The cover stories of two leading business magazines this week are on Information Technology (IT). Can the Silicon Valley miracle can be recreated in India, asks one and the other declares that this is the turning point. Indian success stories abroad--Sabeer Bhatia, Gururaj Deshpande, Kanwal Rekhi, K.B.Chandrasekhar, Naveen Jain, Rajendra Singh, et al--have fired up the public imagination. These successful Indians have been visiting India repeatedly, to tap fresh talent, create incubators to harness new ideas and share their experiences with government, regulators and entrepreneurs. This has enhanced their icon status. It has also strengthened the belief that IT provides a never-before- opportunity to turnaround the economy and catch up with the world.
The ingredients for an IT miracle are all there - angel investors and venture capitalists chasing good ideas, enormous technical capability and entrepreneurial spirit. Also India's huge population will stop being such a disadvantage in the coming years particular in e-commerce related or IT-enabled businesses because it is a huge source of relatively cheap and competent manpower.
The most obvious examples of big cost differentials in hiring adequately qualified employees are in businesses such as call center documentation (legal, medical, etc.) and back-office processing. So far, the focus has been on hiring fresh graduates who can communicate in the English language. At less than Rs 10,000 per month, this workforce in India is available at a fraction that would be paid in by the developed world for the same services.
New employment opportunities are always good news for all segments of society. But IT could be even more of a bonus for the economy since it can be effectively used to down-size government, and reduce the wage bills of both the government and the public sector. Instead, at a time when risk capital from around the world is already chasing new ventures, the Prime Minister has gone and announced a Rs 100 crore venture capital fund. As Kanwal Rekhi said to Business India, a sarkari venture fund is indeed ridiculous. He called it an oxymoron and asked how the government planned to explain to Parliament how nine out of ten projects have failed?
Government involvement and investment are both required in order to exploit IT opportunites but not in the form of venture funding. With a little imagination and innovation, the opportunity created by IT enabled employment can be used to reduce the work force.
A recent recommendation by the Confederation of Indian Industry (CII), India's leading industry association to the finance minister, that three loss making public sector banks should be shut down led to a fierce backlash from the powerful bank trade unions. It would have meant a retrenchment of 75,000 employees. The angry retaliation by bank employees forced the CII to withdraw its recommendation.
It is not that the trade unions refuse to recognise surplus labour; they simply refuse to accept retrenchment as a solution. Their argument, a well justified one, is that bad debt recovery laws and corruption allow industrialists to default on loan repayment and were mainly responsible for turning the banks sick.
Both trade unions and management are conditioned to look at labour reducing exercises in isolation. Retraining efforts are usually restricted to redistribution and relocation of existing employees. Even the best companies do not offer counselling, guidance or re-training to employees accepting a VRS programme.
A sensible Government ought to be spending its money in such awareness-building, re-training and counselling, and use the new opportunity to reduce its large, expensive and mostly unnecessary public sector and bureaucracy.
Instead of setting up venture funds, it should use the Rs 100 crore corpus to launch an information drive through seminars and conferences to make people aware of opportunities in IT-enabled services and help them find new work opportunities in and outside the metropolitan cities. Public sector organisations and large corporate houses have to tell their employees that there is not only life after VRS but that the severance package will liberate them to exploit new opportunities, work at their own pace, avoid long and tedious commuting to the workplace, and maybe even make entrepreneurs out of some of them!
The number of qualified and highly trained workers wanting to work from home in IT-enabled services is on the increase. The need is to marry the opportunities available today with the people who need it most. Ideally the government should set up the infrastructure to create such an interface.
Women are an obvious target for employment through home based IT-enabled services. A significant chunk of the women from nuclear families would be happy to accept a VRS if they could work from home and on flexible time when their children are growing. Since IT eliminates the distance and workplace barriers it can disperse employment opportunity through the country and reverse the migration of workers to cities.
Indian public sector banks and financial institutions have of late been announcing diversification into the IT business and venture financing. Such organisations ought to be asked to give preference to their own employees turning entrepreneurs or those willing to offer jobs to re-trained former government/public sector employees.
For example, Mahanagar Telephone Nigam Ltd. (MTNL) operators would be ideal employees to operate Call Centres with a bit of re-training and re-orientation. The private sector however, could be loath to touch them because of the perception that their brusque attitude will never work in a private sector Call Centre. But that is merely a myth.
Indian Airlines employees have turned significantly more polite and efficient, even in the public sector because of competition from the private sector. Once these employees are re-trained suitably and employed by a private or joint sector company, there is no reason why they would not work as well as other private sector employees. If employing them makes it a tiny bit easier to get funding, it will be a bonus.
It is imperative to find innovative ways to down-size government; providing exit routes through new employment opportunities is bound to be attractive, at least in those departments which do not routinely supplement their income through graft. The alternative is that a booming economy and a bullish stock market will not be enough to avoid large does of fresh taxation to cover the costs of a Kargil intrusion, an Orissa cyclone, various terrorist attacks, and the odd hijacking of aircraft.