One of the most interesting trends in India has been that scores of expatriate Indian engineers with exposure to design and marketing in the global marketplace have streamed back home, a result of the business meltdown of the recent few years. This trend has profited both Indian companies and global firms with centers in India, adding substantial strength in terms of engineering expertise. This development may continue for some time.

While recruitment is up sharply from last year, anecdotal evidence suggests employee attrition is on the rise again, causing more than a few gray hairs in the manpower departments of engineering companies. And higher level technology companies such as chip design firms are finding that the more specific the skill required, the harder it is to get. These companies also see salaries rising and fear that much of benefits accruing to Indian firms from lower employee costs may fade, though company heads do not see that happening in the next five years or so. To be sure, employee costs arising from higher salaries are rising as they did not during 2001 and 2002, but enough companies are willing to dole out more.

This year is likely to answer the question of whether the decades-long quest of the Indian graduate engineer to work overseas is on the wane. Since this recent downturn has appeared to go away, it has been replaced by something many see as even more unsettling — the inconsistent business climate symbolized by mixed signals. The recent elections sent some shivers through the high-tech sector in India when two tech backers were ousted (see May 24, page 40).

Everyone is sure that better days are here again, but unlike in the past no one is sure if even the next six months can be taken for granted. Many seem to have lost the appetite to risk a career by going to the United States now, and given that everyday infrastructure in many Indian cities is better than it used to be, many wonder if it does not make sense to opt for a career in one's own country. The United States does not appear now to be as attractive for engineers here — something unthinkable in the last 50 years.

A notable fact this year has been that two Indian companies listed on American stock exchanges, Infosys and Wipro, reached the $1 billion sales mark, a definite milestone for the Indian software industry. Another organization, Tata Consultancy Services, did reach that mark earlier, but it isn't listed as a company, being a division of the Tata Group.

So what do the next six months hold in store for Indian software firms and for global companies with centers in India? Both Infosys and Wipro are expected to hire hundreds of engineers, with the Indian software industry as a whole hiring thousands. There aren't likely to be any pink slips handed out, which even during the worst of times was not significant. The smiles are back.

Overseas firms too are hiring scores of engineers here, though they are not too willing to disclose numbers given the current U.S. political climate and the debate over outsourcing. All these firms are pouring in millions of more dollars and handing out more projects to their centers here.

The only blip on the radar is the cry over outsourcing in the United States, but the dread of a ban on it no longer seems as imminent as it did six months ago. Most acknowledge that the question is not about whether to outsource, but how much and when. India is no longer about whether to be in or not, but about having to be in and consequently, the sooner the better.

Development shops

Except for the Simputer — a low-cost handheld computer was developed in this country — there has not been much of an electronics industry in India. Yet, the global electronics industry's upheaval in the last few years had and continues to have an impact on this country. More transnational companies have launched significant product development efforts in India. Racing to cut costs and grapple with the near burnout of their businesses arising from the global meltdown, they no longer are considering having development centers here. They have already set up shop and almost every firm is hiring and expanding their efforts here. The list includes any firm you can think of: Intel, Texas Instruments, Philips, Motorola, Nokia, Cypress, Infineon, IBM, Hewlett-Packard, Cadence, Synopsys, and Magma.

If a company has not set up its own development center here — and it is hard to think of any — it has outsourced development to local firms. Some have done both but are wary of mentioning the latter these days, as outsourcing is a politically incorrect word to use, at least until the U.S. presidential elections are done with.

In this way, India is poised to play a far more important role in the future fortunes of the global electronics industry, ranging from semiconductors to mobile phones to television sets. For example, the next generation of processors for servers is being developed here by Intel, while Qualcomm is setting up a development center and Philips is hard at work in Bangalore in developing futuristic television technology.

The stress on quality certification by Indian software development companies has also helped in drawing more work to India, both by those outsourcing to local companies or setting up in-house centers here. India has 50 companies certified to Level 5 of the Software Engineering Institute of Carnegie-Mellon University, while there are only 20 similar companies in the United States. Even with nations such as China posing competitive threats, it is hard to believe that India's software companies would lose their lead in project management skills, certified quality levels, availability of trained talent and a steady stream of engineering graduates.

The question that many here ask is whether despite all these advantages, why is there no local electronics industry here and whether there will ever be one of any significant size? It is a question with more than a tinge of irony to it. Keeping the past in mind and peering into the immediate future, there does not seem any chance of an answer soon.

But India's Department of Information Technology (DIT) is studying ways to promote the country as a global research and development (R&D) destination in information technology. While DIT is now focusing on R&D and has funded some projects, the study seeks to see how the country can be positioned as a location for innovative engineering, rather than continuing to be known merely as a source for low-cost software development. This study may set the ball rolling, but significant development is in the long term, if at all.