Gainers gain, losers lose

Today (Aug 06) Mint carried an article written by one of its columnists which shows how neoliberalism in India has made the rich richer and the poor poorer at the geo-structural level.

The article concludes on the basis of recently released data on “outstanding loans sanctioned in a particular state/region and utilized in that place” – much has changed since India officially took steps towards liberalisation (according to the author, the economy has overall gained), however, “there are winners and losers…, there are some regions that have gained more than others”. What is most significant in the data (which the author does not explicitly recognise) is that it remarkably demonstrates that the geographical hierarchy that prevailed prior to the 1991 counter-revolution persists with hardly any reshuffling, while the vertical gap has tremendously increased. The data is significant since neoliberalism is mainly about financialisation and capital investment through the instruments of usury, debt and the credit system, which seemingly are, what the data perhaps substantiates, “radical means of accumulation by dispossession”, as David Harvey would put.

Excerpts:

1. “Comparing the data for end-March 1991 with the recently released numbers for end-March 2007, the northern and western regions have been the biggest gainers in terms of credit growth. In March 1991, the northern region accounted for 18.3% of the total credit outstanding—that percentage rose to 21.9% in March 2007. The western region, which accounted for 27.5% of total credit outstanding in the country in 1991, saw its share rising to 31.5%. The southern region’s share increased modestly from 28.1% to 28.5%. The losers were: the east, with the region’s share down from 12.3% to 8.9%, the central region (which includes Uttar Pradesh), whose share fell from 12% in 1991 to 8.1% in 2007, and the North-East, for which it declined from 1.7% to 1%”.

2. However, the gain in the northern region is virtually sham as “it’s Delhi that gained the most, with its share of credit going up from 7.1% in 1991 to 12% in 2007. The shares of Haryana, Punjab, Himachal Pradesh and Jammu and Kashmir all declined over the period, while that of Rajasthan was flat”.

3. “In the east, West Bengal’s share fell from 7.7% in 1991 to 5.3% in 2007, Bihar’s share (including Jharkhand) decreased from 3% to 2% while Orissa’s share remained flat at 1.6%. In the central region, the share of Uttar Pradesh, or UP (including Uttarakhand) fell from 7.9% to 5.2%, while that of Madhya Pradesh, or MP (including Chhattisgarh) declined from 4.2% to 2.9%”.

4. “In the south, the big beneficiary has been Karnataka—its share went up from 6.4% to 8.8%. Kerala’s share went down from 3.7% to 3.1%, Andhra Pradesh’s from 7.2% to 6.6% and Tamil Nadu’s from 10.6% to 9.9%.

5. “The data also corresponds to the increasing metropolitan focus of credit delivery. The numbers show that 66.1% of credit was utilized in the metropolitan centres in 2007, compared with 46% in 1991. Naturally, this will mean more credit growth in places such as Delhi and Mumbai. That’s probably the result both of the decay of rural India as well as the more rapid growth of these centres”.

6. Comparing the recent data with the distribution of national credit pie during 1981-91, Delhi’s share actually fell “from 10.2% in December 1981 to 7.2% in March 1991. Growth in that period was more uniform, with all the southern states except Kerala gaining modestly during the decade, as did MP, UP, Orissa and Assam”.

7. As for the political conclusion of the above economic phenomenon, the author shivers at the prospect of increasing “demands for redistribution” along with migration. “These will create immense political strains between Indian states and the potential for serious differences.”

…………………………

“They have exemplified the saying: To him that hath, more shall be given; and from him that hath not the little that he hath shall be taken away — The rich have become richer, and the poor have become poorer; and the vessel of the state is driven between the Scylla and Charybdis of anarchy and despotism. Such are the effects which must ever flow from an unmitigated exercise of the calculating faculty”. (Shelley, ‘The Defence of Poetry’)

Gandhian subversion and parliamentary deviation

Gandhi advised his colleagues and subordinates on 7 August 1937 when the then Congress contested the elections and were ready to accept office under the Government of India Act 1935:

These offices have to be held lightly, not tightly. They are or should be crowns of thorns, never of renown. Offices have been taken in order to see if they enable us to quicken the pace at which we are moving towards our goal.

(The Collected Works of Mahatma Gandhi, Vol.72, pp 99-100)

Again on 21 August 1937, Gandhi said,

Indeed the triumph of the congress will be measured by the success it achieves in rendering the police and the military practically idle. And it will fail utterly if it has to face crises that render the use of the police and the military inevitable. The best and the only effective way to wreck the existing Constitution is for the Congress to prove conclusively that it can rule without the aid of the military and with the least possible assistance of the police.

