WHY WE SHOULDN’T BE AN ECONOMY DEPENDANT ON BPOs?

BPO (Business Process Outsourcing) a wave that stormed India, which played a major role in the India’s IT revolution. The super wave created thousands of jobs in a poverty stricken country like India; it came as a boon for the Indian middle class, especially for the youths who were desperate to earn some quick bucks to meet their needs and certainly lifted the standard of living of many lower middle class, but we shouldn’t be an economy dependant on BPOs.

BPO is a fad. It is a pain killer, not the remedy for the deadly disease called unemployment. As of 2008, around 0.7 million people worked in outsourcing sector i.e, less than 1% of Indians, and annual revenues were around $11 billion, around 1% of GDP. Around 2-5 million people graduate in India every year. Though comparatively, the ever increasing population of the workforce is much higher than the number of people employed in BPOs. 0.7 Million people working in a sector which contributes 1 % to Indian GDP is not ignorable, and increase in the BPO population is not good for future and long-term economic growth, stability and the long-term goal to end unemployment.

Why can’t we be an economy dependant on BPOs? Why BPO as a sector can’t be a permanent source of employment? And finally why BPOs can’t be a career option for Indian Youths?

The basic reason why we have been able to attract BPO jobs to the country is the ‘cost factor’, this is the major disadvantage of this sector, it highly instable, this sector is not a permanent source of Job creation, the sector grows, matures and vanish, these multinationals keep on changing their BPO base based on the ‘cost factor’. The day India loses its edge as an outsourcing destination all the jobs will vanish in no time leaving thousands jobless. This is the danger of BPO.

The same thing happening inside India, with skyrocketing real estate and infrastructural costs and salaries in Tier-I cities like New Delhi, Mumbai, Kolkata, Chennai, Bangalore etc, many BPOs are shifting their operations to Tier II cities like Nashik, Sangli, Aurangabad, Mangalore, Mysore, Hubli-Dharwad, Belgaum, Madurai, Coimbatore, Kochi, Hosur, Kochi, Trivandrum, Jaipur etc, but experts say though Tier II cities offer lower business process overhead compared to Tier I cities, they have a less reliable infrastructure system which may hamper dedicated operations. This is the nature of the BPOs; they keep on shifting bases as they find a better destination based on the ‘cost factor’.

When they can shift locations based on the ‘cost factor’ inside the country, it is very much possible that they can shift bases when they find better destinations out of India, which can provide them the cost benefit and better infrastructural facilities. Many analysts believe that the sector will slowdown in the future and it is extremely dependant on USA and if the US dollar depreciates can adversely impact the sector and the recent American financial meltdown has begun to take its toll on outsourcing business. Mr.Obama is already taking measures to curb outsourcing. Additionally countries like China, Mexico and Vietnam are also expanding outsourcing operations and often provide cheaper services. The worst is yet to come, many African countries are under extreme poverty today - acute hunger, diseases and lack of infrastructural facilities are obstructing these nations from moving forward and these economies are quite stagnant. A day will come, with the help of UN and other international agencies and rich nations, these countries will experience sustainable development, and once they start experiencing growth in terms of education, infrastructural facilities and other resources, they would be able to supply more cheap labors or workers than any other countries of Asia and these BPOs would be among the top sectors which would move forward to grab the opportunity and shift their bases to those nations.

How can we trust such a volatile sector, which might anytime collapse and leave thousands Jobless? The sector has created Jobs, no doubt, and something is better than nothing, it has provided jobs to thousands who otherwise would have remained unemployed, but this is just like a temporary construction under which we can take shelter for a while and the sector cannot be a permanent and stable source of employment.

Apart from the instability of the sector, the second major disadvantage is the skills of the employees working on BPOs and how it might affect the future prospects of the part of our workforce.

What is the basic qualification required to be a BPO employee? A candidate should be a 12th pass and should be able to speak fluent English and some computer knowledge. My intention here is not to underestimate the BPO work profile.

The BPO work profile requires very basic qualifications, thus the sector is continuously producing a lot of unskilled workers, the growing population of such unskilled workers would result in total dependence on the sector and when BPO Jobs would be no longer available in the market, these BPO workers would be left with no option as they are unskilled and incapable of doing any other work except BPO related tasks.

Many youths Join BPOs just for quick earnings and these people normally remain undergraduates or do correspondence courses which hardly have any value. How many such youths have already spoilt their careers? Except a few, many are not poor and not that they can’t afford to get education and incase they don’t have BPO as an option, they definitely would join a college, as these are mostly middle class. If the trend continues, in the future the number of graduates or PGs would start decreasing and youths would be more interested in earning those quick bucks than to join a college and get some formal education. This sector is likely to produce more and more unskilled, semi-literate, and half educated population of BPO workers. We need educated and talented youths and skilled workforce to take India forward. The situation today is worst in United States, says a report, the number of high school dropouts has been increasing. A fear has gripped United States that their youths should not remain semi-literate and less educated as they find students from other nations coming to united states to study, they get enrolled for masters and PhD courses when a section of their youths are busy doing Jobs which can earn them quick bucks. They find parent-sponsored Indian students at Harvard’s, doing their MBA, while there has been a growing trend among American youths to settle for such quick Jobs, and showing less interest to get education.

