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The existing
literature on
offshore
outsourcing
focuses almost
exclusively on
the extent of
job losses in
the home
country, and the
plight of the
unemployed
worker whose
white-collar job
has been
outsourced. The
impact on
recipient
countries is
rarely examined
in the debate on
offshore
outsourcing.
This paper
attempts to
close this gap
by examining
some key
economic and
technological
issues
pertaining to
offshore
outsourcing in
the service
industry in
India,
particularly the
information
technology (IT)
sector, and
IT-enabled
services (ITES)
sector,
including
business process
outsourcing (BPO).
Specifically,
the paper
examines the
impact of
offshore
outsourcing on
(a) employment
in India, and
(b) technology
diffusion/innovation
gap in India.
With respect to
employment
generation, the
paper critically
assesses the
chances for
long-term
success of the
Indian strategy
of
“leapfrogging”
into the big
league of
advanced nations
by exporting
high-tech
services without
first going
through the
labor-intensive,
manufacturing
export stage.
It argues that
being a service
industry, the
IT/ITES sector
cannot possibly
be expected to
solve India’s
massive
unemployment
problem. India
needs to build
labor-intensive,
manufactured
products, not
just services,
in order to
create jobs for
millions of
unemployed
Indians. With
respect to
technology
diffusion/innovation
gap, in spite of
impressive
progress
achieved by
Indian service
providers, they
continue to lag
behind in
high-end areas
that call for
creativity and
innovation such
as inventing
innovative
business
products or
processes that
could sell
globally, and
creating new
markets for such
products or
services.
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