(The Collected Works of Mahatma Gandhi, Vol.72, pp 148-49)

On 17 July, 1937:

The Government of India Act is universally regarded as wholly unsatisfactory for achieving India’s freedom. But it is possible to construe it as an attempt, however limited and feeble, to replace the rule of the sword by the rule of the majority. The creation of the big electorate of three crores of men and women and the placing of wide powers in their hands cannot be described by any other name. Underlying it is the hope that what has been imposed upon us we shall get to like, i.e., we shall really regard our exploitation as a blessing in the end. The hope may be frustrated if the representatives of the thirty million voters have a faith of their own and are intelligent enough to use the powers (including the holding of offices) placed in their hands for the purpose of thwarting the assumed intention of the framers of the Act. And this can be easily done by lawfully using the Act in a manner not expected by them and by refraining from using it in the way intended by them.

(The Collected Works of Mahatma Gandhi, Vol.72, pp 35)

It is known that Marx’s and Lenin’s words (against officialdom) don’t attract the offici-al revolutionaries in India today, except when they could be used to justify their “two steps backward”. Hope they could learn something from Gandhi. Our leaders do recognise exactly 70 years later,

[T]he Constitution we have adopted reflects some of the ambiguities of the ruling classes. The Constitution declares India as a socialist republic. In reality, the State power rests with the bourgeois-landlord class led by the big bourgeoisie.

(Jyoti Basu, “60 Years Of Our Independence And The Left: Some Thoughts”, People’s Democracy, August 19, 2007)

But then have they tried to judge if their act of “accepting and running office” stands at least the Gandhian test of subversion? Have they devised “the best and … effective way to wreck the existing Constitution”? What happened recently in West Bengal – SEZ, Singur, Nandigram…- at least shows that they will definitely not succeed in passing the Gandhian test as defined here.

Ambedkar’s view on organisation

Some days back I was in Nagpur for a seminar on the Dalit question. A dalit leader told me an interesting fact (which needs to be verified) that Ambedkar’s slogan for the movement raised during the formation of Bahishkrit Hitakarani Sabha, (Association for the Welfare of the Ostracised) in 1924 was not shika, sanghatit vha va sangharsh kara (“EDUCATE, ORGANISE AND AGITATE”). It was actually shika, sangharsh kara, sanghatit vha (“EDUCATE, AGITATE AND ORGANISE”). And the change, according to him and I agree, was significant since the original slogan perceives an organisation as produced and reproduced (made, unmade and remade) within the process of movement. The change in the slogan leads to the status-quoisation of the movement, as within this changed framework the institutionalised structure of an organisation manipulates the movement for its own reproduction.

Marx’s lessons on unionism beyond economism

These few hints will suffice to show that the very development of modern industry must progressively turn the scale in favour of the capitalist against the working man, and that consequently the general tendency of capitalistic production is not to raise, but to sink the average standard of wages, or to push the value of labour more or less to its minimum limit. Such being the tendency of things in this system, is this saying that the working class ought to renounce their resistance against the encroachments of capital, and abandon their attempts at making the best of the occasional chances for their temporary improvement? If they did, they would be degraded to one level mass of broken wretches past salvation. I think I have shown that their struggles for the standard of wages are incidents inseparable from the whole wages system, that in 99 cases out of 100 their efforts at raising wages are only efforts at maintaining the given value of labour, and that the necessity of debating their price with the capitalist is inherent to their condition of having to sell themselves as commodities. By cowardly giving way in their everyday conflict with capital, they would certainly disqualify themselves for the initiating of any larger movement.

At the same time, and quite apart form the general servitude involved in the wages system, the working class ought not to exaggerate to themselves the ultimate working of these everyday struggles. They ought not to forget that they are fighting with effects, but not with the causes of those effects; that they are retarding the downward movement, but not changing its direction; that they are applying palliatives, not curing the malady. They ought, therefore, not to be exclusively absorbed in these unavoidable guerilla fights incessantly springing up from the never ceasing encroachments of capital or changes of the market. They ought to understand that, with all the miseries it imposes upon them, the present system simultaneously engenders the material conditions and the social forms necessary for an economical reconstruction of society. Instead of the conservative motto, “A fair day’s wage for a fair day’s work!” they ought to inscribe on their banner the revolutionary watchword, “Abolition of the wages system!”

After this very long and, I fear, tedious exposition, which I was obliged to enter into to do some justice to the subject matter, I shall conclude by proposing the following resolutions:

Firstly. A general rise in the rate of wages would result in a fall of the general rate of profit, but, broadly speaking, not affect the prices of commodities.

Secondly. The general tendency of capitalist production is not to raise, but to sink the average standard of wages.

Thirdly. Trades Unions work well as centers of resistance against the encroachments of capital. They fail partially from an injudicious use of their power. They fail generally from limiting themselves to a guerilla war against the effects of the existing system, instead of simultaneously trying to change it, instead of using their organized forces as a lever for the final emancipation of the working class that is to say the ultimate abolition of the wages system.

VALUE, PRICE AND PROFIT, 1865

2.
Trades’ unions. Their past, present and future

(a) Their past.

Capital is concentrated social force, while the workman has only to dispose of his working force. The contract between capital and labour can therefore never be struck on equitable terms, equitable even in the sense of a society which places the ownership of the material means of life and labour on one side and the vital productive energies on the opposite side. The only social power of the workmen is their number. The force of numbers, however is broken by disunion. The disunion of the workmen is created and perpetuated by their unavoidable competition among themselves.

