Understanding India’s Service Sector Growth in the Post-Liberalization Period
BY BHAVANI ARABANDI
India’s current growth rate of 8 percent has been attributed to the successful implementation of economic liberalization policies in 1991 that opened the economy to global corporations seeking to do business in India. These policies encouraged the formation of partnerships between domestic firms and global corporations, as well as the entry of Indian firms into the global market. These developments not only gave a much needed boost to an economy that had been growing sluggishly, but also seeded broader changes including rising consumerism, a growing private sector, the increasing presence of multinational corporations and expanding employment opportunities in India. At present, discussion and debate over the impact of globalization on the service sector have mainly dealt with Western concerns about outsourcing, “off-shoring” and the exodus of service sector jobs from the West. Conversely, the “flip side,” the impact of globalization on the service sector in developing economies such as India, has received little attention.
While the popular media has highlighted the growing consumerism of the Indian middle class, not much research has been done on the ‘new’ workplace that is emerging amidst the shifts in the economy. My research demonstrates that the new workplace is emerging for at least two reasons: First, transnational corporations are moving to ‘post-Fordist’ systems of production that favor a flexible workforce, technological innovation and competitiveness. When these corporations move their services to other nations, they bring with them different, and therefore new, styles of management. Second, local businesses in India have not been static. The push from Rajiv Gandhi’s government towards dismantling the ‘license-permit raj’1 and deregulation in the mid-1980s has helped revive the failing local Indian private sector. Since then, India has emerged as a competitor in both local and global markets, and remained viable by adopting elements of global business standards such as a flexible system of production. Today, in the post-liberalization climate new private enterprises have come into being, and older enterprises have started to invest in research and development and on becoming more productive and competitive. Some larger private corporations, such as Tata Steel, have started to acquire businesses outside of India, and have made the Fortune Global 500 index of the largest private enterprises in the world.
Interestingly, the restructured workplace in the private sector (both local and global) in India has more features in common with the workplace in the West than with the public sector in India. Within this context of economic expansion and growth in India, both employees and businesses, whether local or global, find that they have to adapt to changing market conditions. Businesses struggle to find a common corporate culture (in various locations), introduce new styles of management to improve efficiency, accommodate working hours that depend on different time zones, and manage a professionally educated and highly motivated workforce. Employees have to adjust to new market conditions where the emphasis seems to be shifting to individual responsibility and ownership of work, telecommuting, working in teams, continual training, and shifting boundaries between work and home. Unlike the public sector in India, rewards in the private sector are given to employees who are most productive and creative regardless of age and rank. But since the organization can downsize anyone at anytime, there is also competition and insecurity among even the best workers.
Employees in both local and global private enterprises in the Indian services sector2 discuss their work in similar terms. In IT, software services are provided to customers primarily based outside India, whereas in financial services, customers can be local, regional and/or international. The organizational structure is generally ‘flat’ or horizontal with few hierarchies. This cultivates a culture of informality in which the work environment is ‘relaxed’ and employees can approach their superiors directly. Employees often socialize with their colleagues in celebrating the successful completion of a project, or participate in ‘Happy Hours’ after work. The focus, however, is on getting the work done in the most efficient and timely manner. To that end, only the most qualified individuals with professional degrees in fields such as finance, management, marketing, sciences, engineering, and information technology are selected after careful screening at multiple levels. These individuals are then given extensive training to fit in not only with the corporate culture, but also, more importantly, to understand the centrality of service and customer satisfaction. Most of the work is project and team based. Teams, with expertise in varied areas from various places inside and outside the corporation, are assembled to work on projects. Upon successful completion of the project, teams are disassembled and reassembled for other projects. Employees in these private sector enterprises (particularly IT and financial services) see themselves as having higher occupational status than others in the public sector or those in other services such as Call Centers or national banks.
