India's New Incarnation

By Anthony Spaeth/New Delhi

Rakesh Dubey did what many young Indians have done to get a future: he went abroad. In this case, it was to the U.S. for a master's degree in genetics. Then Dubey made a major mistake. He went home to find a job. "I would have taken anything, anywhere in India," he says--but 80 job applications, many to multinational seed companies needing geneticists, landed him nowhere. Many firms shunned him precisely because he had gone abroad and returned to India. "They were suspicious," Dubey says. "They wondered, 'Unless there was something wrong with the guy, why would he come back?'" Girls didn't want to date the 30-year-old unemployed scientist either.

Then the tide turned. Last March a labor-hungry Internet portal based in New Delhi gave Dubey a job editing online stories about women's fashion. He was hardly an expert, but, hey, it was his first work in 18 months. Within a couple of weeks, two other Internet-related companies tried to poach him. Today he makes $475 a month, three times the salary of a doctor right out of medical school, and his parents are getting marriage offers from families with available daughters. Dubey is the content manager for a portal providing crop and weather information for Indian farmers. Jobs like his didn't even exist in India a year or so ago. But they do now, because India's Internet economy is becoming a success story of global proportions.

India's prowess in information technology isn't a new phenomenon. For years, the southern city of Bangalore has been a high-tech oasis where Indians write code for international tech giants and export software to the world. But the Net promises to push the IT boom into India's mainstream. Cities like Hyderabad, Bombay and New Delhi are promising telecom links and tax holidays to prospective business investors. "India always had the talent, but with the Internet, we've found the delivery mechanism to transport this talent around the globe," says Prakash Gurbaxani, who set up his own dotcom consultancy, 24/7 Customer.com five months ago in Bangalore.

Unexpectedly and unintentionally, India has found a future. In the past quarter-century, the economy has stagnated behind varying degrees of industrial protectionism that left the country undercapitalized, uncompetitive and underemployed. The country of 1 billion people has only 4.3 million PCs; the phone network is Third World at its worst. India's capacity for international telecom traffic will this year reach 780 megabits per second, a mere 1.4% of what's available in China. E-commerce is but a distant dream.

One of the beneficiaries of that backwardness is the U.S., which has attracted top-flight Indian techies and entrepreneurs with minimal effort to feed its hungry high-tech sector. But the Internet has begun to sneak through the barriers India erected against the outside world. Now the largest national pool of engineering talent in the developing world, a good proportion of which speaks English, is able to set up shop at home. Those engineers' underemployed sisters and cousins have proved willing to work cheaply at a new crop of labor-intensive jobs made possible by the distance-bridging technology of the Net. "Finally, India has something to show to the world," says Dewang Mehta, president of the National Association of Software and Service Companies (NASSCOM).

To date, the bonanza for India has come from the equivalent of the Internet's boiler room--writing code and other labor-intensive work. But that's Big Business in its own right, employing more than 50,000 people and expected to provide more than a million jobs by 2008. Indian software exports have grown from $50 million in 1993 to $6.3 billion this year. Ramalinga Raju, billionaire chairman of Satyam Computer Services, says those opportunities could eventually give India 5% of the worldwide opportunities in IT and create up to 50 million jobs in the next two decades.

The key to those aspirations is the unsightly tangle of TV cable connections that are strung across balconies and laundry lines in every Indian city. In the '90s, they were installed to bring cable TV to urban Indians. These days, they're being transformed into broadband Internet connections. There are 30 million cable connections--compared with 20 million telephone lines; 2 million people in Bombay have high-speed access to the Internet, often by way of a television set, not an expensive PC. (There are 75 million TVs in India.) A slew of companies, including Enron and Hughes Telecom, are building fiber-optic networks to boost those numbers.

Wages are still low in India, but they are a lot higher than in the past, and the result is a growing middle techno-class. Rohini Ramdas and Rohit Mani are a young Bangalore couple, married just eight months and facing the usual struggles of trying to furnish an apartment and make the monthly car payments. They are software engineers at a subsidiary of ANZ Grindlays Bank. They work long hours for a combined income of nearly $17,000 a year, though annual raises can reach 50%. "This industry is so cushy, so comfortable," Mani says. "My peers in manufacturing have to claw their way up the ladder." The couple bank 25% of their earnings.

