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Raghuvir Srinivasan

THIS newspaper reported last week that the information technology industry is on the verge of reaching the one-million-employee mark. This may appear yet another IT industry record but the importance of this achievement for the economy at large cannot be overemphasised.

There is now a growing number of people, a million for now maybe, with high-income levels, sometimes two or even three to a family. Add to this the fact that almost all of them are young with high aspirations, and the revenue generation potential for the economy becomes clear.

It may not be wrong to assume that it is this sector and its employees who are providing the ballast for the economy's growth now. Almost all of manufacturing and service sectors are the beneficiaries of the mini-boom caused by the spending habits of these so-called geeks.

You need look no further than three important sectors that have posted impressive growth in the last couple of years — real estate, automobiles and cellular telephony. Without doubt, it is the resurgence in the IT sector the last two years that has been responsible for the runaway growth in each of the above sectors and these are mere examples. There are many other beneficiaries including those segments that would benefit from the trickle-down effect.

Talk to any real estate agent in the metros and he will tell you how land prices have shot up due to demand for housing from young software professionals. High disposable incomes, limited financial commitments and the compulsion to minimise, if not avoid, income-tax have combined to push young IT professionals towards investing in a house property.

Realtors say the average age of the first-time apartment buyer has now come down to less than 30 years as IT geeks get responsible at an early age and invest in property.

So also with automobiles. Passenger car sales are growing at almost 25 per cent and this after a near-30 per cent growth last year. Here again, if one were to study the ownership patterns one would discover that a much of the new car sales is accounted for by those related either directly or indirectly to the IT industry.

The story is the same with cellular telephones though among the three sectors discussed here, this may be the one least driven by the prosperity in the IT sector.

In all the euphoria over the success of the IT sector and its favourable impact on the economy, an important issue needs to be studied closely — the impact on society.

BPO businesses at the lower-end of the skill spectrum, especially call centres, employ fresh college graduates who are attracted by the promise of Rs 10,000- salaries and a free lifestyle. What they do not realise is that by settling for a basic degree and not qualifying further and going to a call-centre job, they may gain in the short-term but lose in the long-term.

There are two risks that can be pointed out straightaway. First, that they will in due course, get frustrated by the rote job and discover that they are not qualified enough to look for another one elsewhere. Though going back to college is an option it will take extreme motivation to do that for someone used to money and the privileges it fetches.

Second, there is the larger risk that India could itself lose its relative cost advantage in a few years' time as salary levels rise. The very companies that outsourced to India for cost advantages will move elsewhere for the same reason.

This is a live threat that we seem to be missing now in the euphoria over outsourcing. We may then have a situation where tens of thousands of young people are left without a job and, worse, even sans a qualification to re-employ them elsewhere.

Policy-makers and social scientists need to devote attention to this issue that could well turn out to be a major social problem.

For the moment though, the party is well and truly on as observers and analysts are already looking forward to the Nasscom-McKinsey promise of two million jobs by 2008.

This will mean a job growth of almost 26 per cent every year for the next three years in the IT sector alone.

Now, imagine a million more young people out there with large disposable incomes and the positive impact waiting to happen on the economy. Nobody's complaining, at least for now.

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