Trades’ Unions originally sprang up from the spontaneous attempts of workmen at removing or at least checking that competition, in order to conquer such terms of contract as might raise them at least above the condition of mere slaves. The immediate object of Trades’ Unions was therefore confined to everyday necessities, to expediences for the obstruction of the incessant encroachments of capital, in one word, to questions of wages and time of labour. This activity of the Trades’ Unions is not only legitimate, it is necessary. It cannot be dispensed with so long as the present system of production lasts. On the contrary, it must be generalised by the formation and the combination of Trades’ Unions throughout all countries. On the other hand, unconsciously to themselves, the Trades’ Unions were forming centres of organisation of the working class, as the mediaeval municipalities and communes did for the middle class. If the Trades’ Unions are required for the guerilla fights between capital and labour, they are still more important as organised agencies for superseding the very system of wages labour and capital rule.

(b) Their present.

Too exclusively bent upon the local and immediate struggles with capital, the Trades’ Unions have not yet fully understood their power of acting against the system of wages slavery itself. They therefore kept too much aloof from general social and political movements. Of late, however, they seem to awaken to some sense of their great historical mission, as appears, for instance, from their participation, in England, in the recent political movement, from the enlarged views taken of their function in the United States, and from the following resolution passed at the recent great conference of Trades’ delegates at Sheffield:

“That this Conference, fully appreciating the efforts made by the International Association to unite in one common bond of brotherhood the working men of all countries, most earnestly recommend to the various societies here represented, the advisability of becoming affiliated to that hody, believing that it is essential to the progress and prosperity of the entire working community.”

(c) Their future.

Apart from their original purposes, they must now learn to act deliberately as organising centres of the working class in the broad interest of its complete emancipation. They must aid every social and political movement tending in that direction. Considering themselves and acting as the champions and representatives of the whole working class, they cannot fail to enlist the non-society men into their ranks. They must look carefully after the interests of the worst paid trades, such as the agricultural labourers, rendered powerless [French text has: “incapable of organised resistance”] by exceptional circumstances. They must convince the world at large [French and German texts read: “convince the broad masses of workers”] that their efforts, far from being narrow — and selfish, aim at the emancipation of the downtrodden millions.

Instructions for the Delegates of the Provisional General Council, 1866

The political movement of the working class has as its object, of course, the conquest of political power for the working class, and for this it is naturally necessary that a previous organisation of the working class, itself arising from their economic struggles, should have been developed up to a certain point.

On the other hand, however, every movement in which the working class comes out as a class against the ruling classes and attempts to force them by pressure from without is a political movement. For instance, the attempt in a particular factory or even a particular industry to force a shorter working day out of the capitalists by strikes, etc., is a purely economic movement. On the other hand the movement to force an eight-hour day, etc., law is a political movement. And in this way, out of the separate economic movements of the workers there grows up everywhere a political movement, that is to say a movement of the class, with the object of achieving its interests in a general form, in a form possessing a general social force of compulsion. If these movements presuppose a certain degree of previous organisation, they are themselves equally a means of the development of this organisation.

Where the working class is not yet far enough advanced in its organisation to undertake a decisive campaign against the collective power, i.e., the political power of the ruling classes, it must at any rate be trained for this by continual agitation against and a hostile attitude towards the policy of the ruling classes. Otherwise it will remain a plaything in their hands, as the September revolution in France showed, and as is also proved up to a certain point by the game Messrs. Gladstone & Co. are bringing off in England even up to the present time.

LETTER TO FRIEDRICH BOLTE, 1871

For the consciousness that would make generals redundant!

Working class revolutionism, but beyond sectism

The trade unions and political parties cannot be reformed, ‘captured’, or converted into instruments of working class emancipation. We don’t call however for the proclamation of new unions, which in the conditions of today would suffer a similar fate to the old ones. Nor do we call for militants to tear up their union cards. Our aims are simply that the workers themselves should decide on the objectives of their struggles and that the control and organisation of these struggles should remain firmly in their own hands. The forms which this self-activity of the working class may take will vary considerably from country to country and from industry to industry (PC – from time to time). Its basic content will not.

Emphasis mine

For the consciousness that would make generals redundant

A crisis of values and an increased questioning of authority relations are, however, developing features of contemporary society. The growth of these crises is one of the preconditions for socialist revolution. Socialism will only be possible when the majority of people understand the need for -social change, become aware of their ability to transform society, decide to exert their collective power to this end, and know with what they want to replace the present system. IT FOLLOWS that we reject analyses … who define the main crisis of modern society as a ‘crisis of leadership’. They [the party leaders] are all generals in search of an army, for whom recruitment figures are the main yardstick of success. For us revolutionary change is a question of consciousness: the consciousness that would make generals redundant.

Emphasis mine

“They [the party leaders] are all generals in search of an army, for whom recruitment figures are the main yardstick of success”. This one line explains so much about the reality within the left formations in India – with their sectism and membership ((re)conversion!) drives.

