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By Rajkamal Rao
Go back to Earning in India
The Indian economy continues to be one of the fastest growing in the world with projections of 6% annual growth for the next several years. This growth has slowed from a 7-8% clip for most of the first decade of 2010.
Although the Indian media has been severely critical of slower growth rates in recent months - the New York Times reported that the Nov 2012 World Economic Forum in Gurgaon was titled : ‘‘Rebooting India’’ whereas, two years ago, the same conference was discussing happier topics like ‘‘India: What Kind of Superpower Will It Be?’’- Western nations would gladly trade their own anemic growth rates with those of India’s.
The Indian economy depends upon domestic activity for nearly 70% of its GDP. Foreign direct investment to tap into this hunger for western goods and services was strong in 2011 but in the first six months of 2012, it fell to $16.5 billion, down 18 percent compared to the same period in 2011, according to the Reserve Bank of India. While this is troubling, there is no dearth of investment news in the Indian media.
And there is always the question about how accurate the government’s estimates of GDP numbers are. India’s is largely a cash-based economy. Shopkeepers routinely sell products for cash and threaten buyers to charge a 14.5% tax if they demand a receipt - so the sale often goes unreported. Real estate deals between two private parties grossly underestimate their value - and diminish tax collections to the state. All the unreported and excess cash eventually flows back into the economy through goods and services, creating economic growth. The underground economy is so vibrant that no government can hope to accurately assess the nation’s financial health. The only evidence one needs to see how much money people have - and spend - is to traverse the roads of any major metropolis.
Consider this: the US GDP returned to its pre-financial crisis size (i.e. of 2007) in the summer of 2012. The recession essentially wiped out nearly five years of potential growth in the world’s largest economy and caused net job losses in the millions. A big chunk of these lost jobs was related to the housing sector and most economists agree that until housing recovers, the jobs are not likely to return. But many US jobs were simply lost to outsourcing, including to Indian companies. Not only did US companies outsource more jobs in traditional areas such as IT and Business Process Outsourcing, they also cast the net wider to other corporate functions.
In effect, the loss of US jobs translated into growth in jobs outside of the US, including India. A Feb 23, 2012 New York Times story reported that India’s share of global outsourcing was 58 percent in fiscal 2012, up three percent from 2011. Accounting, tax preparation, securities research, financial analysis, paralegal work, medical diagnosis and other areas previously enjoying dominance in US markets are all now considered candidates for outsourcing to India.
Next, look at what technological improvements and process efficiencies are doing to western jobs. In a brilliant McKinsey Quarterly article in October 2011 entitled, “The second economy”, Brian Arthur says that digitization is creating a second economy that’s vast, automatic, and invisible—thereby bringing the biggest change since the Industrial Revolution. Arthur illustrates his point by discussing changes in process for a fairly mundane activity - checking in at an airport.
“Twenty years ago, if you went into an airport you would walk up to a counter and present paper tickets to a human being. That person would register you on a computer, notify the flight you’d arrived, and check your luggage in. All this was done by humans. Today, you walk into an airport and look for a machine. You put in a frequent-flier card or credit card, and it takes just three or four seconds to get back a boarding pass, receipt, and luggage tag. What interests me is what happens in those three or four seconds. The moment the card goes in, you are starting a huge conversation conducted entirely among machines. Once your name is recognized, computers are checking your flight status with the airlines, your past travel history, your name with the TSA (and possibly also with the National Security Agency). They are checking your seat choice, your frequent-flier status, and your access to lounges. This unseen, underground conversation is happening among multiple servers talking to other servers, talking to satellites that are talking to computers (possibly in London, where you’re going), and checking with passport control, with foreign immigration, with ongoing connecting flights.”
John Markoff continues this theme in an August 18, 2012 New York Times article, “Skilled Work, Without the Worker”. Markoff cites multiple examples of western companies investing in robotic technology to replace work done by traditional human employees “without a coffee break — three shifts a day, 365 days a year”. Markoff doesn’t limit his story to high technology industries.
“Traditional and futuristic systems working side by side in a distribution center north of New York City show how robotics is transforming the way products are distributed, threatening jobs. The new system is much smaller, squeezed into only 30,000 square feet at the far end of the warehouse and controlled by just a handful of technicians. They watch over a four-story cage with different levels holding 168 “rover” robots the size of go-carts”.
Weak consumer demand in the west, excessive government debt, loose monetary policies, competitive outsourcing deals and technological advances have caused economic growth in western nations to stall and result in anemic job creation. In the recently concluded US presidential election, even the Obama campaign admitted that unemployment numbers at 7.9% were much weaker than anticipated. Underemployment - where people hold a part-time job despite desiring full-time work -is almost at 15.9% as of November 2012.
In this context, the India story is impressive. A Reuters story on Oct 2, 2012 quoted a study by the Boston Consulting Group to state that consumer spending in emerging market powerhouses China and India is expected to triple by 2020 (from 2010 levels) to a combined $10 trillion a year. The middle class in the two countries is expected to reach 1 billion by 2020, BCG said, noting that in India, the proportion of middle-class people is expected to grow to 45 percent in 2020 from 28 percent in 2010.
The new Indian economy creates numerous opportunities for both those seeking employment and those returning NRIs seeking to start new businesses.
