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India's rise is good or bad for America?

November 08, 2006 14:44 IST

Is India's gain America's loss?

Sunny globalists like New York Times columnist Thomas L Friedman delight in India's rising economic prominence, led by its vast pool of high-tech engineers.

Then there's the apocalyptic crowd, who believe that India's advancement is inexorably tied to America's ruin. In their eyes, every time a US job leaves for India--where well-trained people will get the job done for 30 per centĀ or less of US wages--American workers and the overall US economy suffer a grievous wound.

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The answer is less clear-cut than either side would have you believe. India's new status as a high-tech powerhouse is creating headaches that could soon cause India to look a lot more like any prosperous Western country wrestling with complacency, obesity and all the other ailments of the well-to-do. That doesn't mean Americans can kick back and chill. But as the monetary costs of doing business internationally level out, new opportunities for clever capitalists will appear.

Back in the 1980s, I got to know India as a student of developmental economics and as a visitor who rode rickety overnight buses that swerved around roadside cows. Back then, government restrictions and infrastructure problems made it simply too hard and too expensive to do much high-tech work in India.

Returning to India earlier this year, I was awed by many of the changes triggered by more liberal economic policies and the influx of work that came as international companies first swerved to avoid Y2K problems, then looked for cost savings by piping work overseas via the Internet. Now cities like Bangalore and Hyderabad hum with energy, money and opportunities.

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When I returned to the US, a Silicon Valley friend glumly asked if I too was convinced that American businesses would soon be hollow shells, mere marketing fronts for legions of harder working Indian engineering enterprises.

Not quite, I said.

On the one hand, there is plenty of evidence of the energy and smarts of the Indian workforce.

Stuck in a traffic jam in downtown Bangalore on a work morning, I saw jauntiness in the step of the people heading to work. Locals even take a weird pride in the morning traffic snarls. Look at how busy we are! Just about everyone clutched a cellphone. Just about everyone looks young--because they are. More than a third of India's population is under the age of 15, making it among the most youthful nations on the planet and certainly younger on average than China.

The startups and companies I visited in Bangalore included giants such as Wipro as well as homegrown ventures such as Cosmic Circuits, which design analog circuits for companies making wireless gadgets.

These little companies are virtual cousins to Silicon Valley startups. Ganapathy Subramaniam started Cosmic Circuits with four colleagues after he had spent 16 years at Texas Instruments-India. The engineers kicked in their own money and got their start in Subramaniam's living room. Within a few months they had lined up a couple of international clients and were recruiting on top Indian campuses for "freshers," or recent engineering graduate students. They were so keen to meet one deadline that many people in the company worked for seven days without leaving the office.

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Now, 15 months later, Cosmic Circuits employs more than 50 engineers working on analog chip design and has a dozen international customers. The company's offices have moved to the eastern fringe of Bangalore in part because the cost of downtown office space rivals San Francisco.

From its building, you can see a rash of construction: luxury homes, tunneling into streets to lay fiber optic cable, even bamboo scaffolding swaddling a new local temple. Subramaniam loved his tenure at TI. But he is eager to demonstrate that Indian companies can hold their own with the best. "India has proved herself in software services," he says. "Can we do it in semiconductor design? That's our ambition."

India's more established companies are now struggling with the problems their American competitors face. Big companies, including Wipro, Microsoft, Google and Dell, fill up towering modern offices surrounded by carefully manicured lawns.

It's only a short stroll across those lawns, however, to another office--and another job and a bump up in salary. Managers are reluctant to discuss turnover, but it's a big issue here. Wages are rising steadily, particularly for more experienced engineers. Dataquest India reported last year that engineers could expect an 18 per centĀ average salary bump each year.

Those who watch broad trends worry, too, that India may be running thin on good help. The National Association of Software and Service Companies released a study this year that found that only one in four engineering graduates were employable. The others lacked technical skills, English fluency, ability to work in teams or presentation skills. Some of India's big companies, such as Wipro and Infosys, have begun recruiting top graduates in any field of engineering to work in information technology, creating a vacuum of talent in other fields.

Managers tell me that even when they can find employees, they're increasingly difficult to please. One Indian boss--who has supervised engineers in both the US and India--was vexed at the challenges of managing in India. "People don't say no," noted one manager, even if they don't know how to get a job done. They may be willing to put in long hours on a project, but may not know how to get the help they need to solve a problem.

When projects are finished, employees crave evaluation. "They want lots and lots of recognition," sighed one manager. Employees at another company practically stopped working until executives procured fancier ID badges, simply because friends at nearby companies had such badges.

I idled away half a day in the Bangalore airport, waiting for a delayed flight for Hyderabad, watching well-dressed Indian families also waiting for flights to various local destinations. Everyone looked well fed, many bordering on plump. Teenage boys grinned, flashing silver braces on their teeth. Gold bracelets jangled on the arms of young women as they snapped open the latest Motorola Razr cell phones. We all flipped through the local papers, which carried big stories about cricket match championships, the latest Bollywood scandal and advertisements for luxury apartments.

One business executive pressed me for information about cultivating grapes, as he is keen to start a vineyard. Another reveled in describing trips to Paris, a cultural mecca that made up for the "boring" time spent in the US. Yet a third despaired that his elementary school age son is too spoiled and spoke admiringly of the stricter discipline he had observed in American families.

What's more, just as Americans have nervously watched India's ascendancy, so too do the Indians keep a close eye on China and other emerging economies. Indian executives fret that their country lacks China's manufacturing muscle. They worry about outsourcing operations starting up in Eastern Europe. Indian politicians talk eloquently about the need to improve the schools that lack the star quality of the seven Indian Institutes of Technology. They also wonder how to foster leadership in other industries, including automobiles.

Sound familiar? A few years ago, anthropologists Akhil Gupta and James Ferguson of Stanford University observed that "the 'distance' between the rich in Bombay and those in London may be much shorter than that between different classes in 'the same' city."

Translation: India is embarking on some of the same ups and downs that characterise America. True, Indian companies will beat out some US competitors for jobs. But as India's upper middle class continues to expand, smart US companies will look for ways to tailor products to consumers in Mumbai and Bangalore. That's already happening in the mobile phone business.

Does it mean more or fewer jobs for Americans? It means different jobs, different opportunities, different markets. And realising that our competitors look very much like we do.

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Elizabeth Corcoran, Forbes
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