Obviously, there is much to appreciate in Solidarity (UK)’s document – As We See It / Don’t See It (Maurice Brinton) quoted above. However evident at least in tenor is also (like a major section of autonomist and anarchist comrades) their refusal to apply their own understanding in AS WE SEE IT to deconstruct the existing working class organisations/parties and struggles within them (including their generation and degeneration) as representations of class self-activity “at different levels of awareness and consciousness” . Rejectionism dominating in AS WE DON’T SEE IT in effect produces a dehistoricised conception of working class consciousness and activity – a maximalist revolutionary idealism, especially when they talk about the past and existing organisations/parties and their degeneration. However, this is not to imply that they are not aware of the dynamic logic behind the generation and degeneration of party forms, as the document succinctly concludes:

we hold that organisations whose mechanisms (and their implications) are understood by all can alone provide the framework for democratic decision-making. There are no institutional guarantees against the bureaucratisation of revolutionary groups, The only guarantee is the perpetual awareness and self- mobilisation of their members. We are aware, however, of the danger of revolutionary groups becoming ‘ends in themselves’. In the past, loyalties to groups have often superseded loyalties to ideas. Our prime commitment is to the social revolution – not to any particular political group…

However it seems the document does not ground party dynamics in the class processes and inter/intra class struggles.

The Constituent Assembly for Stable ‘Democracy’ or for uninterrupted Democratisation?

A substantial portion of the following reflections on Nepal was jotted down several days ago, but they seem still relevant.

Stable democracy is the end of democratisation. This statement is ambiguous – on the one hand, it means that democratisation leads to stable democracy, but on the other it also means that the latter actually ends the process of democratisation. Isn’t it true that all stable formal democracies are realisation of particular processes of democratisation? Isn’t it also true that the stability of these democracies depends on how much the ritual of elections and the cacophony of parliamentary halls and senates are able to control the popular assertion on the streets and in every walk of life?

In Nepal, this tussle between democracy and democratisation is very intensive. Till recently especially during the phase of the people’s war the forces representing each of them were easily identifiable since they were generally mutually exclusive, but after April 2006 both are on the same turf trying to overpower one another. The only consistent forces are the royalty and the imperialists – the former is waging an existential struggle, while the latter have to make best out of the worst situation. And all others are inconsistent in varying degrees. The non-communist forces of democracy are evidently still afraid of any drastic break from the past – the royalty and their own past practices. The royal nostalgia looms heavily on the election manifestos of the Nepali Congress and UML, even when they officially declare themselves as republicans. They are afraid of any radical change in the legitimation process. They are unable to give away the ritualism and ceremonialism that characterised the polity which they profess to challenge. They still need a ceremonial patriarch in whose name they will rule.

Everybody knows that it was the mass agitation that forced the royalty and foreign interests on defensive. Even after the restoration of the old parliament it was the continued presence of masses on the streets that coerced the restored leadership to inch forward to further democracy.

By becoming part of the government that is non-committal to any radical change unless forced, the Maoists perhaps became vulnerable to all the pitfalls of power politics in a competitive set-up. However the greatest strength or safeguard for them is their recognition and commitment to two-line struggle within their own ranks – between the tendencies of compromise and of uninterrupted transformation. They are aware that their radicalism lies in intensifying this struggle at every level. If we find today an apparent inconsistency between the Maoists in the government and those on the streets, it is the open realisation of this two-line struggle, which tempers one another not allowing the former to settle with status quoism. Recent statements by Prachanda, Baburam Bhattarai and Mohan Baidya, where they stressed on the need for giving “top priority to the street struggle at this juncture”, reflect the Maoists’ resolution to remain as forces of democratisation, rather than a stability factor for a democracy of an elitist minority and the depoliticised majority.

Definitely, this does not go well with the scheme for democracy as visualised by the hegemonic forces. They need stability; democracy too is needed just to have a stable environment, as a scheme to bribe away the representatives of those who shout on the streets. If democracy goes beyond this scheme, it is an aberration and anarchy – if workers assert themselves on their workplace or the landless demand their share on the resources, they are harming the property rights of the individuals. Democracy is a privilege, which must not be practiced everyday and everywhere. It is in this sense we can understand the conflict between the forces of democracy and those of democratisation. Democratisation in this regard can be understood as perpetual expansion of democracy beyond the confines of established institutions.

It was expected that after locking up the arms of the Maoist army, the Maoists would be “disarmed” and locked up in barracks. It is forgotten that a revolutionary army is first and foremost politically armed and always on watch out. The recent controversies on the activities of the Young Communist League are symptomatic of the impossible demands posed by the status quo on the revolutionary forces. Another controversy that has come up is regarding the issue of returning land to the deposed landlords. It is part of the hegemonic expectations, which seek to do away with any impact of the previous parallel revolutionary government on the future political economy of Nepal. Even if the Maoists officially may agree to it, the popular energy that they have unleashed in their decade-long people’s war will obviously reassert itself, despite all odds. This popular energy is evident in various self-determination movements, which have startled all the political forces in the country with their vigour.

