Inclusive Growth

Having spent about 4 months in the IT industry, though I am not qualified to critique it,
I am in a position to at least draw a comparison between the 2 industry sectors I Have worked in.

Prior to my MBA from Great Lakes Institute of Management, I was with the Engineering industry for 20 months. This industry is characterized by low margins(can u believe that companies in Engineering Industry operate at margins as low as 5%) , lower salary structures, fierce competition and faces acute manpower shortage. In short, the Engineering industry is a mature industry. The Americans & the Europeans were considered pioneers in this sector with a whole heap of companies vying for the same business. There were major Indian players too like BHEL, L&T, etc…who have made a significant mark in the world arena. However they all had one common thread running across — low wages. Engineers are paid a pittance when compared to their counterparts in the IT sector. 16 hours of work a day, a 6 day week and a job profile which involves a substantial amount of physical labor apart from the high pressure work at your desk takes a sizeable effort. In other words, employees were (& are) squeezed to the maximum extent. Hence, frustration seeps in fast for these industrious engineers, especially in comparison with their IT counterparts. That is one of the big motivating factors for the fresh engineer, from the core Engineering sciences (including those with around 3 years of work ex) to make that switch to the IT sector. The glitter, glamour and the luxurious lifestyles of the so called “tech – geeks” cannot keep those outside the IT sector “outside” for long. Engineers have started making the switch (including me) to the so called “happening” industry in India.

I have no complaints against the IT firms or their stalwarts. But, what I have seen amongst some IT stalwarts & employees after having spent 4 months in the industry is a feeling of sheer contempt for anything “non IT”. For them life starts & ends in the IT sector. The fact that there is technology beyond Information Technology is not comprehendible by them. That must be an area of concern for all. As one of our former Prime Ministers had said about a decade ago, “IT is good for India’s growth. But we must all ensure that it doesn’t create another social divide – the IT haves & the IT have nots” With pay packages touching astronomical levels, largely due to the IT sector, the fear of creating another social divide will soon become reality.
No doubt, the IT industry has made us feel proud as Indians after a long interval in the post independence era. The euphoria the sector has created is now reflecting in the other sectors of the economy as well. The thrust for “thinking BIG” has come from the IT sector.
What startles me is the fact that most of the companies in the IT sector operate at such high margins(28%) !!! Logically arguing, one would expect them to have implemented best processes to prune their costs to enable them to enjoy such healthy margins. However that is not the case. Employee Utilization levels at most IT companies is abysmally low!! None of the companies touch even the 77% mark in Utilization. In lay man’s language, it means that 23% of the employees in an IT firm would be literally warming their seats doing nothing in the plush offices across the country. On top of it, these very “jobless-employees” (an oxymoron) are paid handsomely for doing what they are doing!!! i.e. for doing NOTHING. There is no room for such complacency in the Manufacturing/Engineering Sectors. If the IT firms follow some fiscal discipline while recruiting/retaining people, & cut corners, then their growth story would be unparallel in the world. They can then be brought under a tax regime which wouldn’t adversely affect their growth. This would result in some cash inflow for the Government. This additional cash can offset the revenue from tax collections from other sectors & a mini tax holiday can be extended to the manufacturing sector on a priority basis !!
However, the growth of IT has resulted in a step motherly treatment being meted out to other sectors of the economy which are operating at much higher levels of operational efficiency. Even if 20% of the tax sops given to IT sector are doled out to the manufacturing sector in India, Indian companies would become world beaters in their respective industry segments. With the kind of fiscal disciplines these companies follow, their margins would improve, which in turn would at least reduce this mass exodus of engineers from the core sciences to the IT sector. It needs a lot of foresight from the intelligentsia to champion such a cause.
Sustainable development cannot be achieved by just basking in the glory of one sector of the economy. It has to be all inclusive growth. A growth which would destroy social barriers and not create new social divides.