The BPO sector in India is creating such a trend here too, which is not good for long-term growth of India or for the future generation. Americans are still much richer and sophisticated than us and they can even do without education, make a descent income and can lead a good living as they get social and other securities from the government. Where as India as a developing country, cannot allow such a trend here, we need to focus more on quality education so that our youths/ the future generation should get formal education and acquire some skills and knowledge to be competent enough to be competitive in the global platform.

So what can be done to reduce unemployment and increase national income? How can we produce educated and skilled professionals?

We need to develop and encourage sectors which can provide platform for creating reliable jobs and generate sustained revenues. We can’t afford to depend on highly risky sectors and temporary Jobs like BPOs. We need sustained revenue generation, increase in national income and government revenue through developing lucrative sectors, exports, entrepreneurships etc. Government now mostly rely on debts and loans to fund various projects as well as to meet expenditure, the expenditure is more than revenue every year thereby mounting enormous debt burdens which will ultimately passed on the public.

One of the permanent sources of revenue is PSUs, well; these PSUs if run properly can be a great source of revenue for government and also permanent source of job creation. As per a recent report the net profit of PSUs has increased from 8% to 14.5% since the last decade on an average (But analysts say that this growth is insignificant considered the number of PSUs and when the economy is experiencing growth). Due pressure from the corporate lobby and west backed institutions like IMF , World bank, Government shows more interest in either to divest stake in these PSUs or sell them for uncompetitive prices. Many PSUs had been sold off, government slowly plans to divest stake initially and ultimately sell these units, leaving only a few units of crucial sectors which can’t be sold off. Now finally we have a total of 246 PSUs. 33 are yet to commence operations. Out of 213 functioning PSUs remaining, more than 50 PSUs are in losses and PSUs contribution to the GDP of the country is merely 6.5% (statistical source: B&E magazine. Why these PSUs can’t be run properly and efficiently to generate revenue? (You can read my earlier article about PSUs from my archives where I have explained about the reasons for the losses and a few suggestions how things can be set right). Many argue about Privatization as a solution, but privatizing is not an option, because government often privatizes profit making units and not the loss making ones and shows more interest in divesting stake of top performing PSUs. Bureaucracy, corruption and complacency have led many PSUs pathetic conditions. It’s high time that government does something to unlock the true potential of these PSUs.

We need to increase exports and also increase our global presence considerably by establishing Indian brands in the international markets. Many management gurus and experts have written, discussed and argued about this. We need to produce outstanding products/brands to establish ourselves in international business. It is a shame, that this nation has produced so much billionaires and so many Indian companies have emerged especially in the last two decades, but we haven’t successfully created a single outstanding brand which we can boast about in the international market. We can only increase our revenue through more and more exports and our businesses can expand and establish their strong presence abroad by producing quality Indian products and by developing global brands.

Even many Asian countries like Japan, Korea, and china are competing enough in the global market and have successfully developed global brands like Hyundai, Toyota, LG, Haier, Kodak, Panasonic and many more…. And these companies are expanded to global markets and set their strong foot hold and have been indirectly generating income for their respective nations.

To develop such global brands and outstanding products, we need to retain our highly skilled talents, we are not facing talent crunch but what we are facing is talent drain or brain drain by western companies and nations. For example, Pass outs from our premier and prestigious national institutes like IITs, IIMs and many other institutes mostly take Jobs abroad or work for foreign companies and government spends crores of rupees for providing subsidized education for these pass outs, they are not the ones to blame, it the flaw is in our policy and pay, firstly government provides such subsidized education without any pre-conditions ( for example, the Chinese government recently made a policy that those who enroll to join army would be provided free college education, thousands have responded , here youths get employment and education at the same time government has exploited the opportunity to attract fresh educated talents into the army as their army was facing acute shortage of educated officers) why can’t we make such policies to tap the talents that our national institutes produce? Secondly the pay, we need to definitely pay more to retain such exceptional talents, for example, an exceptionally talented Indian scientist would be more interested to work for NASA than ISRO, because of pay and opportunities (there can be exceptions like Abdul Kalam). If we want to retain our talents, we need to provide those adequate facilities, pay and opportunities.

Another important area where government should really focus is entrepreneurship. Government is doing and should do more to encourage entrepreneurship, everyone cannot be provided a Job in this tremendously populated country, but government can really create favorable environment to lift budding entrepreneurs who can grow, expand and contribute to the nation and can also create Jobs for thousands. Entrepreneurial talents are unique which should be encouraged. A thousand entrepreneurs nourished are sources of millions of Jobs; So much is the power of entrepreneurship.

These are few examples how we can set a permanent base for future growth, increase our source of revenue and build platforms to create millions of permanent Jobs and to attain sustainable development. Our policy makers should come up with more innovative ideas and concrete plans to attain development and create Quality Jobs as we cannot rely on temporary sources or dependant on instable sectors, and of course definitely not BPOs!