Among these movements, the Madheshi (Terai) struggle clearly stands out, not only for its vigour but also for its peculiar constitution. Evidently, the various Madheshi identities have long been oppressed and suppressed in the overall Nepali set-up. But the recent attempt to homogenize Madheshi as a singular regional identity beyond divisions – caste and class – is a phenomenon that can only be understood by revealing the interplay of class, national and international forces behind it.

The Madheshi (Terai) region is agriculturally the most productive region in the country. Historically there has been a strong section of landed and propertied gentry in this region which has continued to oppose any systematic land redistribution efforts. Until now this section has been able to preclude such possibility through their opportunist lobbying and support to various political formations. It has time and again resisted any efforts to decrease the land ceilings. Unsurprisingly, it will see the Maoists with their commitment to radical land reforms as a grave threat. With the genuine federalist self-determination movements rising throughout the country to hasten and shape up the future Nepal, this section along with other Indo-Nepali businessmen with evident backing from the mellowed down monarchy supporters utilized sections of the Terai movement to turn anti-Maoist. In order to homogenise the Madheshi sentiment against the Maoists, the Terai ruling class and political elites have been utilising the apprehension that the radical land reforms might relocate non-Terai landless into the region. The following quote from Sarita Giri of Nepal Sadbhawana Party (Anandi Devi), one of the political parties claiming to fight for the Madheshi rights reveals much of the class-fear among the leadership of the Madheshis:

“As a consequence of [the] 1990 movement, Communists (led by hill elites) emerged as a formidable new force. [The] Revolutionary land reform agenda has been now their political agenda. But it would be naive to say that it was no more the agenda of Nepali Congress. Prime minister Sher Bahadur Deuba ha[d] agreed to reduce the ceiling to 4 to 5 bighas from 11 bighas in Madhesh. It was due to the movement led by Nepal Sadbhawana Party and supported by madheshi elites across parties that the government dropped its agenda. And now in 2007 they are the Maoists who have designed to march ahead with their agenda of revolutionary land reform. It has explicitly been mentioned in the Interim Constitution. This time too, Nepal Sadbhawana Party (Anandi Devi) has written note of dissent against the revolutionary land reform program. The aim behind such an agenda is obviously to enhance the control of hill centric state over madhesh. This is the context against which the current Madheshi movement and its demands of republicanism, autonomy, self determination and federalism should be understood.”

Even Jwala Singh, a militant Madhesi leader demanded that, “The land of Madheshis captured by Maoists should be given back”.

Obviously these sections of the Terai leadership will be all the more anxious, as the Maoists have already included the demand for ‘land to the tiller’ in their Commitment Document for the Constituent Assembly elections.

Furthermore, the Terai region being geographically, culturally and economically closer to the only immediate imperialist force and agency in the region, India, is also open to various kinds of imperialist manipulation. In recent years, India with its rising economic interests beyond its territory has used all sorts of “identities” to assert a diasporic homogeny under the garb of which it can support its cross-border political economic expansion. It is not very surprising that this expansionist tenor was firmly and vocally established by the Rightist forces in India. It can in fact be comfortably said that the rightists became a legitimate force in India only with the rise of neoliberalism, when Indian capital found Indianness, Hinduism etc to be effective in its “free” market consolidation and operation globally. One needs to cursorily go through the widely circulated weekly of Hindu fascists, Organiser and its chatterbox journalism to grasp the confident obscenity of Indian expansionism in its extreme. Recently it invented “The Western-Christian agenda in Kathmandu” and “the Christian leadership of the Maoists”, lamenting the threat to the “Hindu civilisation”:

“The bells are tolling, not just for the Nepalese monarchy, but also for the Hindu culture and civilisation of the nation.”

It is a known fact that the Hindu rightists in India have been outspoken against the republican and democratisation processes in Nepal, and have been very active recently in the Terai region. It is this transnational unity among Hindu fascists with its base in India, which acts as a major weapon of active imperialist intervention, besides the usual economic threat of the flight of capital and the diplomatic diatribes.

It is evident that delays that marred the implementation of the anti-royalist agenda to which various democratic forces agreed have given a significant time for the reactionary forces to consolidate. It will be interesting to observe the various political realignments before, during and after the Constituent Assembly elections.

The Maoists claim that the main basis of the new constitution will be “the mandate of the 10 years People’s War and 19 days people’s Movement”. They see, as Maoist leader Badal explains, the Constituent Assembly as “the process of building new Nepal. We are advancing through the Constituent Assembly as the process of institutionalising new Nepal by the representatives elected directly in the participation of the people.[sic!] We raised the agenda of the CA through revolt and movement; institutionalized it and we are in the stage of its implementation. The process has been advanced ahead to carry out movement up to conclusion.” Obviously this reinterpretation of the CA as a process, if legitimised through elections and if the Maoists continue to adher to it, will be a death knell for the reactionary forces in and around Nepal.

Indian Outsourcing Business Outsourced?

