BANGALORE, India An Indian labor group is raising doubts about the country's ability to sustain high growth rates for its software exports.
The International Labor Organization (ILO), in its annual employment report, acknowledges that India has made "striking progress" to date on expanding its exports of software products. Indeed, the group surmises that India's achievements as the first developing country to establish itself as a software force could be behind the government's "ambitious projections" for growth in the face of a global economic slowdown.
But in its report on life and work in the information economy, the ILO questions "whether the momentum generated over the past decade can be sustained in the future in view of growing skill scarcity, rising costs and emerging competition."
India's industry association for software companies, the National Association of Software and Service Companies (Nasscom), challenged the ILO's conclusions.
"The study we made with international consulting agency McKinsey confirms our faith in the growth of India's software business," said Dewang Mehta, Nasscom's president.
India's software business has been growing by more than 50 percent each year since 1991 and was valued at $5.7 billion in 1999-2000. The Nasscom-McKinsey study said India should be able to meet a target of $87 billion in revenues by 2008.
The ILO, however, believes those growth projections may be unsustainable. For one, the current slowdown in the U.S. economy has raised doubts about the prospects for India's software business and whether current growth rates can be sustained. But some software industry observers here think the U.S. slowdown will breed more software opportunities, not fewer, because they're betting that U.S. corporations will outsource work to cut their costs.
The ILO also cites an "eroding labor cost advantage, emerging competition from other countries, infrastructure bottlenecks and a low research and development thrust" as potential roadblocks to the continued high growth of India's software business.
Nasscom's Mehta acknowledged the persistence of such infrastructure bottlenecks as limited bandwidth availability and other telecommunications-related problems. "However, we have factored in various problems when making our projections," Mehta said. "Also, we obviously expect to have constant changes in our strategy to deal with problems that may arise."
The ILO has said that Indian software skills, now seen as an area of strength, may turn out to be a weakness if overseas corporations succeed in recruiting Indian software programmers in large numbers. "This trend threatens to lead to a fresh rise in brain drain from India and in the process adversely affecting the competitiveness of Indian industry," the ILO said.
Most Indian states have announced plans for additional engineering colleges to train software programmers. And the Indian government has just announced the establishment of a National Mission for Technology Education in a bid to increase the number of highly trained professionals available to industry.