The Hindu Business Line : The dragon is no imminent threat: Nasscom

FIRST, the facts. India produces more engineers each year than the entire software talent pool available with China. India's earnings from software export to the US in the current financial year are likely to be 10 times that of China. India has 60 CMM (Capability Maturity Model) Level five certified companies as compared to just two in China.

So, all those who predict doomsday can rest easy. The dragon next door has a lot of catching up to do before it can even pose the semblance of a threat to India's greatest success story, according to a report prepared by the National Association of Software and Service Companies (Nasscom).

India has a powerful combination of a highly skilled, English-speaking labour force. Every year, about 2.9 lakh fresh engineering graduates are added to the existing engineering labour pool of 21 lakh.

In addition, 20 lakh English-speaking graduates are churned out of universities each year to add to the talent pool available to the IT-enabled services (ITES) sector.

In contrast, China produces just 50,000 fresh engineering graduates each year. The country has not even been able to benefit from offshoring due to poor English language skills and will have to wait until 2008 by when a major English proficiency initiative by the Government is likely to make some impact.

India also scores over China on employee cost. While an IT professional in India would be willing to work at just $5,000 per annum (around Rs 2.26 lakh) and the high-end salary would be about $12,000, (around Rs 5.43 lakh), Chinese professionals demand $9,600 (around Rs 4.07 lakh) as gross annual compensation.

The distinct cost advantage has translated into a vibrant software export industry. At nearly $9.5 billion (around Rs 42,968 crore) in terms of exports in the current fiscal, India stays much ahead of China, which is likely to end the year at about $ 1 billion (around Rs 4,523 crore), according to Nasscom figures.

Canada has emerged as a distant second in terms of software exports to the US. America's northern neighbour is expected to sell $3.78 billion (around Rs 17,097 crore) worth of software in 2003-04. Despite the advantages of compatible cultures, good quality and vicinity, the Canadian IT industry has to fork out between three to seven times higher salary to its workers as compared to India.

But there are enough challenges before the Indian software industry and the Government. Apart from poor positioning and management of the "Made In India" brand, lack of adequate transport infrastructure could prove a stumbling block for the Indian IT industry, the Nasscom report says.

The boom in the sector could also lead to slippage in quality standards and wipe out the labour cost advantage as Indian salaries rise. In addition, the industry has to watch out for competition from upcoming outsourcing destinations such as the Philippines, Malaysia and South Africa, the report points out.

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The dragon is no imminent threat: Nasscom