Growing pains dim India’s outsourcing edge

Tue Sep 18, 2007 11:45am IST

By Sumeet Chatterjee

BANGALORE (Reuters) – Indian outsourcing companies are shifting some of their operations to China, the Philippines, Vietnam and Kenya in a bid to stay competitive as higher wages, expensive property prices and a rising rupee eat into profits.

Back-office services companies thrive on doing jobs such as taking customer calls, payroll management and accounting at a fraction of the cost for big multinational firms or governments.

But costs in India are climbing on the back of a robust economy that has lured skilled workers to other sectors, forcing companies to look elsewhere to stay in business.

“If I was only in India, probably I would have been worried to death,” said Partha Sarkar, chief executive of HTMT Global Solutions Ltd.

The Bangalore-based back-office services provider used to generate all its revenue from India by providing services to its clients in the United States. But India now accounts for little over half the total, and rapid expansion in the Philippines and Mauritius has helped it offset the impact of a stronger rupee. It plans to enter China and Vietnam soon.

The company sees its 2008 revenue jumping to $150 million from $97 million in the last fiscal year.

“Three years back, I was completely exposed to rupee-dollar,” Sarkar said. “Now it doesn’t worry me. I have diversified my currency and country risk.”

In July, Infosys Technologies, India’s second-largest software services exporter, said it would buy three of Royal Philips Electronics’ back-office services units in Thailand, Poland and India to expand market presence.

The back-office services unit of the third-largest software exporter Wipro Ltd plans to set up two facilities in China to tap growing business opportunities there, its chief executive T.K. Kurien said.

India’s English-speaking workforce, a big factor in winning call-centre jobs, faces competition from countries like Kenya.

“When compared to India, we are better off in terms of salary and cost per seat, and we have a large pool of Kenyans with clear accents,” said Bitange Ndemo, permanent secretary in Kenya’s Information Ministry.

India’s share in the global back-office services pie will drop to 50 percent in the next 3-5 years from about 60 percent now, according to U.S.-based Tholons Inc, which offers management consultancy for offshoring.

SKILLS SHORTAGE

India produces about 2.5 million graduates every year, versus 400,000 in the Philippines, but only about 15 percent are suitable for employment in the outsourcing sector.

U.S.-based outsourcer 24/7 Customer, which has multiple facilities in Asia’s third-largest economy, interviews 5,000 candidates a month in India, but is able to recruit only about 250, Chief Marketing Officer V. Bharathwaj said.

This is pushing up wages rapidly as financial firms from Citigroup and HSBC to Standard Chartered Bank employ thousands at their back-office hubs in India.

Starting wages at 15,000 rupees ($366) a month are still about one-fifth of what their U.S. counterparts earn, but they are rising 10-15 percent a year.

Cost per employee for a back-office firm in Bangalore is almost similar to Manila, but is 20 percent lower in Guangzhou in China and 35 percent cheaper in Ho Chi Minh in Vietnam, said Avinash Vashistha, chief executive of Tholons.

Analysts say that while Vietnam does not have a vast pool of English-speaking manpower, it is a prime destination for non-voice back-office services such as legal and medical transcription, claims processing, and finance and accounting.

Adding to the squeeze is the rupee, Asia’s best performing currency this year, which climbed to a nine-year high of 40.20 against the dollar, up 10 percent since end-2006, while the Philippine peso has gained more than 5 percent.

First Global Securities last month downgraded India’s IT services sector to “underperform”, citing the rupee and wage inflation. Every 1 percent rise in the rupee impacts the services firms’ margins by 30-50 basis points, analysts say.

“Everything is hitting us adversely,” said Kiran Karnik, president of the National Association of Software and Service Companies. “Wages are going up, real estate costs are escalating and on top of that you have the dollar exchange rate going bad.”

India’s back-office services industry, which earned $8.4 billion in exports in the year to March, is also being lured by tax breaks, infrastructure improvements and investment perks offered by China and the Philippines, he said.

The industry is also anxiously watching for any ripple effect from the U.S. subprime mortgage crisis, with some smaller firms feeling the pinch as U.S. companies trim spending on services.

However, Infosys’ outsourcing unit sees an opportunity here, reckoning that the need to cut costs would be even more prevalent in an economic downturn, potentially boosting business.

(Additional reporting by Helen Nyambura-Mwaura in NAIROBI and Rosemarie Francisco in MANILA)

© Reuters 2006.

Collective memory and prosecution

While reassessing the revolutionary days of the 1970s in Italy, some of the prominent activists of the era observed in 1983:

“The public destruction of the collective memory of the movement is conducted by manipulating the individual memories of the witnesses. Even when they tell the truth, they abolish the real motivations and contexts of what they describe, establishing hypothetical links, effects without causes, interpreted according to theorems constructed by the prosecution.”

