Debating India

Europe, US set to fall to cheap Indian labour

Friday 15 April 2005, by DUGH*Harish

New Delhi, April 14: If world businessmen go by laissez faire economics alone, a country like India offers the best deal anywhere, anytime. Even if parochial interests are keeping most EU and US companies country-bound today, then losses in the near future are definitely going to drive them eastward, to India.

In fact, Newsweek’s Fareed Zakaria said that American car companies like General Motors, Ford and Daimler-Chrysler, one-time icons of motoring, are being driven to rack and ruin due to the huge benefits they offer their employees. On healthcare alone the American worker in these companies gets more than $6,500 per year. He goes on to add, “GM in fact, will pay a whopping $5.2 billion (2005) in medical and insurance bills for its active and retired workers.”

He raises a scenario of a rout for America’s Big Three as and when India’s and China’s carmakers start manufacturing for the US market.

Also, India has come out tops in a study by Mercer Human Resource Consulting as reported by DW-World De, a German website. The stats indicated that, as far as labour costs are concerned the desi worker has no real challenger, anywhere in the world.

As a corollary, said the world’s largest employee benefits consultancy, employers looking for able and willing workers on the cheap, can find the best deals here.

While Belgium, Germany and Sweden have the most expensive labour, costing more than 50,000 euros a year, going to India makes far better sense at a mere fraction of the cost, 2,024 euros!

However, countries that have thrown off the Soviet Union’s yoke in the recent past are also relatively cheap, but they too look awesomely expensive at double that of India.

For instance, Latvia at 4,752 euros, Lithuania at 5,649 euros and Poland at 8,257 euros lose their competitive battle against India even though, when pitted against their European brothers, they win hands down. However, the language barrier that these countries pose is also working against them. India, where English is largely predominant, offers the best brains, dedicated workers and comprehensive infrastructure for even the most technically challenging jobs. That Indians are willing to work extended shifts adds to their appeal.

Japan and USA, where capitalism and managerial excellence rule, also do not emerge as better prospects to take your business to. While in the Land of the Rising Sun labour costs are in the region of 45,839 euros, Uncle Sam’s stands at 33,195 euros.

Putting all of these figures in perspective, one wonders why more European countries are not outsourcing. As it is, the European Union is fighting a virtually stagnant economy. And, if no alternatives are explored, at this rate, the labor costs are going to drive European Union into the ground. Ditto for US. However, even though their businessmen are quite gung ho about outsourcing, politicians are pandering to the nationalist sentiments there to put a spanner in the works of outsourcing.

However, it must be remembered that the EU countries offer very generous social security, annuity benefits, medical assistance besides a host of other incentives. In India these benefits will lead to an expenditure of just $100 at the highest. A people starting from virtual scratch, as India did after hundreds of years of foreign rule, will work for less.

By Y2K the die has been cast. With European and US workers unwilling to accept pay cuts, nor are they willing to outsource, there is no way Germany, France, Spain, US and the rest can keep their rich countries’ financial future safe. Unless they look to countries like India.

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