India has enjoyed the status of being the most sought-after destination for setting up of units in information technology enabled services (ITeS) and business process outsourcing (BPO) sectors for some time now.
But the prominence as the dominant IT/ITeS hub due to demographic dividend, favourable environment and necessary infrastructure is fast fading away as there is a flight of units, small and big, to destinations such as the Philippines if the Eco Pulse Study conducted by the Associated Chambers of Commerce and Industry of India (Assocham) is any indication.
Driving forces
The study, Sustaining India's IT/ITeS Leadership, attributes macroeconomic and sectoral conditions to the flight of the industry, especially from Hyderabad and Bangalore.
The study said investment in world-class facilities, extensive talent development and other initiatives created a cost disadvantage of 10-15 per cent compared to other emerging destinations.
A multitude of reasons including ease of doing business, availability of abundant English speaking workforce at lower wages, better infrastructure and government incentives had become driving forces for the flight of the units, according to Assocham Secretary General D. S. Rawat.
While the country basked in the glory of its status and reason that its demographic dividend allowed it to further improve its position, the ground reality was fast changing, he said.
Reasons for shift
Many ITeS/BPO firms, across all sizes, are shifting their bases from Hyderabad and Bangalore to the Philippines and other countries.
The trend was not yet noticed in the National Capital Region but Pune is expected to witness similar flight soon. The reasons for the shift is diminishing employable talent pool, high cost of doing business owing to inefficiencies in power, transport, security and other concerns. The study said the firms were finding it difficult to retain suitably trained employees coupled with deficient infrastructure, law and order and shrinking margins.
STPs network
Assocham, however, identified widening the software technology parks (STPs) network to semi-urban and rural areas and extending the income-tax benefit to STP units would become the single most effective policy measure to stem the flight of the IT/BPO firms away from the country. This would address most of the immediate concerns of the sector and ensures proliferation of industry further.
The STPs provided basic infrastructural support and state-of-the-art plug and play facilities allowing new and smaller firms to set up operations at minimal investments.
The government needed to act immediately in view of the criticality of the issue, the study said.
Source: http://www.thehindu.com/business/article2790735.ece