Do You Remember Revolution? by Lucio Castellano, Arrigo Cavallina, Giustino Cortiana, Mario Dalmaviva, Luciano Ferrari Bravo, Chicco Funaro, Antonio Negri, Paolo Pozzi, Franco Tommei, Emilio Vesce, and Paolo Virno. Republished in English in Paolo Virno and Michael Hardt (ed.) Radical Thought in Italy: A Potential Politics .University of Minnesota Press (October 1996)

Isn’t this true that we are taught to think about every popular movement in terms of “theorems constructed by the prosecution”? Movements are reduced to leaders… to particular events that suit the present hegemonies… leaders are reduced to objects – of hatred or reverence… Education (in classroom or outside, everywhere) is essentially prosecution!

Untouchability and Indian capitalism

Below is an interesting story published by The Observer. It shows how stratification specific to a society is reproduced and even intensified under capitalism, with competition being generalised. Caste, race and all other hierarchical identities of yesteryears are transformed into competitive identities, as well as inducing market segmentation – the upper caste/race seeks to maintain its supremacy utilising every brutal means, while the lower caste/race tries to assert itself. A schematic radical would call this situation semi-feudal, as it seems to him/her an aberration to “pure” idealised capitalism. Is there anything like that? But who can argue with the convinced ones – ever afraid of dropping the coloured glasses that their fathers lent them? This forces him/her to go in all kinds of ‘bourgeois democratic’ alliances – in order to sweep away the “vestiges” of “pre-capitalism”, before removing capitalism and the capitalists. So much for his/her utopianism and idea-lism.

India’s untouchable millionaire

Entrepreneur who escaped the rigid caste system warns that it is becoming more divisive as India grows richer

Amelia Gentleman in Agra
Sunday May 6, 2007
The Observer

As a child, Hari Pippal slept alongside his six sisters and eight brothers on a stretch of pavement. As a teenager, he pedalled a bicycle rickshaw to help feed the family. Now the owner of a large, profitable private hospital, a shoe factory, a motorbike dealership and a successful restaurant, Hari Pippal has become a symbol of the enormous possibilities available in new India to anyone with entrepreneurial flair.

The fact that this self-made millionaire has risen to the top despite being a Dalit (an untouchable) has prompted some to promote his achievements as proof that, as India races towards economic transformation, a more egalitarian society is emerging. Magazines feature him as a Dalit success story. Pippal, however, is uneasy with his status as poster boy for a casteless modern India. He believes his triumphs have come in spite of his caste and warns that, as India becomes richer, caste divisions are becoming ever more pronounced. At the headquarters of his business empire, he said: ‘As a rule India’s economic boom is only enjoyed by high-caste people. This is a great tragedy for India, because so much talent is being excluded. I feel real despair.’

The Hindu concept of untouchability was abolished in 1950, but the challenge of eradicating prejudices dating back thousands of years has defeated successive governments. Last week in Delhi the issue of caste-related inequalities divided politicians as they argued over the merits of extending affirmative action programmes in universities for backward castes. Prime Minister Manmohan Singh has compared the caste system to apartheid South Africa. ‘Untouchability is not just social discrimination; it is a blot on humanity,’ he said.

Pippal believes that the government needs to force the blossoming corporate sector to introduce positive discrimination schemes of the kind which have existed in the public sector for decades.

‘The government believes the scheduled caste [the official term for Dalits] is coming up, that the caste system is disappearing. That is wrong. The gap between the scheduled castes and the higher castes is increasing,’ Pippal said. ‘Lower castes are still very poor. Without money it’s hard to take advantage of the new opportunities, so they stay poor and everyone else gets richer.’

Pippal became conscious of his status on the first day at school. His teachers would mutter in his direction: ‘You people are ill-educated, badly dressed and don’t know how to behave’. Consigned to do the jobs no one else wants – latrine-cleaners and roadsweepers – Dalits have traditionally been forbidden from touching the food or water of upper castes. Pippal, 56, remembers how teachers would never ask him to bring them water or invite him to eat with them, as they did other higher-caste pupils.

‘I responded by deciding I had to be better than the others – cleverer, better dressed, better behaved, more successful,’ he said. But the snubs and subtle insults have lasted a lifetime. His surname identifies him as a Dalit, so when he opened his first company he called it ‘People’s Export’ – which sounded about the same, but did not have the same negative connotations.

When he opened his hospital in 2004, it was difficult to recruit high-caste doctors, many of whom would not contemplate working under him. Because the hospital, a few kilometres from the Taj Mahal, swiftly gained a reputation, attitudes changed and he now employs 25 upper-caste doctors. Even now, several of the Dalit doctors avoid revealing their surname, relying on initials so that they don’t alarm higher-caste patients.

When the oldest of his five sons said that he was engaged to a girl from a higher caste, Pippal was happy that his son had found someone he loved. Her parents, too, made no objection to the match, but a few days later about 100 people from her community arrived at Pippal’s flat, threatening to kill the girl’s parents if the marriage went ahead. ‘I told my son that he would destroy their whole family if he persisted in the marriage, and he understood,’ Pippal said. The son recently married a Dalit doctor from his father’s hospital. ‘Now I believe my children should marry within their caste. It’s better that way.’

