Enablers I: technology, ICT and the offshoring of services

Detail

1. Where technology fits: the three enablers

• Class 10 NCERT names three enablers of globalisation: 1. Technology, covered in this section. 2. Liberalisation of trade and investment policy. 3. Pressure from international bodies such as the WTO.

• Globalisation means the quick joining up of countries through trade, investment, technology and the movement of people.

• Why technology comes first: removing trade barriers does not help much if moving goods and information is still slow and costly. Technology cut these costs. Policy then opened the door.
• Link to the era:
• 1950s to 1980s: India protected its home producers with import barriers. Imports of costly technology and telecom equipment were tightly controlled.
• 1991 opening: barriers came down. India could now use the ICT revolution that was already under way around the world.
• Present: Indian services, from call centres to R&D, are sold all over the world.

2. Transport technology (past 50 years, per NCERT)

• Containerisation means packing goods into standard-size steel containers. The same box is loaded, still sealed, onto ships, railways, planes and trucks.
• Goods are not unpacked and repacked at every change of transport. This means less labour, less damage and less theft.
• Port-handling costs fall sharply.

• Exports reach markets faster.

• Air transport costs have fallen. Much larger volumes now travel by air, especially goods that are light, high in value or spoil quickly.

• Illustrative example (numbers are not official):
• A shirt exporter's cost per shirt is ₹200 to make, ₹30 to ship and handle, and ₹20 in tariff. Delivered cost = ₹250.
• Suppose containers cut shipping and handling from ₹30 to ₹10.
• Delivered cost falls to ₹230, which is 8% cheaper. That is enough to beat a rival producer in the importing country.
• Lesson: falling transport costs work like a tariff cut. They make trade possible where it did not pay before.

3. Information and communication technology (ICT/IT)

• ICT (information and communication technology) covers:
• Telecommunications: telegraph, telephone, mobile phone, fax.
• Computers.

• The internet.

• What ICT makes possible:

• Instant contact across the world.
• E-mail and voice-mail.
• All of this at negligible cost, meaning almost nothing per extra message.

• Satellite communication reaches even remote areas that have no cables.

• The key point: ICT spreads the production of services across countries.

• Goods need ships and planes to move. Many services, like data, text, voice and designs, can move as digital signals.

• So a service can be produced in one country and "delivered" in another in seconds.

• Digitally delivered services: India's share of world digitally delivered services exports rose from 4.1% (2014) to 5.8% (2024) [5].

4. NCERT case: the London magazine made in Delhi

Step	What moves	Technology used
1	Text of the magazine, London → Delhi	Internet
2	Design instructions, London → Delhi	Telecommunication
3	Designing and printing	Computers (in Delhi)
4	Printed magazine, Delhi → London	Air transport
5	Payment, London bank → Delhi bank	E-banking (electronic banking: moving money through the internet or bank networks, with no cash or cheque)

• What the case shows:
• Every stage uses a different technology. Take away any one and the chain breaks.
• The London publisher gets Indian skills at Indian costs without opening an office in India.

• This is offshore outsourcing (defined below) in its simplest form.

• Class 10 question: would globalisation have been possible without IT?

• For goods: partly. Containers and cheaper air freight already moved goods.
• For services: largely no. A service that cannot be sent digitally has to be produced where the customer lives.

5. Outsourcing (Class 11, section 3.5)

• Outsourcing means a company hires regular services from external sources, mostly from other countries. It earlier provided these services itself or bought them within its own country.

• Examples: legal advice, computer services, advertising, security.

• Enabler: fast communication, especially IT.

• Services outsourced to India (NCERT list):
• Voice-based BPO (business process outsourcing), meaning a firm hands a whole business task to an outside firm; call centres are one example.
• Record keeping, accountancy, banking services.
• Music recording, film editing, book transcription.

• Clinical advice, teaching.

• How this works: text, voice and visual data are digitised (turned into computer data) and transmitted in real time (sent instantly as the work happens).

• Why India:
• Low wage rates.
• Skilled, English-speaking manpower.

• Together these give reasonable skill and accuracy at a lower cost.

• Illustrative cost logic (numbers are not official):

• A US firm pays $4,000 a month for one accountant at home.
• An Indian provider does the same work for $1,500, plus $300 for telecom and management.

• The firm saves $2,200 a month on each worker, which is 55%. This saving is the push behind outsourcing.

• The Class 11 figure shows the IT industry as a major contributor to India's exports.

• Current data:
• Software services make up over 40% of India's total services exports. They grew at an average of 13.5% a year during FY23–FY25 [5].
• The technology industry had about 5.4 million employees in FY2023. It contributed 53% of India's services exports [4].
• India's share of world commercial services exports had already reached 3.5% in 2018 (Economic Survey 2019-20) [6].

