Page 66 - DCAP405_SOFTWARE_ENGINEERING

Unit 4: Evolutionary Process Models

Notes
Valorising Services
That change is not yet evident. India’s economic successes are still identified with the IT
sector and, more specifically, with a handful of firms that dominate the space. Services
contribute the most to the GDP; software and business process outsourcing represent the
brightest face of exports — icons of the country’s passage into post-modernity.
The services sector dominates the economy in more ways than one; in terms of employment
preferences, BFSI (Banking, Financial Services and Insurance) has overtaken manufacturing
to a considerable degree. Most management or IIT graduates would prefer BFSI or IT firms
for jobs over manufacturing even though salaries in the former are more prone to the
vicissitudes of the business cycle.

In 2009, placement salary offerings in IT and BFSI dropped 25 per cent over 2007-08, while
salaries in the manufacturing sector fell far less. Yet, the BFSI sector grabbed 39 per cent of
graduates from the Indian Institutes of Management (IIMs) followed by consulting firms
that attracted 24 per cent.
Manufacturing together with the media and rating agencies had to settle for a mere 6 per
cent of the future cream of Indian managerial talent.
It is this star-lit sheen of IT and BFSI sectors that also blinds analysts, keen to advice the rest
of the world just how it should go about getting prosperous.
India’s liberalisation has focused largely on the financial and IT sectors, and the fact that
both are in their own ways connected to the global economy offers the impression of the
country participating in the creation of global wealth.
In their paper titled, “Service with a smile: A New growth Engine for poor countries”
published on the Web site www.voxeu.org, Ejaz Ghani, Arti Grover (from The World
Bank) and Homi Kharas from the Brookings Institution argue that services provide poor
countries the easiest and fastest route to prosperity. At one time the privilege of rich
countries, the globalisation of services has created new opportunities for countries mired
in poverty. That data can substantiate their claim as accomplished fact does not detract
from the strong apprehension and deep scepticism that must accompany this strategy for
growth.
Chinks in the Model
The world knows what happens to countries that decide to become rich quick through
services-led economic growth. Iceland is a case in point. A traditional cod-fishing based
economy with a high level of stability, it could not resist the temptation that global
finance threw its way to become a superstar, the crowning example of financial services-
inspired prosperity, only to come to grief when Lehmann Brothers collapsed. The morality
tale is yet to conclude, with Portugal the latest victim of the globalisation of services.
On the other hand, countries that have a strong manufacturing base, such as the emerging
economies and India and China could, with the help of efficient and prescient monetary
and exchange controls, contain the contagion unleashed by Wall Street on the world.
The fact that ‘services’ have become globalised distorts the differences between services
exported by the US and the EU members such as France and Germany (finance capital and
universal banking) on the one hand, and those adopted by poor countries, from tourism to
business process outsourcing and call centres on the other; the fact of ‘success’ obfuscates
the inherent inequalities.
Contd...

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