India has a number of Dalit role models who have battled their way to the top. This year KG Balakrishnan was sworn in as chief justice of India, the first Dalit to hold the post. Narendra Jadhav, the chief economist of India’s central bank, is a Dalit. Yet the social mobility which usually accompanies rapid economic growth has barely touched this 150 million-strong community, the bulk of whom remain deprived and oppressed. Dalits die sooner and are more likely to be malnourished, unemployed and murdered than others.

Pippal knows how exceptional his life has been when he meets his contemporaries from primary school. ‘All of my school friends of my caste are still sitting on a pavement making shoes,’ he said. ‘They are angry with the system, but what can they do?’

Eroding India’s “competitive advantage”?

Business Standard on May 03 had an interesting article (posted below) about the erosion of India’s comparative advantage in IT – cheap labour seems not so cheap now. Even if labour is still cheaper than the ‘advanced’ countries’, but then productivity is far lower. Solutions are suggested – off to KPO. Also, “Some feel there is nothing to worry as India is rapidly creating huge economies of scale in IT offshoring, which offset the inflationary pressures of salary increases”. This bubbly boom and bust of BPO – how much does it affect the country’s overall economy – the P(roductive) F(orces)/P(roduction) R(elations)?

BPO`s diminishing competitiveness
THE HUMAN FACTOR
Shyamal Majumdar / Mumbai May 03, 2007

The cost-arbitrage benefit may erode if the meagre productivity of IT staff is factored in.

In a survey released yesterday, CLSA Asia Pacific says 40 per cent of India’s information technology employees expect their salaries to rise by 20 per cent annually over the next 10 years. Two-thirds expect at least a 15 per cent growth. While this indicates continued all-round prosperity for IT employees — for example, the IT professionals spend $1 billion annually just on eating out and almost half in the 28-35 age group had an international vacation last year — how does the zooming salary bill impact the competitiveness of India’s outsourcing industry?

The jury is still out on this. Some feel there is nothing to worry as India is rapidly creating huge economies of scale in IT offshoring, which offset the inflationary pressures of salary increases. Many outsourcing companies are implementing large team sizes and long-term projects to help maintain utilisation levels at above 75 per cent.

But there are quite a few other analyst firms which feel by 2010, India may become too costly to provide low-end services at competitive costs. For example, Evalueserve, a leading provider of knowledge process outsourcing services, says Indian salaries have increased at an average of 14 per cent a year. If this trend continues, the cost-arbitrage benefit would get reduced from the present 40 per cent to 25 per cent by 2010.

Or, listen to The Conference Board. The world’s pre-eminent business membership and research organisation has been a longtime supporter of outsourcing and offshoring American jobs to cheap overseas labour markets. It said in a report in 2005 that potentially massive savings in wage and benefit costs will continue to drive the global offshoring movement.

But the same organisation is now questioning the economic benefits of outsourcing. In a study in October last year, the Conference Board said the competitive advantage of low-wage countries is often exaggerated once the meagre productivity of their workers is factored in. The study said the comparative cost advantages of taking your business to low-wage countries such as China or India are often not the bargain they seem when wages are adjusted for low productivity. The manufacturing sector in India and China only pays between 2 per cent and 3 per cent of the US compensation level on average.

But labour productivity in these countries is also far below the US level at 12 per cent to 13 per cent.Though the productivity levels at present exceed compensation levels by a considerable margin — unit labour costs in China and India are on average 20 per cent lower than that in the US — The Conference Board warns that the one critical lesson for businesses that benefit from one-time labour cost benefits when investing in low wage countries is that productivity gains from new technology and innovation have to keep pace with often fast rising wages of skilled and semi-skilled workers. Or the cost advantage begins to erode.

The worry is real. For example, according to Deloitte research, the top 10 per cent of the IT workforce in India has been receiving an average salary rise of more than 40 per cent. In contrast, most IT employees in the US received a salary rise of five per cent or less. Though salaries in the US are still, on an average, nearly 10 times higher than those in India, the gap is sure to diminish over time. One reason for the fast-rising wages is the limited “employable” pool.

The Indian education system is not churning out enough computer science and electronics graduates. For instance, though India’s 272 universities and nearly 14,000 colleges churn out over 25 million graduates, only about 300,000 enter the workforce as engineers. And, out of that, maybe just 30 per cent are suitable for the software and IT services industry.

One way out of the diminishing competitiveness could be to go up the value chain — from voice-based services to knowledge process outsourcing. According to an Evalueserve study, the global KPO market is expected to grow at a cumulative annual growth rate (CAGR) of 46 per cent. Compare this with the prediction for the low-end outsourcing services market. This is expected to have a CAGR of 26 per cent.The high-end KPO opportunities are immense for Indian firms.

For instance, look at some of the figures pertaining to intellectual property research. Drafting and filing of patent applications in the US is quite expensive. A typical application costs about $10,000 to $15,000 to draft and file with the United States Patent and Trademark Office. Cost savings from offshoring even a portion of the patent drafting process can easily save up to 50 per cent of the cost for the end client, according to Evalueserve.