News: India to emerge as biggest labour pool

(DNA 31/05/2006) Bangalore - Doomsayers may be talking about how India's cost advantage due to cheap labour is about to disappear as Indian salaries catch up with salaries in the western countries, but, leading US-based Boston Consulting Group (BCG) begs to differ.

A study carried out by the management consulting firm reveals that India's surplus population in the working age group is nowhere near depletion. In contrast, it will see the biggest surge in the world by 2020 as the surplus workforce moves to 47 million, while China faces a shortage of 10 million people by that year. USA's working age population will shrink the most, with a shortfall of 17 million, while Japan will be short of 9 million people, discloses the study.

"What this means is that, even in 2020, India's workforce supply will outstrip demand. This will pin down the rise in Indian salaries, and maintain the present gap between the Indian salaries and salaries of other countries, giving companies working out of India the same cost advantage they enjoy today," explains BCG director James Abraham.

Going by the BCG findings, India would have the maximum labour cost advantage by 2020, compared to other countries. India's surplus is way ahead of other countries with excess working class population, including Pakistan (19 million), Bangladesh (7 million), Indonesia (5 million), Vietnam (4 million) and Egypt (4 million). Countries that would face employee crunch include France (3 million), Spain (3 million), Russia (6 million), UK (2 million), Italy (4 million) and Germany (3 million).

"Those talking about the shortage of working age population in India are taking a myopic view. If the current level of 8% GDP growth rate is maintained, then this is the kind of surplus workforce that we are likely to see by 2020," says Abraham.

However, there's a catch here. Of the total surplus workforce that India will have in another 14 years, a very small proportion will be skilled.

Abraham feels the Indian industry, especially the knowledge industry, may not be able leverage this advantage to the fullest if the current education standards remain.