6. Outsourcing vs offshoring

	Outsourcing	Offshoring
Question	Who does the work?	Where is it done?
Meaning	An outside firm does it	The activity moves to another country
OECD framing	The "make or buy" decision [8]	The "location" decision [8]
Can overlap	A US bank hiring an Indian BPO = offshore outsourcing	A US bank running its own Indian unit = captive offshoring

• Offshoring: moving production or service work to another country, usually to cut costs.
• OECD definition: offshoring is the total or partial transfer of an industrial activity (manufacturing or services) abroad. It can happen in two ways [7]:
• through a firm's own existing or new affiliate, meaning a unit it owns abroad; or

• by subcontracting to a foreign firm it does not own.

• Two routes of services offshoring (OECD) [7]:

• International outsourcing → trade in services between firms that are not related (unaffiliated trade). Example: Indian BPO firms.

• Sourcing from a firm's own foreign affiliates → FDI (foreign direct investment, where a foreign company owns a business here) plus trade within the same company group. Example: GCCs.

• Digital outsourcing vs digital offshoring (OECD) [9]:

• Digital outsourcing: a firm replaces in-person workers with remote workers in the same country.

• Digital offshoring: a firm replaces home workers with remote workers in another country.

• Trap: outsourcing can happen inside one country (a Delhi firm hiring a Noida security agency). That is outsourcing, but not offshoring.

7. From BPO to GCCs: moving up the value chain

• Global Capability Centres (GCCs) are units owned by MNCs (multinational corporations, companies that operate in many countries). They do R&D, analytics, engineering, finance and technology work for their parent company.

• GCCs are captive offshoring. The MNC keeps the work inside the company but moves it to India.

• Scale:

• About 1,430 GCCs (FY19) grew to over 1,700 (FY24) [2].
• Over 1,700 GCCs employ 1.9 million professionals and earned $64.6 billion in revenue (2024) [3]. (NCERT scaffold: about 1,700+ GCCs, about 1.9 million, which is confirmed.)

• Projection for 2030: about 2,400 GCCs, over 2.8 million jobs, about $105 billion in revenue [3].

• Change in role (Economic Survey 2024-25): GCCs have moved beyond back-office work, meaning support tasks like data entry and payroll. They are now strategic hubs for engineering R&D in aerospace, defence, semiconductors and advanced manufacturing [2].

• Main hubs: Bengaluru, Hyderabad, Pune, Chennai, Mumbai, NCR [2].
• The value-chain climb:
• Call centres (voice work, low value).
• → IT services and back-office processing.

• → Analytics, engineering and R&D in GCCs (high value, high skill).

• Result: IT-BPM (information technology and business process management) is now one of India's main export engines.

8. Class 11 debates

• Is call-centre employment sustainable?
• It depends on skills.
• Routine voice and data-entry work is exposed to automation and AI. Chatbots and speech software can replace scripted calls.
• Workers need domain skills (knowing a field like finance or health), digital skills and analytical skills to move up.

• The move from BPO to GCCs shows that upgrading is possible, but only for the workforce that has the skills.

• Why do developed countries oppose outsourcing?

• Job losses at home, especially in routine white-collar work.
• Wage pressure: home workers must now compete with cheaper foreign workers.
• This is the political root of later reshoring, meaning bringing work back to the home country (Section 10).

Prelims Hooks

• NCERT Class 10 lists three enablers of globalisation: technology, liberalisation of trade and investment policy, and pressure from international bodies like the WTO.
• Containerisation mainly cuts port-handling costs and speeds up exports. Air transport also got cheaper.
• Outsourcing = who does the work (make or buy). Offshoring = where it is done (location). Outsourcing inside one country is not offshoring [8].
• A US bank running its own unit in India = captive offshoring. Hiring an Indian BPO firm = offshore outsourcing.
• GCCs are MNC-owned units. They are captive offshoring, not outsourcing. Over 1,700 GCCs employ 1.9 million (2024) [2][3].
• In the NCERT magazine case, payment from London to Delhi moves by e-banking, not cheque or cash.
• NCERT's two reasons for outsourcing to India: low wage rates + skilled, English-speaking manpower.
• Software services make up over 40% of India's services exports (FY23–FY25 trend) [5].
• India's share of world digitally delivered services exports was 5.8% (2024), up from 4.1% (2014) [5].

Mains Points

• Technology as the base of services globalisation: ICT made services tradable. This let India skip the usual path and grow through services exports, with software above 40% of services exports [5]. The weak side: this growth creates relatively few jobs for low-skilled workers compared with manufacturing.
• Moving up the value chain: the shift from voice BPO to 1,700+ GCCs doing engineering R&D [2][3] shows how FDI in services can deepen skills. To support it, policy needs Tier-2 city infrastructure, data-protection rules and STEM skilling.
• Threat from AI and automation: routine offshored work is the easiest to automate. Workforce programmes should target domain, digital and analytical skills. Otherwise the demographic dividend becomes a risk.
• The politics of offshoring: job and wage losses in rich countries lead to reshoring, visa limits and protectionism [9]. India's defence is to offer higher-value work that is hard to move back home, and to negotiate services trade access in the WTO and in trade agreements.