholarships to those who take up higher education. Private enterprise is the most powerful engine for growth in India. Entrepreneurship has always been in the country’s genes, and with the government continuing to open up sectors, India will learn to take advantage of technology to achieve economic growth.

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