October 2006 Volume 12 Number 4

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India's IT sector employs about one percent of the labor force and generates three percent of GDP. With IT and other white-collar services expanding, some Indians say that if China is "the world's workshop," India is "the world's back office." However, the state government in Karnataka, where Bangalore is located, in October 2006 ordered primary schools teaching 100,000 pupils in English to switch to the local Kannada language, as required by a 1994 law. Bangalore has 1,500 technology companies and accounts for a third of a $23-billion Indian export IT industry.

China and India graduate hundreds of thousands of "engineers" each year but, according to hiring managers for multinationals, many are not qualified- only 10 percent of recent graduates have sufficient English and skills to be hired by multinationals. US Commerce Secretary Carlos M. Gutierrez cited estimates that China produces 600,000 college-trained engineers a year, India 350,000, and the US 70,000.

However, a more careful review found that the US had 137,000 graduates of four-year programs in engineering and computer science in 2004, while India had 112,000 and China 352,000 (the Chinese data included technicians). The seven prestigious Indian Institutes of Technology graduate only 3,000 engineers a year. India produces 2.5 million "college graduates" a year, but their uneven quality is evidenced in their unemployment rate of 17 percent.

India has private hospitals that serve foreigners, and Blue Ridge Paper Products in North Carolina aimed to be the first US firm with a union contract to send patients to India for treatment. However, the United Steelworkers stopped a plan to send an employee to the Apollo Hospital in New Delhi for surgery, saying that there are too many risks in international health care (US patients sign papers absolving the Indian facilities of responsibility for malpractice).

Health care costs in India are up to 80 percent lower than in the US, and firms such as IndUShealth http://www.indushealth.com) are ready to match US patients with Indian hospitals. Indian hospitals treated 150,000 foreign patients in 2005, making it the leader in health care outsourcing. Three Indian hospital chains, Fortis, Wockhardt and Apollo, dominate the growing industry.

McKinsey, which forecasts that leading US companies' expenditures on health insurance would equal profits by 2008, predicts that India will have a $20 billion medical outsourcing sector by 2020, the size of IT exports today.

Agriculture. India is growing, but agriculture still employs 60 percent of the labor force while generating just 20 percent of GDP, which is why most of the poverty in India is in rural areas. About 10 percent of Indian workers are in the formal labor market.

India is rapidly urbanizing, and is expected to double its urban population to almost 600 million by 2030. India had one city of over a million in 1900, Calcutta; today, India has 35 cities with a million or more residents.

Cell-phones usage is increasing even faster- there were 1.6 million subscribers in 2000, and 125 million in 2006. India has some of the lowest cell phone rates, typically less than $0.01 a minute, which enables farmers and other sellers of produce to call around for price quotes on their produce- some use camera phones to provide pictures of what they are offering for sale. With more than half of India's 1.1 billion people under 25, cell-phone usage is expected to continue climbing rapidly.

Affirmative Action. India is struggling with affirmative action, asking whether "backward" castes should continue to have preferential admission quotas in higher education. India's constitution sets aside 22.5 percent of public university seats for the lowest castes on the Hindu social ladder and members of indigenous tribes.

The current government proposed that another 27 percent of slots at the best universities be "reserved" for a group known as "other backward classes," or OBCs. In May 2006, medical students protested, arguing that merit should be the only criteria for admission. They pointed out that, if quotas are expanded, almost half of the admissions slots would be given out on the basis of caste rather than merit.

In modern India, caste no longer necessarily determines a person's occupation, but it does shape whom one marries, dines with and votes for in elections. OBCs are an important voting block, and giving them quotas for university slots and public sector jobs could attract their votes.

As wages rise in China, some manufacturers are moving to India. Factory worker wages in China are $4 to $8 a day, about $4 in Thailand, and $2 in India, prompting some multinationals to begin or expand operations in India. India has a relatively well-educated labor force, but red tape and expensive inputs such as electricity mean that middle-range manufacturers producing cars and parts rather than toys are expanding in India.

India and Bangladesh share a 2,500-mile ill-defined border, and India has begun fencing the border to keep out unauthorized migrants. In Fall 2006, there were skirmishes along the border, with each country accusing the other of fomenting violence.

Bangladeshi economist Muhammad Yunus and the Grameen Bank won the 2006 Nobel Peace Prize for making small loans to mostly poor women beginning in 1976. So-called microlending to the world's poor has spread, as the potential of very poor people to use money to improve their condition was recognized more widely. Most micro loans, often $50 or $100, go to women, who have proven to be better credit risks and who are most likely to spend any additional income on family education and health. The Microcredit Summit http://www.microcreditsummit.org) says that 100 million people received small loans from 3,100 institutions in 130 countries in 2005.

Afghanistan. Afghanistan's population was 31 million in 2006, and its GDP about $9 billion, or about $300 per capita. The keystones of the economy are foreign aid and opium. Poppy is grown on about 400,000 acres, and three million people depend on the $3 billion a year it generates for their livelihood.

Saritha Rai, "Union Disrupts Plan to Send Ailing Workers to India for Cheaper Medical Care," New York Times, October 11, 2006. Henry Chu, "India's Looming Talent Shortage," Los Angeles Times, September 23, 2006. Somini Sengupta, "Quotas to Aid India's Poor Spark Push for Meritocracy," New York Times, May 21, 2006.