The US labour arbitrage incentive for outsourcing work to India “may still be running strong in 25-35 years” contrary to expectations, according to global research firm Everest Group.

The prediction could be morale booster for the IT sector, which has been going through a gloomy times with issues of mass lay-off and reduced employee hiring.

“India is still a highly attractive and viable option for low-cost labour, albeit not quite as good as it was 15 years ago,” and it will be so for another three decades, according to Michel Janssen, Chief Research Guru, Everest, in the report “India Global Service Industry – A look back at the last decade and our future outlook” released recently.

Growth rate of Indian global services industry will decline due to maturation of traditional services.

However, growth will remain high for digital services but with fewer employees. This will mean ample supply of entry level talent in future, he said.

Industry and recruitment officials said challenges will include higher-end talent availability for key skills. But value of higher-end talent may increase.

It’s not just labour arbitrage but also exchange rate arbitrage. If one combines real wages and impact of currency in dollar terms for foreign service buyers, labour cost arbitrage will continue into the next decade and well beyond, said Amitabh Jaipuria, President and CEO, Global Services, Quess Corp, a business service provider. Demand-supply economics and fresh talent joining the workforce every year will rein in wage inflation. But the key issue will be to match what the industry wants and what the system produces, he said.

BN Thammaiah, Managing Director, Kelly Services India, a recruitment company, said challenges for education system and industry will be to provide industry-ready graduates and planning for roles that are required for the future, he said.

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