Reality check on IT: Masters or cyber-coolies?

India's computer software export boom is admittedly a success story, with annual growth of 40 percent-plus or more over a decade. But the euphoria is misplaced -- and not only because growth has slowed down to 26 percent.

For all its contribution for India's economy, IT remains an "island" phenomenon. It cannot drive the country into another development "stage" -- for three reasons.

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First, the IT business remains extremely (80 percent) export-dependent. This is even truer of information technology-enabled services (ITES) like call centres, medical transcription and business-process outsourcing (BPO) which are growing twice faster than software exports.

The best estimate of the size of India's indigenous IT sector, including hardware and domestic software, is under 2 percent of GDP. By contrast, trade and hospitality account for 15 percent of GDP. Even in external accounts, software exports ($7.2 billion) contribute less than remittances, mainly from Gulf workers ($8.1 billion).

Even if optimistically the ITES/BPO business grows five- or eight-fold over five years, its GDP contribution will remain small.

Second, despite their meteoric rise, most IT companies are puny by Indian corporate standards, their sales being about one-tenth of these manufacturing sector majors.

It is only this year that India's largest IT company, Tata Consultancy Services, joined the "One Billion Club", with revenues exceeding Rs. 4,800 crores. Other IT giants, like Infosys and Wipro, have lower revenues.

Only four IT companies figure in the Economic Times list of top 100 corporations (in sales). IT companies' profits are high and share prices stellar. But their turnover is limited.

Third, the geographical distribution of IT is more uneven than that of literacy, education, or infrastructure. Of total IT exports, the South alone accounts for over 50 percent. The North is a distant second (26 percent). The East lags at just 2 percent.

There are no signs that these huge gaps are narrowing. This too doesn't speak of a national-level "growth engine". There are other constraints too, such as poor infrastructure, low telecom density (just five out of 100 Indians are connected), and poor penetration of computers (less than 6 per thousand people, as compared to China's 19).

Many IT strategists pin their hopes on the rapid recent expansion of IT-enabled services. Their growth spurted last year by 59 percent.

ITES now contributes a quarter of India's IT exports and has created 160,000 jobs. ITES boasts of a 65:35 female-male employment ratio. According to the National Association of Software and Service Companies, ITES "has the potential of creating one million direct jobs by 2008" largely through outsourcing or farming out by the West.

India has emerged as an outsourcing destination because of ITES advantages like low costs, language, and policy stability, according to investment banking research firm, Brean Murrary Research. The firm says India should adopt the outsourcing model as a "strategic necessity".

However, this hope is running up against obstacles. The greatest obstacle is rising awareness in the West that India's ITES has grown largely because of outsourcing. Well-known consultant Forrester Research estimates that 3.3 million service-sector jobs will leave the US by 2015, half of them for India.

In Britain, The Sunday Times carried the "shock and horror" headline: "Banks prepare to shift 200,000 jobs to India". This has alarmed trade unionists into launching a campaign against India's call centres.

These aren't all crying-wolf stories. In the US, Silicon Valley programmer Kevin Flanagan recently shot himself to death, because he couldn't face the prospect of losing his job to outsourcing. Ironically, before being sacked, he helped train the very Indians who took over his job.

Flanagan's circumstances were not exceptional. He was one of some 800,000 Americans who lost their jobs to outsourcing last year alone.

This has prompted New Jersey to ban the export of IT-related state contracts. Missouri, Connecticut, Washington, Maryland are also moving in that direction.

Why is India an outsourcing "threat"? In the US, it costs $43,000 to hire a full-time ITES employee. An Indian employee costs $6,180, or seven times less. Because of time-zone difference, India can provide round-the-clock service all days of the week.

Big companies like General Electric report 85 percent-plus "satisfaction" ratings for their Indian employees. There is a large pool of English speaking low-skilled manpower in India. All this makes it a corporate attraction -- and a Western worker's nightmare!

The crux is low wages. India's ITES-BPO, like its software business, is heavily concentrated in low-paid jobs. Indian companies have developed few software products. They develop sub-pac0ka-ges/assemblies/programmes that go into the final products marketed by US companies.

A good proportion of the sub-programmes in Windows 95 and 98 were developed by Indian engineers. But it's Mr Bill Gates who skimmed off the profits!

In call centres, the situation is even worse. Here, young women and men work painfully long hours practising cultivated American accents to sell products they have never seen -- all for a pittance. This disembodied work relationship, and low wages -- lower than even a bank chaprasi's -- are turning these people into cyber-coolies.

This isn't something we should be proud of. We must get into high-end, high-value-added services, which alone can upgrade our people's skills, raise incomes and redistribute wealth. We must set our sights high.

That implies ambitious goals for manpower training, skill generation, backward-region development, export content rules, etc.

Western companies won't do that for us. Setting our goals in accordance with our people's needs and resources is the only way we can move from being cyber-coolies with no rights and little security, to dignified workers who control their own labour.

Praful Bidwai is an eminent Indian columnist.