Fascinating article. The author travels to Nasscon and notices, among other things, that Valentine's Day has taken hold in India, and the days of obtaining a room at a 5 Star hotel for $100-a-night are gone.
The former point demonstrates an aspect of the cultural struggle going on within the subcontinent. Money quote:
When I travelled to the Nasscom event last year there was an enormous row over Valentine's Day. It has only recently become a popular concept in India and angry mobs had burned shops that dared to sell gifts aimed at lovers celebrating the holiday - evidence of the local outrage at Western customs usurping local tradition. This is just a minor example of the struggles arising as India quickly changes and adapts to global customs and behaviour.
This year I saw billboard posters everywhere for Valentine's Day. Restaurants were advertising candle-lit deals for couples, phone companies were encouraging text messages of devotion and shops everywhere had succumbed to selling kitsch at twice the usual price.
The latter point suggests that India may be toying with the goose that lays the golden egg.
A further example of how India is changing is the availability and price of good hotels close to where people want to do business. The main hotel chains no longer see any need to charge prices that reflect the fact they are located in a low-cost environment - they just charge international rates. I could not even get into the conference hotel for the second year running because it was booked months in advance - at something like $300 per room. Only a few years back I was enjoying the 5-star experience in India for $100 per night. Those days are truly over for any business traveller to India now.
But the most interesting and potentially impactful story is the tax story. When the IT services industry entered it's hypergrowth phase, the government extended tax breaks to those firms until 2009. Now that year does not appear that far off, and the companies are lobbying furiously to extend those breaks. I am no authority on Indian tax code, but at the minimum, any tax increase will be passed on to the customers. A company with a lush tax history like India's would give me pause. Could they be that short-sighted?
In a development that warms my capitalistic heart, Dubai is offering 30 year tax havens for IT services to relocate or startup there. Indian people are wise not to think of their success as inherently Indian, any more than automobile success in the early 20th century was inherently American. Other nations can and will compete.
Looks like India will continue to be a relatively more inexpensive IT services region, but those savings are not going to be as significant as in days past. Anecdotally I've heard that the cost of offshoring to India just isn't as cheap as it used to be, and companies in search of low IT services costs are scouring the former Eastern Bloc countries with some success.
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