Globalisation of Service Activities: Opportunities and Challenges for India

Abstract

The impact of globalisation on services is increasingly receiving the attention of researchers and policy-makers alike, as services have emerged as the single largest contributor to economic growth and employment. The present examines the processes of globalisation and their impact on the service sector, in particular on the IT-enabled services. Over the past decade or so, low-wage countries such as India have developed vibrant, export-oriented software and IT service industries, which admittedly have both positive and negative implications. On the positive side, globalisation tends to force down the price of services in high cost areas, increase output and improve service quality. On the negative side, there is dislocation from increased competition as uncompetitive firms lose market-share and their employees are laid-off. India is the most prominent off-shore location in the TT sector. Depending on the statistical source one is using, its share of global off-shore outsourcing business is estimated at 70 to 90 per cent. Its service portfolio focuses on a range of activities - application development, taking over the entire IT infrastructure or individual business support services (Business Process Outsourcing - BPO), and call centre services. As India's major trading partner, North America accounts for the lion's share - two thirds - of the subcontinent's software and IT-based services exports. Software and service export firms in India are growing at 20 to 25 per cent per year according to the best statistics available; and each of the three leading Indian software firms (InfoSys, TCS, and Wipro) already employs over 40,000 people. India has made substantial inroads in applications development, where it has captured 16.4 per cent of the world market. India's recent boom in outsourcing of IT services has further facilitated declining costs of international communication and transportation, which points to the wide range of economic opportunities existing in the service businesses. By 2008, the global market for IT-enabled services alone will exceed US $1,000 billion, and India's export of IT services will exceed $50 billion which is double the country's total export of goods and services in 2000.