Go back to Earning in India
The Indian economy continues to be one of the fastest growing in the world with projections of 6% annual growth for the next several years. This growth has slowed from a 7-8% clip for most of the first decade of 2010.
Although the Indian media has been severely critical of slower growth rates in recent months - the New York Times reported that the Nov 2012 World Economic Forum in Gurgaon was titled : ‘‘Rebooting India’’ whereas, two years ago, the same conference was discussing happier topics like ‘‘India: What Kind of Superpower Will It Be?’’- Western nations would gladly trade their own anemic growth rates with those of India’s.
The Indian economy depends upon domestic activity for nearly 70% of its GDP. Foreign direct investment to tap into this hunger for western goods and services was strong in 2011 but in the first six months of 2012, it fell to $16.5 billion, down 18 percent compared to the same period in 2011, according to the Reserve Bank of India. While this is troubling, there is no dearth of investment news in the Indian media.
And there is always the question about how accurate the government’s estimates of GDP numbers are. India’s is largely a cash-based economy. Shopkeepers routinely sell products for cash and threaten buyers to charge a 14.5% tax if they demand a receipt - so the sale often goes unreported. Real estate deals between two private parties grossly underestimate their value - and diminish tax collections to the state. All the unreported and excess cash eventually flows back into the economy through goods and services, creating economic growth. The underground economy is so vibrant that no government can hope to accurately assess the nation’s financial health. The only evidence one needs to see how much money people have - and spend - is to traverse the roads of any major metropolis.
Consider this: the US GDP returned to its pre-financial crisis size (i.e. of 2007) in the summer of 2012. The recession essentially wiped out nearly five years of potential growth in the world’s largest economy and caused net job losses in the millions. A big chunk of these lost jobs was related to the housing sector and most economists agree that until housing recovers, the jobs are not likely to return. But many US jobs were simply lost to outsourcing, including to Indian companies. Not only did US companies outsource more jobs in traditional areas such as IT and Business Process Outsourcing, they also cast the net wider to other corporate functions.
In effect, the loss of US jobs translated into growth in jobs outside of the US, including India. A Feb 23, 2012 New York Times story reported that India’s share of global outsourcing was 58 percent in fiscal 2012, up three percent from 2011. Accounting, tax preparation, securities research, financial analysis, paralegal work, medical diagnosis and other areas previously enjoying dominance in US markets are all now considered candidates for outsourcing to India.
Next, look at what technological improvements and process efficiencies are doing to western jobs. In a brilliant McKinsey Quarterly article in October 2011 entitled, “The second economy”, Brian Arthur says that digitization is creating a second economy that’s vast, automatic, and invisible—thereby bringing the biggest change since the Industrial Revolution. Arthur illustrates his point by discussing changes in process for a fairly mundane activity - checking in at an airport.
“Twenty years ago, if you went into an airport you would walk up to a counter and present paper tickets to a human being. That person would register you on a computer, notify the flight you’d arrived, and check your luggage in. All this was done by humans. Today, you walk into an airport and look for a machine. You put in a frequent-flier card or credit card, and it takes just three or four seconds to get back a boarding pass, receipt, and luggage tag. What interests me is what happens in those three or four seconds. The moment the card goes in, you are starting a huge conversation conducted entirely among machines. Once your name is recognized, computers are checking your flight status with the airlines, your past travel history, your name with the TSA (and possibly also with the National Security Agency). They are checking your seat choice, your frequent-flier status, and your access to lounges. This unseen, underground conversation is happening among multiple servers talking to other servers, talking to satellites that are talking to computers (possibly in London, where you’re going), and checking with passport control, with foreign immigration, with ongoing connecting flights.”
John Markoff continues this theme in an August 18, 2012 New York Times article, “Skilled Work, Without the Worker”. Markoff cites multiple examples of western companies investing in robotic technology to replace work done by traditional human employees “without a coffee break — three shifts a day, 365 days a year”. Markoff doesn’t limit his story to high technology industries.
“Traditional and futuristic systems working side by side in a distribution center north of New York City show how robotics is transforming the way products are distributed, threatening jobs. The new system is much smaller, squeezed into only 30,000 square feet at the far end of the warehouse and controlled by just a handful of technicians. They watch over a four-story cage with different levels holding 168 “rover” robots the size of go-carts”.
Weak consumer demand in the west, excessive government debt, loose monetary policies, competitive outsourcing deals and technological advances have caused economic growth in western nations to stall and result in anemic job creation. In the recently concluded US presidential election, even the Obama campaign admitted that unemployment numbers at 7.9% were much weaker than anticipated. Underemployment - where people hold a part-time job despite desiring full-time work -is almost at 15.9% as of November 2012.
In this context, the India story is impressive. A Reuters story on Oct 2, 2012 quoted a study by the Boston Consulting Group to state that consumer spending in emerging market powerhouses China and India is expected to triple by 2020 (from 2010 levels) to a combined $10 trillion a year. The middle class in the two countries is expected to reach 1 billion by 2020, BCG said, noting that in India, the proportion of middle-class people is expected to grow to 45 percent in 2020 from 28 percent in 2010.
The new Indian economy creates numerous opportunities for both those seeking employment and those returning NRIs seeking to start new businesses.
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