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[I244]India And China Relationship

by Jim John, Jim

But with the number of US companies increasing their operations in India, wages in India are going high. It has also increased manpower turnover and in turn delivery problems. Because of which, clients are seeking for alternatives like china, Philippines, Russia, Poland, Romania etc. In a survey by management consulting company DiamondCluster, in 2004 not a single company mentioned that they are outsourcing software development to China. But in the year 2005, 6% companies mentioned they are in china. Companies which are expected to open software outsourcing operations in China have risen from 8% to 40% in just one year. Bigger attraction for china is, its reliable infrastructure and skilled workers. Although wages in developed cities like Shanghai have gone up, overall they have remained lower then India's. But biggest obstacle in their path is deficiencies in English fluency unlike India.

On the other hand, many Indian companies have started their operations in China. Infosys is planning to have office near to Shanghai. Accenture is also looking at china. And cost of a development center in china is 25% lower then cost of Indian development center. Although, it is considered that, India will move up in the ladder and handle more consulting work.

Hedging himself on emerging Asia, Bob Buckle, chairman ofthe APEC Economic Committee told the AFP ?If China and India come through this crisis withvery good growth rates that would be very important for the rise of globaleconomy.?

The IMF added that emerging economies, which include China and India ? will account forapproximately 2.2 percent of global growth next year. According to the AFP, itestimates rich nations? economies will together grow by just 0.1 percent thisyear while the developing world will grow by 5 percent.

More...Deciding to act quickly and decisively, leaders whocontrol half the world economy also decided not to raise trade barriers butinstead to quickly resolve the WTO Doha round of trade talks. ?A prompt,ambitious and balanced conclusion to the World Trade Organization - DohaDevelopment Agenda negotiations would deliver substantial improvements inmarket access and reduce market-distorting measures in global agriculturaltrade,? they told the BBC.

So why are global leaders pushing for trade? Why not sealoff boarders and depend on domestic industries and consumption? One pointanalysts argue could be the growing clout of developing nations, and theirability to resuscitate the global economy. Proponents of free trade, or thoseagainst protectionism follow the economic principle of comparative advantageie. it allows countries to specialize in the production of goods and servicesin which they have a comparative advantage, leading to the most efficient useof resources at competitive prices. Alan Greenspan, former chair of theAmerican Federal Reserve in his criticism of protectionist proposals said ?Ifthe protectionist route is followed, newer, more efficient industries will haveless scope to expand, and overall output and economic welfare will suffer.?

In this context, industry insiders feel that in resolvingthe financial crisis, which follows the food and fuel crisis, developedcountries are supporting developing countries on their call for free tradehoping that the lack of trade barriers leading to competition will drive forbetter prices, wages, living conditions and a more efficient use of resources.

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