Despite growing opportunities and the open structure of the ‘new’ workplace there are many risks and uncertainties. Businesses no longer have large numbers of permanent employees. Instead they retain a small number of key individuals in higher positions such as Managers and Team Leads, and the rest of the team members are temporary and hired for the duration of the project, often for three to six months. Further, individuals have to upgrade their skills on a continual basis or become out-dated quite quickly. Those who cannot keep up with the demands of work, or do not take the initiative are not a ‘fit’ with this ‘new’ workplace and are terminated. Current attrition rates in the IT industry are between 30-35 percent and 20-25 percent in the financial sector according to National Association of Software and Service Companies. Contrary to claims of employee empowerment, work in the ‘new’ workplace has led to frequent scrutiny of productivity and employee’s use of time and resources. While such processes benefit the organization by cutting costs and improving efficiency, over time they lead to a loss of skills for the workers, routinization, and decline in individual initiative and creativity. Finally, the emphasis on long working hours, nightshifts, frequent changing of jobs, and individual ownership of work and productivity is leading to an erosion of the collective identity of the employees in the ‘new’ workplace. Still, despite these disadvantages in the restructured workplace in the private sector, there are many hopefuls waiting in the wings to get a chance to live the ‘Indian dream.’
In the pre-liberalization period, the Indian middle class dream was a cushy job in the Indian civil services or a management position in one of the few remaining British firms in India with benefits such as access to privileged housing, membership in selective clubs, a government or company provided vehicle, personal attendants, etc. This dream, while highly coveted, was within reach to few as it was subject to reservations or affirmative action policies, limited opportunities, and having the right connections. In contrast, the Indian dream today, a job in the private sector with a high salary and benefits such as travel abroad, seems much more attainable because it is based on merit and performance. Also, unlike the public sector, it does not have quotas for backward castes and classes (although the Indian government is attempting to change this). The shift in economic policies and growing opportunities in the private sector have led to concomitant changes in gender relations, caste and status orientations in Indian society which in turn have, according to many observers, led to changes in middle class life in
India. For instance, increasing female labor force participation has brought about changes to family life. There is a reappearance of extended families in urban areas where grandparents help with childcare while their parents are at work. Women are not only contributing significantly to the household income, but are also involved in decision-making within the family, especially in setting financial goals. Successfully employed women are able to negotiate with parents about putting off marriage for a few more years, and have more to say about to whom they get married. These women serve as role models to two generations simultaneously, i.e., to younger siblings and to parents who now invest in education for girls. However, it is important to note that while these have been significant changes in terms of gender relations, they are limited to middle class women employed in the service sector and their families. Overall, the status of women in India is still very low. While middle class Indians are participating in the global economy, they remain ‘traditional’ as far as caste and status orientations are concerned. For instance, despite increasing interaction of the sexes in the workplace, marriages are still overwhelmingly arranged by the parents and are endogamous, i.e., within the caste. Indian ‘traditions’ are filtered via consumerism: weddings are very elaborate and lavish, and dowry, far from declining in modern India, has given rise to demands for luxury goods and services that are plentiful in the liberalized market. Additionally, while the middle class boasts a large number of castes, those employed in the private sector are overwhelmingly upper-caste.
In sum, whether one is employed in a local or a global private corporation, the workplace in both contexts is being restructured in India. While transnational corporations are bringing global business standards and new styles of management from the West, local enterprises are not remaining static. In order to compete in the global market, these local businesses are rapidly adopting Western business practices.
Accompanying the structural changes are increased opportunities, risks and uncertainties for individuals working in the private sector. At this time, restructuring of the workplace and labor market has not resulted in a political backlash against globalization or liberalization; however, it is becoming clear that the new workplace has set into motion transformations in the wider culture, and traditional gender, status, and caste orientations are being recast and reinvented to blend with globalization and modernity.
Bhavani Arabandi (baraband@gmu.edu) is an adjunct professor in George Mason’s department of Sociology and Anthropolog (http://anthropology.gmu.edu) and a doctoral candidate in sociology at the University of Virginia.
- The ‘license-permit raj’ refers to the system of tight bureaucratic control exercised by the Indian state over the economy. Licenses were required to start new enterprises, produce new products, import technology/goods or expand production capacities. The system was ridden with red tape and political corruption. The growth of the private sector was severely stunted during this period. [↩]
- In this paper, the discussion of the services sector is limited to businesses providing high-end IT and financial services. [↩]
