The Indian labor market has always been key in globalization, and has been attractive due to its low wages, and the scientific and managerial talent found in the country. The main issues faced in this case mostly stem from the loss of the tax abatement in India, in addition to the weakening US dollar. Due to these two issues, doing business in India versus other fruitful options like Philippines becomes very expensive. These are major challenges to combat for any firm looking to outsource in India. In India, the infrastructure along with the setback discussed around transportation, puts a strain on the bottom line. The Tax abatement ending in 2009 was the initial cause of the dilemma. India's transportation and infrastructure costs are here to stay and other countries like Philippines have much more attractive incentives to bring in higher margins for the multinational corporations. The entire flow and boom of bringing BPOs into India has been affected due to this. The top dollar return on investment for a multinational corporation to bring their business into India is no longer there. However, it is there in the Philippines with the same levels customer satisfaction to be achieved. The solution is that if India wants to keep BPO’s around, they need to revisit re-instating the tax abatement as well as figure out ways the government cover the transportation costs. The Indian government needs to do everything they can to prevent these BPO’s from transplanting or just picking up their entire business and relocating to another country. They should place them in a lower tax bracket for them to stay in India. They should cover the costs of transportation as an additional incentive. At the end of the day, it comes down to profitability and return on investment. It has to be worthwhile for these firms to keep their BPO's wherever they have them. 1) How has the global economic downturn, discussed in the opening profile and throughout this chapter, impacted jobs outsourcing in the BPO industry?
Millions of people work in outsourcing sectors of countries like in India and the Philippines, pumping huge annual revenues in the billions, favorably impacting their country's GDP. The global economic downturn has definitely helped outsourcing destinations like India among others in their BPO industry by driving many western companies their way. World trade is growing, by 133 percent in the last 15 years” (Deresky, 2011). This has encouraged numerous multinational companies (MNCs) to move their operations overseas into countries like India and Philippines where they can take advantage of lower wages and taxes domestically. This has not only favorably impacted these local economies, but it has enabled many corporations to remain in business operating with low costs even with the global economic downturn.
2) Referring to this chapter and this case, discuss the general trends in the globalization of human capital.
It is accurate that in the U.S., the effects of globalization have been present for several decades. Many multinational companies around the world are moving to new global operating models, driven by the rapid rise of emerging and developing economies. These MNC's are doing so both as customers and as sources of talent, stemming from continuing pressure to reduce costs. Globalization of human capital is even more so prevalent in the information technology industry and white-collar sector these days. Jobs in customer support, computer programming, form filling and claims processing, all these jobs can now move around the globe the same way that farming and factory jobs could a century ago (Deresky, 2011). 3) What are the affects of the Indian government policies on the Indian BPO industry and on MNC decisions regarding locations for outsourcing jobs?
The Indian government was unwilling to extend the STPI(Software Technology Park of India)...