[Assam] Bangalore Squeezes India's Low-Skill Hinterland - What canAssam Do?

Barua25 barua25 at hotmail.com
Sat Feb 11 14:51:49 PST 2006

> the current surge in India's software 
>and call-center industries pushes up the price of skilled workers 
>to a point where textile, furniture or footwear makers, which 
>have small profit margins, can't find supervisors and managers. 

Does anybody know what is India's unemployment number compared with the same yardsticks as of USA?
Without knowing this, there is no way of knowing if the author is writing purely academic stuff and it is the reality.
Are we really at that stage where the Indian youth have a choice?.
Why we hear so much unemployment of engineers?
Rajen Barua

---- Original Message ----- 
  From: Rajiv Baruah 
  To: assam at assamnet.org 
  Sent: Thursday, February 09, 2006 1:44 AM
  Subject: [Assam] Bangalore Squeezes India's Low-Skill Hinterland - What canAssam Do?

  Does this means that there are thousands, well hundreds of jobs for our educated but not gainfully employed??


  Bangalore Squeezes India's Low-Skill Hinterland

  By Andy Mukherjee 
  Feb. 7 (Bloomberg) -- Windfall gains are seldom an unalloyed 
  blessing for an economy, and very often a curse. 
  Economists call it the ``Dutch Disease,'' a reference to the 
  deindustrialization that took place in the Netherlands after 
  natural gas was discovered in the North Sea in the 1960s. 
  A variant of the disease -- the ``Bangalore Bug'' -- now 
  threatens India, Kalpana Kochchar and other researchers at the 
  International Monetary Fund warn in a new study. 
  The bug may spread as the current surge in India's software 
  and call-center industries pushes up the price of skilled workers 
  to a point where textile, furniture or footwear makers, which 
  have small profit margins, can't find supervisors and managers. 
  If that prevents labor-intensive manufacturing from 
  expanding, employment may suffer because growth in India's 
  services has created few jobs and too many of the country's 
  workers are still eking out a living from farmland. 
  ``The advanced skill-intensive part of the Indian economy 
  may be bidding up scarce skills in such a way as to slow the 
  growth of labor-intensive manufacture and the exit of surplus 
  labor from agriculture,'' the study says. 
  The fast-growing western and southern Indian states of 
  Karnataka (of which Bangalore is the capital), Maharashtra, Tamil 
  Nadu and Andhra Pradesh are narrowing the skills -- and wage -- 
  gap with rich nations. These states, whose population growth has 
  already slowed because of rising literacy and falling fertility, 
  are luring away skilled workers from their poorer northern rivals. 
  This may be most detrimental to Bihar, Madhya Pradesh, 
  Rajasthan and Uttar Pradesh, which are often referred to as the 
  four ``sick'' states of the country. 


  As much as 60 percent of India's population increase by 2051 
  is expected to take place in these northern and central Indian 
  states, which are laggards in economic growth and on most social 
  indicators. For instance in Bihar, a state more populous than 
  Germany, two out of three women can't read or write. 
  In Uttar Pradesh, whose population exceeds the U.K., France 
  and Spain put together, seven out of 10 children don't receive 
  full immunization. 
  In these states, there's little scope for skills-based 
  industries to take root because the infrastructure needed to 
  support them -- assured industrial power, good roads and law and 
  order -- are largely absent. 
  These landlocked states, already at a disadvantage because 
  of their distance from ports, are most at risk from the Bangalore 
  Bug because the current pace of 15 percent to 20 percent annual 
  inflation in skilled workers' pay makes it difficult for them to 
  hire and retain technicians and managers. 

  Containing the Bug 

  That, in turn, undermines their only chance to escape 
  poverty by replicating Chinese-style, large-scale, labor- 
  intensive manufacturing. 
  India's service industries employ about 30 percent of the 
  nation's workers, a figure that has barely moved in 10 years. 
  That stagnation has occurred even as the share of banking, 
  telecommunications, software, tourism, transportation, health, 
  education, entertainment and trade has grown to more than half of 
  the $693 billion economy, compensating for the full decline in 
  agriculture, which shrank to 20 percent of gross domestic product 
  in 2005, from 31 percent in 1991. The share of manufacturing has 
  been little changed at 16 percent of GDP. 
  Stifling Bangalore's growth is not the solution to 
  containing the bug. A much better way would be to ease the 
  emerging skilled-worker shortage by freeing higher education from 
  the clutches of state controls. 

  World-Class Engineers 

  If the supply of technical and managerial manpower keeps 
  pace with the burgeoning demand, the price for skilled labor will 
  remain within reach of what laggard states can afford to pay to 
  create globally competitive labor-intensive factories. 
  ``From a policy perspective, the irony is that in order to 
  promote unskilled labor-intensive activities in the future, a 
  great deal of attention may need to be paid to fostering the 
  supply of skilled labor,'' Kochchar and her colleagues conclude. 
  India's success in skill-based industries has been an 
  unintended outcome of state policy. 
  The windfall accrued because, soon after independence in 
  1947, Soviet-inspired economic planners decided to make in state- 
  owned factories all the heavy equipment that most other poor 
  countries with surplus labor might have preferred to import. 
  The emphasis, therefore, was on producing world-class 
  engineers even at the cost of scrimping on blackboards in village 
  schools. In 2000, India spent 86 percent of per capita gross 
  domestic product on university training of each student. It 
  allocated 14 percent to primary schooling. By contrast, China 
  only spent 11 percent of its per capita GDP in university 


  When the Indian economy started opening to the world in 1991, 
  the country had a ready pool of engineers. These engineers could, 
  thanks to the plunge in telecommunications costs, design computer 
  chips for Intel Corp. and aircraft engines for General Electric 
  Co. without having to leave Bangalore. 
  Now is the time to take economic growth to the Indian 
  hinterland by improving the business climate in slow-growing 
  states so that it starts making business sense to employ 
  thousands of low-skilled workers. 
  That would be the surest defense against the Bangalore bonus 
  degenerating into a resource curse. 

  --Editors: Greiff (jdu) 

  Story illustration: To graph the year-on-year change in 
  India's quarterly gross domestic product, click 
  {INQGGDPY <Index> GP <GO>}. Click on {TNI INDIA ECO BN <GO>} to 
  see more stories on the Indian economy. Click on {RBIN <GO>} for 
  more information on the central bank. For more news on India, 
  please see {TOP IN <GO>}. 
  To see more Mukherjee columns, click on {NI MUKHERJEE <GO>}. 
  To comment on this column, click on {LETT <GO>} and send a 
  letter to the editor. 

  To contact the writer of this column: 
  Andy Mukherjee in Singapore (65) 6212-1591 or 
  amukherjee at bloomberg.net. 

  To contact the editor responsible for this column: 
  James Greiff at (1) (212) 617-5801 or jgreiff at bloomberg.net. 


  NI EM 


  -0- Feb/06/2006 20:06 GMT 


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