July 2007

Differential scenarios in employment

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The IT phenomenon has received many a laudatory pats on the back for its stellar economic success, its potential to be an agent of social change, and its promise to provide employment to people across classes. It is said that all you need to get employment in the IT world is knowledge and ability, unlike the traditional businesses which presented major obstacles for inclusive employment strategies. It has been widely claimed that a large number of employees come from rural and semi-urban areas. This article argues that unfortunately the above mentioned claims are misplaced. 

Invisible hand

The spectacular success of the IT industry is seen as a stand alone success story which took off in spite of protectionist state policies.  Indeed this discourse is rampant even today. The 2007 budget invoked strong reactions from industry leaders. Apart from Narayana Murthy, the only one who supported the move for software being brought under the tax net, most others were aghast at the announcement. “The industry is dismayed as they had chalked out business plans keeping in mind the sunset clause of the Software Technology Park Scheme, where the sops come to an end in 2009. Withdrawing some sops two years in advance does not send the right signals,” said the National Association of Software and Services Companies president, Kiran Karnik.”The budget seems to be against the software and ITES sector. It is a high-growth industry with monumental impact on the economy in general and employment in particular. The tax comes a bit too early in the day for the export-oriented sector,” says WNS Group CEO Neeraj Bhargava. (The Hindustan Times , New Delhi, March 01, 2007). As is clear from these responses, the IT industry would ideally like state intervention but only in terms of giving the industry tax holidays. Through a train of impressing but misleading statistics the Indian IT industry is claiming to be an industry which should get special benefits given the  contribution to the GDP and employment figures.

There is no justification for providing Tax Sops to the sunshine industry. 'IT industry has benefited greatly from more recent developments, including Nehru's championing of educational opportunities for technical excellence, including the IITs', says Amartya Sen, in a recent interview in Outlook Business, dated March 5, 2007.

Is the economic success of the IT industry in India premised on a non-interventionist government that endorses a liberal trade policy? What has been the role of economic policy in making the Indian IT industry a leading software and related services vendors in the world ? “More to the point, we may seek the role of industrial policy defined as the use of “selective strategies to promote particular activities” [Lall 1994]. Some have argued that it is the absence of bureaucratic control that has led to the flowering of the IT Industry. However, it may well be worth arguing that this is indeed false propaganda and that the state had an enabling role to play. First, the exclusive STPs (Software Technology Parks) played a huge facilitating role in helping the software firms to become export oriented. Second, the oft repeated point, that there was an availability of cheap work-force due to decades of thrust on higher technical education which was heavily subsidised.

Employment tales

In 1985, the software sector employed only about 6,800 people. The employment numbers grew to 280,000 in 1997 and rose to 650,000 by the end of 2002 (NASSCOM). The demand for IT professionals is estimated to go up to 1.1 million by 2008 if the current growth trends hold (NASSCOM, 2003). However these figures can be quite misleading as far as an equitable employment generation is concerned. The increase in employment in the IT industry is largely only beneficial to a middle class minority. It will be perhaps interesting to examine general employment statistics before we examine the labour market for the IT industry. There has been a significant decline in wage employment across India. According to the NSSO survey

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