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November 30, 2003

US CEOs can't afford to ignore India: Businessweek


In its cover story titled "The Rise Of India", Businessweek magazine says, whether Americans regard the outsourcing of services jobs to India as disruptive or beneficial, one thing is clear: Corporate America no longer feels it can afford to ignore India.

Some extracts:

"If India can turn into a fast-growth economy, it will be the first developing nation that used its brainpower, not natural resources or the raw muscle of factory labor, as the catalyst. And this huge country desperately needs China-style growth. For all its R&D labs, India remains visibly Third World."

" Still, this deep source of low-cost, high-IQ, English-speaking brainpower may soon have a more far-reaching impact on the U.S. than China. Manufacturing -- China's strength -- accounts for just 14% of U.S. output and 11% of jobs. India's forte is services -- which make up 60% of the U.S. economy and employ two-thirds of its workers. "

"We can barely imagine investing in a company without at least asking what their plans are for India," says Sequoia Capital partner Michael Moritz, who nurtured Google, Flextronics (FLEX ), and Agile Software (AGIL ). "India has seeped into the marrow of the Valley."

This year, the tax returns of some 20,000 Americans were prepared by $500-a-month CPAs such as Sandhya Iyer, 24, in the Bombay office of Bangalore's MphasiS. After reading scanned seed and fertilizer invoices, soybean sales receipts, W2 forms, and investment records from a farmer in Kansas, Iyer fills in the farmer's 82-page return. "He needs to amortize these," she types next to an entry for new machinery and a barn. A U.S. CPA reviews and signs the finished return. Next year, up to 200,000 U.S. returns will be done in India, says CCH Inc. in Riverwoods, Ill., a supplier of accounting software. And it's not only Big Four firms that are outsourcing. "We are seeing lots of firms with 30 to 200 CPAs -- even single practitioners," says CCH Sales Vice-President Mike Sabbatis.

Adapting to the India effect will be traumatic, but there's no sign Corporate America is turning back. Yet the India challenge also presents an enormous opportunity for the U.S. If America can handle the transition right, the end result could be a brain gain that accelerates productivity and innovation. India and the U.S., nations that barely interacted 15 years ago, could turn out to be the ideal economic partners for the new century.

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