Biztech Dec 15, 2009
India has had robust economic growth since 1991 when the government reversed its socialist-inspired policy of a large public sector with extensive controls on the private sector and began to liberalise the economy. Liberalisation has proceeded slowly, but the economy has responded well by posting strong growth in many sectors. A report by Goldman Sachs predicted that India's economy would be the third largest by 2050.
However, the economic development of large countries often presents unique challenges that require innovative solutions. Census figures of 2001 put the number of villages in India at 6,38,365. One in 10 people live in rural India. Much of this population is isolated in terms of access to information, materials and markets. I feel that creating equal opportunities for enhancing rural prosperity is the most important task that India has to accomplish in the next 10 years. India has the largest number of youth, who are a major strength and the future of the IT industry. The country, with such a young force, has a huge possibility of growth. Almost two-third of India’s youth live in rural areas. Thus, it is necessary to reach out to them and make them IT literate and build the capacities for rural employability.
Increasing access to technology can be a critical driver of economic growth in rural India, but it will require government and industry leaders to work together to make it happen. Inclusive IT development requires a business model linking rural skill development with commercial outsourcing. Rural IT is making a positive contribution to improve the access to competitive employment for the young and educated population of rural India.
Corporates should make an attempt to move rural India from the edge to the centre of the new economy. Revolutions in information and communications technologies (ICT) have the potential to remove the barriers to information asymmetries that were impeding the working of markets that are critical for economic growth. The forces of globalisation have created opportunities for the integration of rural populations in a larger marketplace. This article aims to emphasise on the concept of rural BPOs to bridge the rural and urban IT divide, particularly when the industry is expected to grow five-fold over the next five years to clock revenues up to $ 28-30 billion by 2012, if they receive the required fillip.
Rural, the way to go
The Indian domestic market has undergone a transformation over the past decade—rising from the periphery to emerge as a viable, high potential opportunity for the country’s IT-BPO sector. The market has witnessed heightened interest from customers as well as outsourcing services providers at a global level. A new study from Ernst & Young reveals that domestic BPO outpaced the overall BPO services market by growing at a compounded annual rate (CAGR) of 50 percent over the last five years. The research agency predicts that the domestic BPO market will reach $6 billion in size by FY2012, showing a CAGR of 38 percent from the current $1.6 billion.
Considering the fact that about 74 percent of Indians reside in villages, domestic BPOs can bring a revolution in employment opportunities for the rural educated masses. There are 7.5 million graduates in rural India in the age group of 20-34 years and the rural BPO industry will be in a position to employ at least one million of them over the next five years. By 2020, if one-tenth of domestic BPO is outsourced to villages, it will employ 900,000. This would also help bridge the urban-rural divide. Also, leveraging economies of scale and a modest increase in price will boost margins for domestic BPOs. The establishment of BPOs in villages is resulting in the development of rural infrastructure, increase in the standard of living, and generation of sufficient employment opportunities at the village level. All this is effectively addressing the problem to distress migration.
Domestic providers' shift of focus to Tier II and Tier III cities is a pragmatic approach to cost control. With the high incidence of attrition associated with the average urban graduate, there is scope for vernacular BPOs in rural areas. So if Indian companies start looking at rural areas, they get to tap the most sizeable population of graduates and expect to retain them for a much longer period of time. This would help companies reduce their human costs in terms of hiring and training. Mangalore, Mysore, Lucknow, Goa and Aurangabad would be examples of Tier III towns that are yet to establish footprints as BPO centres but have substantial locally-educated population and related infrastructure. Similarly, places like Davangere, Nanded, Belgaum, Bagepalli or Purnia in Bihar have substantial locally-educated population, who migrate to larger urban cities for employment.
The industry must tap the untapped potential of Tier III and Tier IV towns. The movement by the IT industry players into Tier-II, Tier-III and Tier-IV towns will not be merely about cutting costs. It should be a conscious move to ensure that we go wherever talent pool is available and create opportunities for broad-based and diversified growth. The industry must initiate proactive measures to be as inclusive as possible and to ensure that the digital divide narrows. We must look at this young educated rural India as a resource pool for jobs right where they live in Tier III and IV towns. Further, the relatively lower rental, transport costs and the wages in Tier III and IV towns will make the profitability of BPO enterprises brighter.
Language no barrier
Global BPO requires English language skills, but Indian companies are now outsourcing domestic work, and need to do so in regional languages. As English language skills are not imperative, the market becomes relatively larger spanning Tier II and III cities as well. Expertise in English is no more a critical requirement, especially for a rural BPO set-up. Further, expanding to rural areas will help the companies in meeting their corporate social responsibility objectives. There is no point in establishing a helpline in Marathi in Delhi or a Bengali one in Mumbai. Hindi belt BPOs operating on data entry and documentation in Haryana and Rajasthan manned by high school, computer literate youths are good examples of IT penetration in local language reaching out to hitherto unreached segments of rural India through the BPO window.
Challenges & the way forward
Rural India is dogged by problems such as under-developed infrastructure and lack of basic amenities. Availability of reliable and fast network connectivity in rural areas is another big challenge. The very nature of IT/ ITeS operations demands a high level of real-time connectivity with many parts of the world. One answer is improved telecom and broadband penetration, and better rural power. We have to develop deep domain expertise coupled with process expertise to develop relevant innovative solutions. Deployment of superior technology to remain competitive and innovation to scale and move up the value chain will define the way forward.
Both the private sector and Indian government are taking initiatives to remove these deficiencies in a gradual and phased manner. Economic development grows once infrastructure growth picks up speed. And going forward, that's precisely where the IT and BPO industry can play the role of a fulcrum with the increasingly younger population as the lever.
One of the noticeable changes that urban India witnessed in the last 30 years is the improvement in self-confidence as a result of providing IT and IT-enabled services for the world. While this is so, one of the biggest challenges that rural graduates face is low confidence in facing clients and presenting themselves. Can we not infuse the same confidence among rural folks? Yes, we can, through proper orientation and training, and a structured and scientifically-designed methodology. The key is to change the process to make it viable for rural areas. Today, just like you can take a process from the US and do it in India, you can take a process from the metro and apply it in a rural area. May be it's just data entry. But there is a good scope for the BPO sector to grow in rural areas.
As rural India becomes increasingly connected, there is no reason that jobs cannot move from New York to Mumbai or London to Hyderabad or Michigan to Mahbubnagar (one of the backward districts in Andhra Pradesh once notorious for distress migrations). Although there are various ways to empower people living in rural areas, but seeing the upsurge of Internet usage, this seems to be one of the best ways for the development of rural India.
The Internet has played a pivotal role in the world emerging as the proverbial ‘global village’, with the farthest corners of the globe just a mouse click away. In the context of the necessity to stop migration to the urban and metro areas, the government must encourage such initiatives by providing adequate infrastructure support. Setting up telecom towers, providing wireline broadband connectivity to all rural kiosks, rolling out WiMAX services in rural India, augmenting the optic fibre cable connectivity of the country and funding technology innovations in far flung areas will go a long way in changing the economy of rural India. Through connectivity, rural India can challenge the information asymmetry.
Rao is Chairman, Nasscom Foundation.