India must move beyond superficial IT prowess (2007)

The Tribune, Chandigarh,2 February 2007)

by Rajesh Kochhar

A nation can be accurately judged by what it considers to be worthy of celebration. Upper India has been rather hasty in trumpeting its success on the IT front.

Given our felicity with the English language, our propensity to appropriate clever phrases from the lexicons of others, and our willingness to suspend our own judgment so as to savour motivated praise showered by the outsiders, we have persuaded ourselves that India is an IT superpower, that Bangalore is our silicon valley, India is now a world hotspot for innovation, and the like.

Facts and figures do not support this picture. Countries become rich not from wages but from royalties. India is still in the wage stage. It has an opportunity to graduate to the royalty stage. But this opportunity is in immediate danger of being frittered away. India still has miles to go. If it starts celebrating prematurely, it will never arrive.

India’s share in the world software market is a paltry two per cent. In the fiscal year 2006, India’s software-related exports stood at $ 24.2 billion. This is a gross figure. To obtain the net figure we must subtract from it the amount expended on importing the required computer hardware and branded software.

Unfortunately this latter figure is not publicly known. It could be as high as half the gross figure. My own impression is that the total Indian computer – related imports (for all sectors) exceed the corresponding exports.

A major source of foreign exchange for India is the money sent back home by Indians living or working abroad. For the fiscal year 2006 these inward remittances stood at $24.6 billion. Two thirds of this came from two sources: USA (44%) and the Gulf (24%).

The fact that a fraction of the savings of Indians employed abroad equals India’s gross software export earning brings home a point that is often ignored. Much of India’s software manpower is under-employed.

In the calendar year 2005, China exported to USA toys, games and sports equipment worth $19 billion; furniture worth $17 billion; and footwear and parts worth $12 billion. Thus China earned about $48 billion from the labours of its relatively low-skilled work force, while India employed its top brains to bring in no more than $24 billion.

Much of the foreign praise for the so-called Indian IT prowess stems not because of the cost advantage India offers but because India makes available highly skilled people for doing stupid repetitive work at a couple of hundreds of dollars a month. Many analysts have used the term cyber-coolie to describe the phenomenon.

My own preference is for the term techno-baboo or cyber-baboo (colonial-era spellings being advisedly used). Coolie is a degrading term; the coolie can retaliate. The British in South Africa called Mahatma Gandhi a coolie, and see what happened to the empire! But baboo is a soothing term. A baboo can remain a baboo for ever and feel proud of the fact.

About 200 global companies have opened their research and development centres in India. Not withstanding the composite nomenclature, these centres are for further development of original research done in the West rather than for original research itself. In any case even if the authors of the patents being filed from these centres are Indians, the patents are not owned by them but by the parent company.

If the parent companies were to set these centres up in their own countries and hire these very Indians, their salary bill will go up about eight times. The money Indians will be sending back home will far exceed the salaries they are now getting.

We should now wean our upper-end IT experts away from employment and convert them into entrepreneurs. This would require a strategy and more importantly a change in the national mindset. As a society, we are afraid of failure. We do not want to try lest we fail.

We content ourselves with letting others take the initiative and feel happy when a peripheral role assigned to us. As Kiran Majumdar is fond of pointing out, nothing succeeds like failure. People should be encouraged to try and fail so that they themselves or others can build on their failure and succeed.

India should set up an IT Entrepreneur Fund. We should encourage, or rather tempt, professionals currently employed in India or abroad to set up eventually royalty-yielding companies. For this not only capital but also small pieces of land at concessional rates should be provided.

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