As an example of comparative advantage India is increasingly

As an example of comparative advantage, India is increasingly using its English speaking pool of low cost labor to export service to foreign campanies and their customers,a process known as outsourcing. True or false

Solution

It is true that India has become an outsourcing hub which is set to obtain profitable business with the help of its large English speaking pool of population. The Multinational companies have three motives to outsource their secondary business processes. The first one being cost advantage and the others being profit maximization and process efficiency. Outsourcing is an attempt to save costs and it not untrue that this practice has had significant impact on various sectors including manufacturing and IT services. Although the developed countries like US have outsourced jobs to countries like China and Bangladesh, India still gains the competitive advantage in this business because of its English speaking skills.

India has been the major gainer in terms of outsourcing be it manufacturing, customer service jobs, human resource tasks or computer programming jobs. A country which has taken up literacy as one of its main mission in its Five Year Plans, it is not surprising that the literacy rate is touching 75% because of the government’s continuous efforts to eradicate illiteracy. It is more heartening to know that most of the literates in the country have considerable amount of skills in English when compared to countries like China and Bangladesh.

India is the most preferred destination for outsourcing as outsourcing to India is considered to be one of the best financial decisions across the globe for the past few decades. India’s outsourcing business today stands at approximately $US 118 billion, clearly proving India’s dominance in the outsourcing landscape. Indian cities like Bangalore, Gurgaon, Hyderabad and Pune are on the list of top 10 outsourcing destinations across the world.

Below listed are a few advantages basis which Indian outsourcing market is blooming in the world:

Lower costs when compared to countries like China: India has proven to be most cost effective when compared to the labour costs in developed countries like US, UK and Australia. With cheap labour rates, continuous supply of English bread candidates is a good combination which simplifies and reasons with the outsourcing.

Seamless communication : Uninterrupted communication is the crux for running any business in a smooth manner. Regular communication with India is possible because of its extensive English base which is another reason for India being the preferred destination.

Friendly Government regulations: With India welcoming Globalisation and Liberalization way back in 1991, it has become much easier for Multinational organisations to deal with Indian citizens.

Latest Technology and Infrastructure: Indian agencies make sure that the technology is up to date which makes for another reason to outsource the business to India

Availability of skilled workforce: In addition to speaking English, most of the graduates from India are technologically advanced in their respective areas which undoubtedly gives an edge to Indian outsourcing business.

There are some disadvantages also to the business of outsourcing but when compared to the advantages which the outsourcing business offers, the disadvantages are few and far in between which makes India one of the preferred outsourcing destinations.