Mani and Ramdas, both 24, are on the low end of the ladder. Young programmers may earn $700 a month, and companies like software giant Infosys Technologies are introducing workers to America's stock-option business culture. As a result, more than 200 Infosys workers have become U.S.-dollar millionaires. "The IT industry has created more millionaires in the past five years than all of India's industries put together in the past 50 years," says Azim Premji, chairman of Wipro, another big software house with headquarters in Bangalore.

A few software billionaires have become national heroes. For a brief period this year, Wipro's Premji was the second richest man in the world, after Bill Gates. (Wipro's stock price subsided in April, though Premji's net worth is still estimated at more than $11 billion.) The techno-tycoons are admired because they have earned fortunes in one of the world's most competitive industries without any under-the-counter help from Indian bureaucrats. In the early 1990s, in fact, the software lobby got the government to remove import duties intended to protect local firms from software products sold in India by Western companies. "We said that if we can't compete with multinationals in India, how will we ever be able to compete outside," says NASSCOM's Mehta. It was a winning strategy. The Software Engineering Institute of Carnegie Mellon University in the U.S. gives a "top-quality" ranking to only 32 software companies around the world; 17 of them are based in India.

Software is only the more prominent half of India's IT bonanza. A glimpse of the other big new line of business can be found at Selectronic, a three-year-old New Delhi company where young Indian workers are paid to watch American TV programs like ER and Chicago Hope as part of their job training. Selectronic also hires stenographers to transcribe medical records for doctors in California, Georgia and Pennsylvania. Without the Internet, that vast distance was unbridgeable; with the Net in place, a whole range of labor-intensive work--or "IT-enabled services"--can be done anywhere on the globe. Ireland and the Philippines have also caught on, but India is becoming the international leader.

Selectronic's business works like this: to protect themselves in malpractice suits, doctors in the U.S. have to keep detailed notes of all consultations but don't want to hire stenographers at U.S. wage rates. Indians charge far less for the same work--and the Internet has brought them within reach. A doctor in the U.S. simply dials a toll-free number and dictates case summaries into the phone. Those recordings are transmitted via satellite to New Delhi, where they are typed by Selectronic's 200 transcribers.

Founder Veer Sagar, who left a computer company to get into the business, says his service has more potential for growth than software because it can employ Indians with nonspecialized education. Some 100 Indian companies are doing medical transcription already, and Selectronic operates 24 hours a day, 365 days a year--a claim that Indian power companies and telephone exchanges can barely make. There are challenges to the job. Speed is a must; the company promises a 24-hour turnaround. So, too, is accuracy, and that poses challenges for Indians dealing with American English, which is why those U.S. TV programs are part of the training program. One worker couldn't understand a case history that involved a patient who ate a tortilla--so the company imported restaurant menus from the U.S. for study.

In Bombay, 940 people sit at terminals in a huge, air-conditioned hall, working for World Network Services, a unit of British Airways. They perform a variety of long-distance functions--tracking cargo, processing reservations, collating sales--for BA and other carriers. Qualifications for the jobs aren't high. Anyone who knows English and can use a keyboard can apply. WNS general manager Roy Marshall says the company looked at several countries before settling on India. The main reason: so many people speak English that expansion would never be a problem.

The consulting firm McKinsey & Co. estimates that the number of jobs in India's software and IT-services sector will jump from 280,000 last year to 2.2 million by 2008. "For people who are educated, speak English and have some basic skills," says Salil Parikh, CEO of Ernst & Young's Indian consulting operation, "it will be a great life."

--Reported by Meenakshi Ganguly/ Bombay, Saritha Rai/Bangalore and Maseeh Rahman/New Delhi

With reporting by Meenakshi Ganguly/Bombay, Saritha Rai/Bangalore and Maseeh Rahman/New Delhi