The Ir-Rationale of Euphoric India

Wherever and whatever I read on economy these days, I do get hold of at least few articles on India Euphoria and how India is supposed to grow by double digits for the next 20 years. The reasons these economist present are perfectly rationale and make it a sound theory for us to believe. Increasing working population, increasing public and private investments, changing demographics all point to same direction of consumption led growth story. But, aren't we missing a critical point here?

In the last 20 years after liberalization in 1991, the biggest contributor to India's economic growth has been the 'Services' sector, particularly IT and BPO services. If we think back, the question is Why these services were outsourced to India? And we all know the answer - Availability of cheap and abundant labor. The share of GDP from Services has increased from 41% in 1991 to 55% in 2010 indicating India's increased reliance on services.

The point is that as India develops with increase in GDP and per capita income, wages are surely going to increase significantly from present levels. And as wages grows, the cost advantage India holds in the outsourcing sector will start decreasing unless additional value is added to those services.

The fact of the matter here is that very little is being done for the value addition part. The Government is not emphasizing on vocational courses (that can help masses to get professional training specifically for jobs). Neither do MNCs seems very enthusiastic in providing advanced training to their employees and increase their training costs. Illustratively, Planning Commission report says that only 5% of youth (age group 20-24) undergo vocational training as compared to 60% in industrial countries.
Thus, the picture could sound and look quite gloomy, if you view it from a different angle.
Adios!!