Question

India has certain advantages which make it a favourite outsourcing destination. What are these advantages?

Mention the advantages, which make India a favourite outsourcing destination.

Answer 1

The following points qualify India as the favourite destination for outsourcing by various MNCs:

1. Easy Availability of Cheap Labour: As wage rates in India are comparatively lower than those in developed countries, MNCs find it economically feasible to outsource their operations to India.
2. Reasonable Degree of Skills: Indians have a fairly reasonable degree of skills and techniques that need a low training period and, thus, a low cost of training.
3. Favourable Government Policies: The most important factor making India the most favoured destination for outsourcing is its favourable government and tax policies. MNCs receive various lucrative offers from the Indian government, such as tax holidays, low tax rates, and easy tax policies. All these policies enable MNCs to retain a significant portion of their earnings as savings, which they can invest to grow and expand their business.
4. International worthiness: India has a fair degree of international credibility. This enhances foreign investors’ confidence in India.
5. Virgin Market: India has a virgin market for produced goods and services. This not only helps MNCs explore India’s vast domestic market but also enables them to conquer international markets, as production costs in India are relatively low.
6. Stable Political Environment: India’s democratic political environment provides a stable, secure environment for MNCs to expand and grow.
7. Lack of Competitive Competitors: The most important issue for the MNCs in India is that they don’t face stiff competition from the Indian domestic industries. This almost enables them to enjoy a monopoly status in the Indian markets.
8. Reasonable Degree of Infrastructural Investment: The Indian government has invested heavily in the past two decades in the infrastructural sector. Various steps have been taken to connect remote and rural areas to the metropolitan and other major cities. This has not only reduced the MNCs’ production costs but also helped them operate efficiently and effectively.
9. Cheap and Abundant Availability of Raw Materials: India is well-endowed with natural resources. This ensures MNCs’ cheap access to raw materials and an uninterrupted, perennial supply. This enables proper and smooth operation of MNCs.