Is ‘Make in India’ a threat to the Indian IT industry?

economy : Is-Make-in-India-a-threat-to-the-Indian-IT-industry

Answer by Vijayraj Kamat:

My house-help does our dishes. Her children go to college. If they graduate and get a good job, she might quit. I might have to pay more for someone else. Is that a bad thing? No, if we look at the bigger picture. The hope is, if everybody gets a good job, manufacturing becomes cheaper, and average incomes rise, we might be able to afford an electric dishwasher in our home. Finally, the aim of a nation is to increase its average standard of living. 

This is an interesting question which brings out seeming conflict of interests. But it has 2 separate aspects to it:
1) Protection against rupee appreciation
2) Evaluating the 'net' impact to the nation

1) Protection against rupee appreciation
What if the dollar depreciates? Your problem is still true. Hedging against such risks is a normal corporate strategy for IT firms.

  • Buying derivatives like futures.
  • Long term plans include reducing dependence on exports by diversifying client base. Market share is slowly shifting from US/Europe to the eastern European countries like Turkey
  • Expanding domestic market

2) Evaluating net impact to the nation
An uncomfortable reality is revealed when we look at the numbers.

  • The services sector accounts for 57% of GDP but provides employment to only 27%.
  • IT sector which we celebrate a lot, specifically contributes to just 6-7% of GDP.
  • Industry accounts for only 27% of the GDP(Manufacturing is around 16%) , but employs 22% of the workforce.
  • Manufacturing can also contribute to exports. Not just IT
  • So it becomes evident that focusing on the manufacturing sector is a much bigger priority for India.

Source: Wikipedia

What is also evident is that increasing productivity is paramount for growth and sustainability. Reliance on dollar rates is not a long term solution in any case

  • In manufacturing sector, this is done by skill development, massive capital investments. this is a major focus of the 'Make in India' program
  • In IT sector this is done by moving up the value chain, and doing high complexity projects, establishing R&D centers rather than just acting as a cost center
  • Boost to the manufacturing industry also means more scope for growth of IT enabled services creating a bigger domestic market.

What this means for IT workers
Relying on 'onsite trips' to make money is passe 🙂 Focusing more on business knowledge expertise, ability to handle complex projects, capitalizing on domestic market, entrepreneurship(note that IT enablement in India is still weak), differentiating yourself from the crowd is what will sustain you.

Thanks for the A2A!

If you like this answer do read My answers that make me happy

Is 'Make in India' a threat to the Indian IT industry?


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